Chapter 4.08 - County Investment Policy
Pueblo County establishes the following statement of investment policy for the management of the county’s investment funds ("funds"). The purpose of this statement is to create a general framework within which the assets of the county can be invested with respect to efficient portfolio management.
This document is intended to identify the investment objectives, constraints and guidelines of the county. This policy will be used in the implementation of an investment program utilizing fixed-income investments and cash equivalents. This policy also provides a basis for monitoring and measuring the performance of the funds on an ongoing basis. (Res. 98-170 (part))
The Pueblo County statement of investment policy covers all investment activity of Pueblo County under the control of the County Treasurer and applies to both county operating revenues and "pass through" revenues. (Res. 98-170 (part))
Pursuant to Section 30-10-707, C.R.S., it is the duty of the County Treasurer to receive all moneys belonging to Pueblo County and pursuant to Section 30-10-708(1), C.R.S., the Treasurer shall deposit all such funds or moneys that come into his or her possession, by virtue of his or her office, in depositories as allowed by the state statutes and designated and approved by the Board of County Commissioners. The Board of County Commissioners, by written resolution, shall authorize the County Treasurer to invest all or any part of the funds in certain investments allowable under state statute and further designated by this statement of investment policy.
The county may, at their election, appoint investment advisors, registered with the Securities and Exchange Commission under the Investment Advisors Act of 1940, to assist in the investment function including the execution of transactions on the county’s behalf. Investment advisors must be approved by a resolution of the Board of County Commissioners. (Res. 98-170 (part))
The Pueblo County Treasurer seeks to act responsibly as the custodian of the public trust by avoiding any transactions that might impair public confidence. Funds shall be invested so as to accomplish the following objectives:
A. First Objective: Safety. The first objective shall be to insure the safety of all county funds. Investments shall be made as to minimize the potential for realized losses arising from changes in market value or default.
B. Second Objective: Cash Income Requirements. The second objective will be to maintain sufficient liquidity to meet the anticipated cash needs of the county.
C. Third Objective: Rate of Return. The long-term investment objective for the funds will be capital preservation and income. The goal of the funds is to earn an investment return that exceeds one hundred ten (110) percent of the average return on ninety (90) day U.S. Treasury Bills. "Investment return" means total return, calculated to recognize all cash income plus realized and unrealized capital gains and losses.
D. Fourth Objective: Measurement Period. A fair market cycle of three to five years is required for judging whether the rate of return objective has been met.
E. Fifth Objective: Fiduciary Standards. The assets of the county shall be invested in a manner consistent with generally accepted standards of fiduciary responsibility. The safeguards that would guide a prudent investor will be observed. (Res. 98-170 (part))
All depositories and securities broker/dealers shall be approved and designated by resolution of the Board of County Commissioners in compliance with Section 30-10-708 (1), C.R.S. All such resolution(s) are incorporated as part of this investment policy. No banking or investment activities shall be conducted with any institutions not so approved and designated.
A. Banking Institutions. National and state banks having offices in the state of Colorado and designated as eligible public depositories by the State Banking Commission pursuant to the provisions of Section 11-10.5-101, et seq., C.R.S., are eligible depositories if approved and designated by resolution of the Board of County Commissioners, such resolution(s) are incorporated as part of this investment policy. Banking institutions shall meet the following criteria:
1. The bank shall agree in writing to conform with all regulatory controls including examinations, directives and requirements set by the State Banking Commission;
2. Public deposits shall be insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) and Public Deposit Protection Act (PDPA);
3. The bank shall remain in compliance with the capital standards set by the State Banking Commission;
4. The bank shall file annually with the Pueblo County Treasurer, a written authorization from the State Banking Board, a declaration of designation as an eligible depository under the provisions of the PDPA;
5. For all banks utilized as depositories of Pueblo County funds, the Treasurer shall confirm prior to initial deposit and periodically review the bank’s assets to ensure those assets have, at a minimum, a satisfactory rating pursuant to a standardized rating system.
B. Broker/Dealers. Only those brok-er/dealers approved and designated by resolution of the Board of County Commissioners will be considered eligible securities dealers, such resolution(s) are incorporated as part of this investment policy. Eligible security dealers shall meet the following criteria:
1. Broker/dealers and banks that are designated as primary dealers by the Federal Reserve Bank;
2. Broker/dealers are to be insured by the Securities Investors Protection Corporation (SIPC);
3. Broker/dealers must provide the county with their Annual Financial Statements. (Res. 98-170 (part))
A. Statutory Requirements and Constraints. Funds will be invested in compliance with the provisions of Title 24, Article 75, Part 6 (Funds--Legal Investment) Colorado Revised Statutes and these policies and written administrative procedures.
1. Investments shall be made solely in the interest of the county and for the exclusive purpose of providing security and continuity to the investment program.
2. Investments shall be made with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of a plan of like character and with like aims.
3. Investments shall be diversified so as to minimize the risk of loss and to maximize the rate of return, unless under the circumstances it is clearly prudent not to do so.
4. Investments shall possess value and quality corroborated by accepted techniques and standards of fundamental, economic, financial and security analysis.
5. In accordance with Section 30-10-708, C.R.S., the County Treasurer and authorized investment personnel acting in accordance with this policy and any other policies and procedures set forth in the Colorado Revised Statutes or in any resolution of the Board of County Commissioners and exercising due diligence shall be relieved of any personal responsibility for an individual security’s credit risk or market price changes, provided that changing conditions are reported in a timely fashion and appropriate action is taken to control adverse developments.
6. All securities will have a maximum final maturity of five years or less, unless specifically approved by the Board of County Commissioners.
B. Fixed-Income Investments.
1. The county will limit its fixed-income investments to the following types of securities:
a. U.S. Treasury Bills, notes and bonds;
b. The following federal agencies:
i. Federal Farm Credit Bank,
ii. Federal Land Bank,
iii. Federal Home Loan Bank,
iv. Federal Home Loan Mortgage Company,
v. Federal National Mortgage Association;
c. Commercial paper. Limitations: security must be rated at least Al/P1 at the time of purchase;
d. Repurchase agreements collateralized by securities listed in subsection (B)(1)(a) of this section. Limitations:
i. Securities must be marketable,
ii. Market value of collateral must be equal to or greater than one hundred two (102) percent of funds invested at all times,
iii. Title or perfected security investment must be transferred to public entity or custodian,
iv. Securities must be delivered to public entity, third party custodian or trustee for safekeeping;
e. Money Market Funds. Limitations:
i. Must be registered as an investment company under SEC requirements,
ii. Must be rated AAAm by Standard & Poors,
iii. Investment policies must include the requirement of an attempt to maintain a constant share price,
iv. No sales load/fee added to purchase or subtracted from the redemption price;
f. Colorado public investment trusts registered with the State Securities Commission. Limitations: Must be rated AAAm by Standard & Poors;
g. Bank Certificates of Deposit insured by the FDIC from banks with reasonable credit ratings and who maintain collateral as required by the State of Colorado Public Deposit Protection Act (PDPA);
h. Cash deposits in banks insured by the FDIC who maintain collateral as required by the State of Colorado Public Deposit Protection Act (PDPA).
2. All investments should be actively managed with the focus on total return. No distinction need be made between realized and unrealized capital gains or losses.
3. No derivative securities shall be purchased. A derivative security shall be defined as a security that’s value is derived from another security or index.
4. No mortgaged-backed securities, including Collateralized Mortgage Obligations (CMOs), shall be purchased.
5. Uninvested cash balances should be kept to a minimum through the prompt investment of available funds in short-term or more permanent security holdings.
C. Security Diversification.
|Security Type||Minimum Allocation||Maximum Allocation|
|US Treasury Bills, notes and bonds||25%||100%|
|Maximum per Issuer||-||25%|
|Maximum per Issuer||-||5%|
|Certificates of Deposit||0%||20%|
|Money Market Funds||0%||50%|
|Local Government Investment Pools||0%||50%|
D. Portfolio Structure.
1. Assets of the county shall be pooled to maximize efficiency.
2. The county’s funds shall be broken into two portfolios for efficient portfolio management. Funds will be allocated by the liquidity demands of the county as follows:
a. Liquidity portfolio: those funds needed with in the next one hundred eighty (180) days.
b. Reserve portfolio: all funds that are not needed with in the next one hundred eighty (180) days. (Res. 98-170 (part))
All investments other than bank deposits shall be held in a third party custodial account in the name of Pueblo County. The custodian will meet the following requirements:
A. Safekeeping. The custodian will provide safekeeping of all securities in a segregated account that will not be commingled with either the custodian’s other assets or the assets of other clients.
B. Monthly Statement. Monthly reports will be provided by the custodian and will include a transaction summary of all activity in the account for the month. (Res. 98-170 (part))
The County Treasurer will maintain performance reporting for all funds in accordance with the following:
A. Reports on all investments will be prepared on a monthly basis. These reports will include, but not be limited to, the following:
1. Income received;
2. Current market value;
3. Current performance;
3. Trends in performance;
4. Portfolio composition and diver-sification;
5. Portfolio characteristics.
B. Performance will be calculated in compliance with the Association of Investment Management and Research (AIMR) Performance Presentation Standards.
C. Comparative analysis must be made between the portfolios and their Standard of Comparison (Benchmark) on a total return basis. The Benchmarks for the two portfolios will be as follows:
1. Liquidity Portfolio Benchmark: the average return on ninety (90) day U.S. Treasury Bills.
2. Reserve Portfolio Benchmark: the Merrill Lynch one to three year Government Bond Index.
D. The Treasurer will submit reporting on the funds to the Board of County Commissioners on a monthly basis. (Res. 98-170 (part))