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HomeMy WebLinkAboutHandouts_Pension Public Safety_02/18/2005• • Village of Tequesta Public Safety Officers' Pension Fund Investment Policy Statement L PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees maintains that an important determinant of future investment returns is the expression and periodic review of the Fund's investment objectives. To that end, the Trustees have adopted this statement of Investment Policy. In fulfilling their fiduciary responsibility, the Trustees recognize 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 Fund 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 yeazs or less. The Pension Board of Trustees will employ a professional Investment Management firm to invest the assets of the fund. Within the pazameters allowed in this IPS, the asset allocation of the fund is solely at the Investment Manager's discretion, including sector weightings and investment style. The Trustees, in performing their investment duties shall comply with the fiduciary standazds set forth in Employee Retirement Income Security Act of 1974 (FRIBA) 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. • • II. INVESTMENT PERFORMANCE OBJECTIVES The below fisted performance measures will be used as objective criteria for evaluating effectiveness of the Investment Manager. A. Total Fund Performance The performance of the total Fund 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 60% Standard & Poor's 500 Stock Index and 40% Lehman Brothers Intermediate Government /Credit Bond Index. 2. On a relative basis, it is expected that the money manager's performance with regard to the total return of combined equity, fixed income, and cash portfolio, will be in the top 40% of the Mobius Universe over three to five-year periods. 3. On an absolute basis, it is expected that total return of the combined equity, fixed income, and cash portfolio, will equal or exceed the actuarial earnings assumption (8 %), and equal or exceed the Consumer Price Index plus 3% over three to five-year periods. B. Equitv Performance The 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 Index and be in the top 40% of the Mobius Universe. 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 fund. The fixed income portion of the portfolio, defined as fixed income and preferred stocks, is expected to perform at a rate at least equal to the Lehman Brothers Intermediate Government /Credit Bond Index, and in the top 40% of the Mobius Universe. • • III. INVESTMENT GUIDELINES A. Authorized Investments All investments made or held in the fund shall be limited to: 1. Time, savings, and money market deposit accounts of a national bank, a state bank or a savings and loan institution, insured by the Federal Deposit Insurance Corporation, provided the amount deposited does not exceed the insured amount. 2. Obligations issued by the United States Government or obligations guaranteed as to principal and interest by the United States Government or by an agency of the United States Government. 3. Stocks, commingled funds administered by national or state banks, mutual funds and bonds or other evidences of indebtedness, issued or guaranteed by a corporation organized under the laws of the United States, any state Qr organized territory of the United States or the District of Columbia, provided: a. The securities meet the following ranking criteria: i. Fixed Income: Standard & Poor's Investment Grade or Moody's Investment Grade ii. Equities: At least 90% of the equities shall be rated by a major rating service in the top three quality grades. iii. Money Market: Standard & Poor's A I or Moody's P 1. b. Not more than 5% of the Fund's assets shall be invested in the common stock or capital 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. c. The value of bonds issued by any single corporation shall not exceed 5% of the total fund. 4. Commingled stock, bond or money market funds whose investments are restricted to securities meeting the above criteria. 5. Foreign securities. B. Limitations 1. Investments in corporate common stock and convertible bonds shall not exceed 60% of the Fund assets at cost or 7'0% of the fund assets at market value. 2. Foreign securities shall not exceed IO% of the value at cost of the fund. 3. All equity securities must have been traded on a major exchange for at least one year. • • C. Absolute Restrictions There will be no investment activity in the following: 1. Short sales, margin purchases, or borrowing. 2. Commodities. 3. Puts, calls, straddles or hedging. 4. Warrants or other options, except as part of purchase of another security. 5. Tax-exempt bonds. 6. Repurchase Agreements 7. Venture capital. 8. Illiquid investments, as described in Chapter 215.47, Florida Statutes 9. Any investment prohibited by State or Federal Law. 10. Any investment not specifically allowed as part of this policy. D. 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. IV. 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 Manager shall provide a written report afFirming compliance with the security restrictions of Section iII above and a summary of common stock diversification and attendant schedules. In addition, the Investment Manager shall deliver each quarter a report detailing the Fund's performance, adherence to the investment policy, forecast of the market and economy, portfolio analysis and current assets of the Trust. Written reports shall be delivered to the Trustees within 60 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the city, and shall be available for public inspection. The Investment Manager will provide immediate written and telephone notice to the Trustees 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 III above. B. The Investment Manager will disclose any securities that do not comply with section III in each quarterly report. C. If the Fund owns investments, that complied with section III at the time of purchase, which subsequently exceed the applicable limit or do not satisfy the applicable investment standard, such excess or noncompliant investments maybe continued until it is economically feasible to dispose of such investment in accordance with the prudent man standard of care, but no additional investment may be made unless authorized by law or ordinance. D. The Trustees shall retain a monitoring service to evaluate and report on a quarterly basis the rate of return and relative performance of the Fund. E. The Trustees will meet quarterly to review the monitoring service's Performance Report. The Trustees will meet with the Investment Manager and appropriate outside consultants to discuss performance results, economic outlook, investment strategy and tactics and other pertinent matters affecting the Fund on a periodic basis. F. At least annually, the Trustees shall provide the Investment Manager with projected disbursement needs of the plan, so that the investment portfolio can be structured in such manner as to provide su$'icient liquidity to pay obligations as they come due. To this end, the Investment Manager should, to the extent possible, attempt to match investment maturities with known cash needs and anticipated cash-flow requirements. V. COMPLLANCE A. It is the direction of the Trustees 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 of Trustees or their designee. 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. B. At the direction of the Trustees, operations of the fund shall be reviewed by independent certified public accountants, as part of any financial audit periodically required. Compliance with the Trustees' internal controls shall be verified. These controls have been designed to prevent losses of funds 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 of Trustees shall participate in a continuing education program relating to investments and the Trustee's responsibilities to the fund. It is highly suggested that this education process begin during the Trustees' first term. D. With each actuarial valuation, the Board of Trustees 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. In general, proxies shall be voted in accordance with the Trustees proxy policy, which states that "The proxy votes must be exercised for the exclusive benefit of the participants of the Fund." On a regular basis, at least annually, each manager shall report a record of his or her proxy vote. ~ ~ VI. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of the Investment Manager may be made. With this in mind, the following are adopted: If, at any time, any one of the following is breached, the Investment Manager will be warned of the Board's serious concern for the Fund's continued safety and performance. A. Four consecutive quarters of total Fund performance below the 50th percentile in manager performance rankings. B. Standard deviation for the Fund in excess of 120% of the policy C. Loss by the Investment Manager of any senior investment personnel. D. Any change in basic investment philosophy by the Investment Manager. E. Failure to attain a 60% vote of confidence by the Board of Trustees. F. Failure to observe the security quality restrictions of section III. Nothing in this section shall limit or diminish the Trustees' right to terminate the Investment Manager at any time for any reason. VII. FLORIDA STATUTES 175, 185 AND APPLICABLE VII.LAGEORDINANCES If, at any time, this document is found to be in conflict with Chapters 175 or 185, Florida Statutes, or the applicable Village Ordinances, the Statutes and Ordinances shall prevail. VIII. REVIEW AND AMENDMENTS It is the Trustees intention to review this document periodically 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, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Trustees should be notified in writing. By initial and continuing acceptance of this Investment Policy Statement, the Investment Manager concurs with the provisions of this document. Date: 13 December, 2004 ROCKWOOD CAPITAL ADVISORS VII.LAGE OF TEQUESTA PUBLIC SAFETY OFFICERS' PENSIO FUND .- By: ~ By: As:~~~a~~ ~r~ _,~ Cha' an, Board of Tru tees