§ 2-414. Authorized investments and portfolio composition.

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Investments should be made subject to the cash flow needs and such cash flows are subject to revisions as market conditions and the city's needs change. However, when the invested funds are needed in whole or in part for the purpose originally intended or for more optimal investments, the finance director may sell the investment at the then-prevailing market price and place the proceeds into the proper account at the city's custodian.

The following are the investment requirements and allocation limits on security types, issuers, and maturities as established by the city. The finance director shall have the option to further restrict investment percentages from time to time based on market conditions, risk, and diversification investment strategies. The percentage allocations requirements for investment types and issuers are calculated based on the original cost of each investment, at the time of purchase. Investments not listed in this policy are prohibited.

Sector	Sector Maximum (%)	Per Issuer Maximum (%)	Minimum Ratings Requirement	Maximum Maturity
U.S. Treasury	100%	100%	N/A	5.50 years (5.50 year avg. life for GNMA)
GNMA		40%
Other U.S. Government Guaranteed (e.g. AID, GTC)		10%
Federal Agency/GSE: FNMA, FHLMC, FHLB, FFCB	75%	40%	N/A	5.50 years
Federal Agency/GSE other than those above	75%	10%	N/A	5.50 years
Supranationals where U.S. is a shareholder and voting member	25%	10%	Highest ST or highest LT rating categories (A-1/P-1, AAA-/Aaa, or equivalent)	5.50 years
Corporates	35%	5%	Highest ST or three highest LT rating categories (A-1/P-1, A-/A3 or equivalent)	5.50 years
Municipals	25%	5%	Highest ST or three highest LT rating categories (SP-1/MIG 1, A-/A3, or equivalent)	5.50 years
Agency Mortgage-Backed Securities (MBS)	25%	40%	N/A	5.50 years avg. life
Asset-Backed Securities (ABS)	25%	5%	Highest ST or LT rating (A-1+/P-1, AAA/Aaa, or equivalent)	5.50 years avg. life
Non-Negotiable Certificate of Deposit and Savings Accounts	50%	25%	None, if fully collateralized.	1 year
Commercial Paper (CP)	35%	5%	Highest ST rating category (A-1/P-1, or equivalent)	270 days
Bankers' Acceptances (BAs)	10%	5%	Highest ST rating category (A-1/P-1, or equivalent)	180 days
Repurchase agreements (Repo or RP)	40%	20%	Counterparty (or if the counterparty is not rated by an NRSRO, then the counterparty's parent) must be rated in the highest ST rating category (A-1/P-1, or equivalent). If the counterparty is a Federal Reserve Bank, no rating is required.	1 year
Money Market Funds (MMFs)	50%	25%	Highest fund rating by all NRSROs who rate the fund (AAAm/Aaa-mf, or equivalent)	N/A
Fixed-Income Mutual Funds & ETFs	20%	10%	N/A	N/A
Intergovernmental Pools (LGIPs)	50%	25%	Highest fund quality and volatility rating categories by all NRSROs, if rated (AAAm/AAAf, S1, or equivalent)	N/A
Florida Local Government Surplus Funds Trust Funds ("Florida Prime")	25%	N/A	Highest fund rating by all NRSROs who rate the fund (AAAm/Aaa-mf, or equivalent)	N/A
Notes:
Rating by at least one Nationally Recognized Statistical Ratings Organization ("NRSRO"). ST=Short-term; LT=Long-term. Allow for split rated bonds and look to the lowest rating.
Maximum allocation to all corporate and bank credit instruments is 50% combined.
Maximum across all permitted investment sectors (excluding Treasuries, U.S. Federal Agencies, Agency MBS, Non-Negotiable CD's, Savings Accounts, Repos, Money Market Funds, Mutual Funds, LGIPs, and Florida Prime) is 5% combined per issuer.
Maximum exposure to any one federal agency, including the combined holdings of agency debt and agency MBS, is 40%.
The maturity limit for MBS and ABS is based on the expected average life at time of purchase, measured using Bloomberg or other industry standard methods.
* Federal National Mortgage Association (FNMA); Federal Home Loan Mortgage Corporation (FHLMC); Federal Home Loan Bank or its district banks (FHLB); Federal Farm Credit Bank (FFCB).

(1)

U.S. Treasury & Government Guaranteed - U.S. Treasury obligations, and obligations the principal and interest of which are backed or guaranteed by the full faith and credit of the U.S. Government.

(2)

Federal Agency/GSE - Debt obligations, participations or other instruments issued or fully guaranteed by any U.S. Federal agency, instrumentality or government-sponsored enterprise (GSE).

(3)

Supranationals - U.S. dollar denominated debt obligations of a multilateral organization of governments where U.S. is a shareholder and voting member.

(4)

Corporates - U.S. dollar denominated corporate notes, bonds or other debt obligations issued or guaranteed by a domestic corporation, financial institution, non-profit, or other entity.

(5)

Municipals - Obligations, including both taxable and tax-exempt, issued or guaranteed by any state, territory or possession of the United States, political subdivision, public corporation, authority, agency board, instrumentality or other unit of local government of any state or territory.

(6)

Agency Mortgage Backed Securities - Mortgage-backed securities (MBS), backed by residential, multi-family or commercial mortgages, that are issued or fully guaranteed as to principal and interest by a U.S. Federal agency or government sponsored enterprise, including but not limited to pass-throughs, collateralized mortgage obligations (CMOs) and REMICs.

(7)

Asset-Backed Securities - Asset-backed securities (ABS) whose underlying collateral consists of loans, leases or receivables, including but not limited to auto loans/leases, credit card receivables, student loans, equipment loans/leases, or home-equity loans.

(8)

Non-Negotiable Certificate of Deposit and Savings Accounts - Non-negotiable interest bearing time certificates of deposit, or savings accounts in banks organized under the laws of this state or in national banks organized under the laws of the United States and doing business in this state, provided that any such deposits are secured by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes.

(9)

Commercial Paper - U.S. dollar denominated commercial paper issued or guaranteed by a domestic corporation, company, financial institution, trust or other entity, including both unsecured debt and asset-backed programs.

(10)

Bankers' Acceptances - Bankers' acceptances issued, drawn on, or guaranteed by a U.S. bank or U.S. branch of a foreign bank.

(11)

Repurchase Agreements - Repurchase agreements (Repo or RP) that meet the following requirements:

Must be governed by a written SIFMA Master Repurchase Agreement which specifies securities eligible for purchase and resale, and which provides the unconditional right to liquidate the underlying securities should the counterparty default or fail to provide full timely repayment.

Counterparty must be a Federal Reserve Bank, a primary dealer as designated by the Federal Reserve Bank of New York, or a nationally chartered commercial bank.

Securities underlying repurchase agreements must be delivered to a third party custodian under a written custodial agreement and may be of deliverable or tri-party form. Securities must be held in the city's custodial account or in a separate account in the name of the city.

Acceptable underlying securities include only securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States, or U.S. Agency-backed mortgage related securities.

Underlying securities must have an aggregate current market value of at least 102 percent (or 100 percent if the counterparty is a Federal Reserve Bank) of the purchase price plus current accrued price differential at the close of each business day.

Final term of the agreement must be one year or less.

(12)

Money Market Funds - Shares in open-end and no-load money market mutual funds, provided such funds are registered under the Investment Company Act of 1940 and operate in accordance with Rule 2a-7.

A thorough investigation of any money market fund is required prior to investing, and on an annual basis. Attachment A is a questionnaire that contains a list of questions, to be answered prior to investing, that cover the major aspects of any investment pool/fund. A current prospectus must be obtained.

(13)

Fixed-Income Mutual Funds and ETFs - Shares in open-end and no-load fixed-income mutual funds or exchange-traded funds (ETFs) whose underlying investments would be permitted for purchase under this policy and all its restrictions.

(14)

Local Government Investment Pools - State, local government or privately-sponsored investment pools that are authorized pursuant to state law.

A thorough investigation of any intergovernmental investment pool is required prior to investing, and on an annual basis. Attachment A is a questionnaire that contains a list of questions, to be answered prior to investing, that cover the major aspects of any investment pool/fund. A current prospectus must be obtained.

(15)

The Florida Local Government Surplus Funds Trust Funds ("Florida Prime") A thorough investigation of the Florida Prime is required prior to investing, and on an annual basis. Attachment A is a questionnaire that contains a list of questions, to be answered prior to investing, that cover the major aspects of any investment pool/fund. A current prospectus or portfolio report must be obtained.

General investment and portfolio limits

(1)

General investment limitations:

Investments must be denominated in U.S. dollars and issued for legal sale in U.S. markets.

Minimum ratings are based on the highest rating by any one Nationally Recognized Statistical Ratings Organization ("NRSRO"), unless otherwise specified.

All limits and rating requirements apply at time of purchase.

Should a security fall below the minimum credit rating requirement for purchase, the investment manager or advisor will notify the finance director.

The maximum maturity (or average life for MBS/ABS) of any investment is five and a half years. Maturity and average life are measured from settlement date. The final maturity date can be based on any mandatory call, put, pre-refunding date, or other mandatory redemption date.

(2)

General portfolio limitations:

The maximum effective duration of the aggregate portfolio is three years.

(3)

Investment in the following are permitted, provided they meet all other policy requirements:

Callable, step-up callable, called, pre-refunded, putable and extendable securities, as long as the effective final maturity meets the maturity limits for the sector.

Variable-rate and floating-rate securities.

Subordinated, secured and covered debt, if it meets the ratings requirements for the sector.

Zero coupon issues and strips, excluding agency mortgage-backed Interest-only structures (I/Os).

Treasury TIPS.

(4)

The following are not permitted investments, unless specifically authorized by statute and with prior approval of the governing body:

Trading for speculation.

Derivatives.

Mortgage-backed interest-only structures (I/Os).

Inverse or leveraged floating-rate and variable-rate instruments.

Currency, equity, index and event-linked notes (e.g. range notes), or other structures that could return less than par at maturity.

Private placements and direct loans, except as may be legally permitted by Rule 144A or commercial paper issued under a 4(2) exemption from registration.

Convertible, high yield, and non-U.S. dollar denominated debt.

Short sales.

Use of leverage.

Futures and options.

Mutual funds, other than fixed-income mutual funds and ETFs, and money market funds.

Equities, commodities, currencies and hard assets.

(Ord. No. 2015-15 , § 2(Exh. A, § XIV), 4-7-2015; Ord. No. 2016-07 , § 2(Exh. A, § XIV), 4-13-2016; Ord. No. 2018-06 , § 2(Exh. A, § XIV), 5-9-2018)

                    
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