HomeMy WebLinkAboutDocumentation_Pension General_Tab 01_06/17/09VILLAGE OF TEQUESTA
(Plan Sponsor)
GENERAL EMPLOYEES' RETIREMENT PLAN
Investment Policy Statement
I. PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board of Trustees, as named fiduciaries, maintains that an important determinant of
future investment returns is the expression and periodic review of the Plan's investment
objectives. To that end, the Board has adopted this statement of Investment Policy and directs
that it apply to all assets under their control.
In fulfilling their fiduciary responsibility, the Board recognizes that the retirement system is an
essential vehicle for providing income benefits to retired participants or their beneficiaries. The
Board also recognizes that the obligations of the Plan are long-term and that investment policy
should be made with a view toward performance and return over a number of years. The
general investment objective, then, is to obtain a reasonable total rate of return -defined as
interest and dividend income plus realized and unrealized capital gains or losses -commensurate
with the Prudent Investor Rule and any other applicable statute.
Reasonable consistency of return and protection of assets against the inroads of inflation are
paramount. However, the volatility of interest rates and securities markets make it necessary to
judge results within the context of several years rather than over short periods of two years or
less.
The Board will employ professional Investment Management firms to invest the assets of the
Plan. Within the parameters allowed in this document, the Investment Managers shall have full
discretion, including security selection, sector weightings and investment style.
additionally the Board will retain the services of an independent outside Investment Lonsultan
ind Monitor Firm to assist it in the initial development of an Investment Policy Statement
;election of qualified Investment Managers and to perforni ongoing and periodic performance
valuation and policy adherence reviews of all Investment Managers.
The Board, in performing their investment duties, shall comply with the fiduciary standards set
forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1)
(A) - (C). In case of conflict with other provisions of law authorizing investments, the
investment and fiduciary standards set forth in this section shall prevail.
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II. TARGET ALLOCATIONS
In order to provide for a diversified portfolio, the Board has engaged several Investment
Management firms. The managers are responsible for the assets and allocation of their mandate
only and will be provided an addendum to this policy with their specific performance objectives
and investment criterea.
Asset Class Tar et Ran a Benchmark Index
Domestic Equity 50% 35% - 65% S & P 500
Foreign E utiy 10% 0% - 25% MSCI EAFE.
Broad Market Fixed Income 40% 30% - 50% Barclays Intermediate
U.S. Govt/Credit
*Benchmark will default to "broad market fixed income" if these portfolios are not fiznded. Targets and
ranges above are based on market value of total Plan assets.
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the Trustees will monitor
the aggregate asset allocation of the portfolio, and will rebalance to the target asset allocation
based on market conditions. If at the end of any calendar quarter, the allocation of an asset class
falls outside of its allowable range, barring extenuating circumstances such as pending cash
flows or allocation levels viewed as temporary, the asset allocation will be rebalanced into the
allowable range. To the extent possible, cash contributions into and withdrawals from the
portfolio will be executed proportionally based on the most current market values available. The
Trustees do not intend to exercise short-term changes to the target allocation.
III. INVESTMENT PERFORMANCE OBJECTIVES
The following performance measures will be used as objective criteria for evaluating the
effectiveness of the Investment Managers.
A. Total Portfolio Performance
1. The performance of the Total Portfolio will be measured for rolling three and five year
periods. These periods are considered sufficient to accommodate the market cycles
experienced with investments. The performance of this portfolio will be compared to
the return of a portfolio comprised of 50% S&P 500, 10% MSCI-EAFE, and 40%
Barclays Capital U.S. Intermediate U.S. Government/Credit Bond Index.
2. On a relative basis, it is expected that the total portfolio performance will rank in the top
40~' percentile of the appropriate peer universe over three and five-year time periods.
3. On an absolute basis, it is expected that total return of the combined portfolio will equal
or exceed the actuarial earnings assumption ( 7.5%
), and equal or exceed the Consumer Price
Index plus 3% over three to five year periods.
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B. Equity Performance
The combined equity portion of the portfolio, defined as common stocks and convertible
bonds, is expected to perform at a rate at least equal to the S&P 500 Stock Index. All
portfolios are expected to rank in the top 40th percentile of the appropriate peer universe over
three and five-yeaz time periods.
C. Fixed Income Performance
The overall objective of the fixed income portion of the portfolio is to add stability,
consistency and safety to the total portfolio. The fixed income portion of the portfolio is
expected to perform at a rate at least equal to the Barclays Capital U.S. Intermediate U.S.
Government/Credit Bond Index. All portfolios are expected to rank in the top 40th
percentile of the appropriate peer universe over three and five-year time periods.
D. Treasury Inflation Protection Securities (TIPS)
The overall objective of the TIPS portfolio, if utilized, is to provide inflation protection
while adding stability to the total portfolio. If TIPS are utilized the strategy is expected to
approximate the structure and performance of the Barclays Capital U.S Treasury TIPS
Index.
E. Real Estate Performance
The overall objective of the real estate portfolio of the portfolio, if utilized, is to add
diversification and another stable income stream to the total fund. The real estate portion of
the total fund, defined as core, open ended private real estate, is expected to perform at a rate
at least equal to the NCREIF Index and rank in the top 40th percentile of the appropriate peer
universe over three and five-year time periods. If investments in real estate are utilized then
the specific performance objectives and portfolio constraints will be
to this investment policy statement.
F. Alternatives
The overall objective of the alternative portion of the portfolio, if utilized, is to reduce the
overall volatility of the portfolio and improve potential absolute returns. This portion of the
fund is expected to provide an absolute rate of return. If investments in alternative
investments aze utilized then the specific performance objectives and portfolio constraints
will be to this investment policy statement.
IV. INVESTMENT GUIDELINES
A. Authorized Investments
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Invest and reinvest the assets of the eneral mployees ension in annuity and life
insurance contracts of life insurance companies in amounts sufficient to provide, in whole or
in part, the benefits to which all of the participants in the eneral mployees ension
shall be entitled under the provisions of this chapter and pay the initial and subsequent
premiums thereon.
Invest and reinvest the assets of the eneral mployees ension in:
1. Time or savings accounts of a national bank, a state bank insured by the Bank Insurance
Fund, or a savings, building, and loan association insured by the Savings Association
Insurance Fund which is administered by the Federal Deposit Insurance Corporation or a
state or federal chartered credit union whose share accounts are insured by the National
Credit Union Share Insurance Fund.
2. Obligations of the United States or obligations guaranteed as to principal and interest by
the government of the United States.
3. Bonds issued by the State of Israel.
4. Bonds, stocks, or other evidences of indebtedness issued or guaranteed by a corporation
organized under the laws of the United States, any state or organized territory of the
United States, or the District of Columbia, provided:
The corporation is listed on any one or more of the recognized national stock exchanges
or on the National Market System of the NASDAQ Stock Market and, in the case of
bonds only, holds a rating in one of the three highest classifications by a major rating
service; and
Equities:
a. Traded on a national exchange, with exception to foreign equities Perhaps just
,ted per its
b. Not more than 5% of the Plan's assets, at the time of purchase, shall be invested in
the common stock, capital stock or convertible stock of any one issuing company,
nor shall the aggregate investment in any one issuing company exceed 5% of the
outstanding capital stock of the company.
2. Fixed Income:
All fixed income investments shall have a minimum rating of investment grade or
higher as determined by credit rating service.
b. The value of bonds issued by any single corporation shall not exceed 10% of the
total fund.
3. Money Market:
a. The money market fund or STIF provided by the Plan's custodian.
b. Government paper backed by full faith & credit of the United States Government.
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4. Foreign Securities:
Limited to and fully and easily negotiable equity
securities.
5. Commingled Funds/Mutual Funds & Exchange Traded Funds:
Investments- made by the may include commingled funds. For purposes of this
policy such funds may include mutual funds, commingled funds, and exchange-traded
funds.
a. Such funds may be governed by separate policy which may include investments not
expressly permitted in this Investment Policy Statement. In the event of investment
by the Plan into a fund the Board will adopt the prospectus or governing policy of
that fund as the stated addendum to this Investment Policy Statement.
b. The asset classification of the fund will be based upon its investment objective.
B. Trading Parameters
When feasible and appropriate, all securities shall be competitively bid. Except as otherwise
required by law, the most economically advantageous bid shall be selected. Commissions
paid for purchase of securities must meet the prevailing best-execution rates. The
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C. Limitations
1. Investments in corporate common stock and convertible bonds shall not exceed seventy
percent (70%) of the Fund assets at market.
2. Foreign securities shall not exceed twenty percent (2 %) of the value at cost of the
fund.
D. Absolute Restrictions
There will be no investment activity in the following:
1. Any investment prohibited by State or Federal Law.
2. Any investment not specifically allowed as part of this policy.
3. Illiquid investments, as described in Chapter 215.47, Florida Statutes.
Any investment in speculative derivative instntments such as short sales, margin
purchases, borrowings, commodities, puts, calls, straddles, warrants or other options
(except those as part of an equity investment), foreign. exchange hedging, private
placements, venture capital, other than those defined under Section IV.A.S (a) of this
Investment Policy Statement pertaining to investments held in Commingled
Funds/Mutual Funds Xt Fxchan~7P Traded Fimdc
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V. COMMUNICATIONS
A. On a monthly basis, the custodian shall supply an accounting statement that will include a
summary of all receipts and disbursements and the cost and the market value of all assets.
On a quarterly basis, the Investment Managers shall provide a written report affirming
compliance with the security restrictions of Section IV above and a summary of common
stock diversification and attendant schedules.
B. In addition, the Investment Managers shall deliver each quarter a report detailing the Plan's
performance, adherence to the investment policy, forecast of the market and economy,
portfolio analysis and current assets of the Plan. Written reports shall be delivered to the
Board within 30 days of the end of the quarter. A copy of the written report shall be
submitted to the person designated by the Village, and shall be available for public
inspection. The Investment Managers will provide immediate written and telephone notice
to the Board of any significant market related
or non-market related event, specifically including, but not limited to, any deviation from
the standards set forth in Section IV above.
C. The Investment Managers and will disclose ,~l
securities that do not comply with ection IV in each quarterly report _ ,,f
D. If the Plan owns investments at the end of a calendar quarter that complied with ection IV
at the time of purchase, which do not satisfy the applicable investment standard, then such
investment shall be disposed of at the earliest economically feasible opportunity in
accordance with the prudent man standard of care and no additional investment may be
made. However an action plan outlining the disposition strategy shall be provided
to the Board.
E. The Investment Consutlant shall evaluate and report on a quarterly basis
the rate of return and relative performance of the Plan.
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!~e Board to quantify overall Fund performance as ti~~cll as the individual perf~~rmance
~~ nchmarks of all Investment Managers. Additionally ~
to discuss performance results,
economic outlook, investment strategy and tactics and other pertinent matters affecting the
Plan on a periodic basis.
G. At least annually, the Board shall provide the Investment Managers with projected
disbursement needs of the Plan so that the investment portfolio can be structured in such a
manner as to provide sufficient liquidity to pay obligations as they come due. To this end
the Investment Managers should, to the extent possible, attempt to match investment
maturities with known cash needs and anticipated cash-flow requirements.
VI. COMPLIANCE
It is the direction of the Board that the plan assets are held by a third party custodian, and that
all securities purchased by, and all collateral obtained by the plan shall be properly
designated as Plan assets. No withdrawal of assets, in whole or in part, shall be made from
safekeeping except by an authorized member of the Board or their designee.
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Securities transactions between abroker-dealer and the custodian involving purchase or sale
of securities by transfer of money or securities must be made on a "delivery vs. payment"
basis to insure that the custodian will have the security or money in hand at conclusion of the
transaction. Provided that all approved vendors transacting repurchase agreements perform
as stated in any Master Repurchase Agreement
B. At the direction of the Board operations of the Plan shall be reviewed by independent
certified public accountants as part of any financial audit periodically required. Compliance
with the Board's internal controls shall be verified. These controls have been designed to
prevent losses of assets that might arise from fraud, error, or misrepresentation by third
parties or imprudent actions by the Board or employees of the plan sponsor, to the extent
possible.
C. Each member of the Board shall participate in a continuing education program relating to
investments and the Board's responsibilities to the Plan. It is highly suggested that this
education process begin during each Trustee's first term.
D. With each actuarial valuation, the Board shall determine the total expected annual rate of
return for the current year, for each of the next several years and for the long term thereafter.
This determination shall be filed promptly with the Department of Management Services, the
plan's sponsor and the consulting actuary.
E. The proxy votes must be exercised for the exclusive benefit of the participants of the Plan.
Each Investment Manager shall provide the Board with a copy of their proxy voting policy
for approval. On a regular basis, at least annually, each manager shall report a record of their
proxy vote.
F. Investments for which there is no generally recognized market or consistent accepted pricing
mechanism shall be valued at 50% cost. Assets without a fair market value shall be excluded
from determination of annual funding cost.
VII. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board wishes to adopt standards by which judgments of the ongoing performance of a
portfolio manager may be made. If, at any time, any t of the following is breached, the
portfolio manager will be warned of the Board's serious concern for the Fund's continued safety
and performance. If any five of these are violated the consultant will recommend a manager
search for that mandate.
^ Four (4) consecutive quarters of relative under-performance verses the benchmark.
^ Three (3) year trailing return below the top 40th percentile within the appropriate peer
group and under performance verses the benchmark.
^ Five (5) year trailing return below the top 40th percentile and under performance
verses the benchmark.
^ Three (3) year downside volatility greater than the index (greater than 100), as
measured by down market capture ratio.
^ Five (5) year downside volatility greater than the index (greater than 100), as
measured by down market capture ratio.
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^ Style consistency or purity drift from the mandate.
^ Management turnover in portfolio team or senior management.
^ Investment process change, including varying the index or benchmark.
^ Failure to adhere to the IPS or other compliance issues.
^ Investigation of the firm by the Securities and Exchange Commission (SEC).
^ Significant asset flows into or out of the company.
^ Merger or sale of firm.
^ Fee increases outside of the competitive range.
^ Servicing issues - key personnel stop servicing the account without proper
notification.
^ Failure to attain a 60% vote of confidence by the Board.
Nothing in this section shall limit or diminish the Board's right to terminate the manager at any
time for any reason.
VIII. APPLICABLE VILLAGE ORDINANCES
If, at any time, this document is found to be in conflict with the Village Ordinances, the
Ordinances shall prevail.
IX. REVIEW AND AMENDMENTS
It is the Board's intention to review this document at least annually subsequent to the actuarial
report and to amend this statement to reflect any changes in philosophy, objectives, or
guidelines. In this regard, the Investment Manager's interest in consistency in these matters is
recognized and will be taken into account when changes are being considered. If, at any time,
Investment Manager feels that the specific objectives defined herein cannot be met, or the
guidelines constrict performance, the Board should be notified in writing. By initialing and
continuing acceptance of this Investment Policy Statement, the Investment Managers concur
with the provisions of this document.
Village of Tequesta General Employees' Retirement Plan
Chairman, Board of Trustees
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