HomeMy WebLinkAbout(0044) M&C 20-0686City of Fort Worth, Texas
Mayor and Council Communication
DATE: 09/22/20 M&C FILE NUMBER: M&C 20-0686
LOG NAME: 13GENERAL PORTFOLIO INVESTMENT POLICY AND STRATEGY 2020
SUBJECT
(ALL) Adopt the Investment Policy and Strategy for the City's General Portfolio
RECOMMENDATION:
It is recommended that the City Council adopt attached amended and revised Investment Policy and Strategy for the City's General Portfolio.
DISCUSSION:
The purpose of this Mayor and Council Communication (M&C) is to adopt an amended and revised investment Policy and Strategy (IPS) for the
City's General Portfolio in accordance with the requirements of the Public Funds Investment Act, Texas Local Government Code Chapter 2256 and
the Public Funds Collateral Act, Texas Local Government Code Chapter 2257 ("State Law").
State Law requires the Investment Policy and Strategy document be reviewed, at least annually, by the governing body. The IPS was last approved
on September 10, 2019 (M&C 19-0144). This policy formalizes the framework for the City's investment activities for all funds, with the exception of
funds held in the Fort Worth Permanent Fund and the Fort Worth Other Post -Employment Benefits trusts. Those funds are governed by separate
IPS documents.
The proposed policy changes, as described below, are designed to give the Investment Officers the flexibility to effectively manage the General
Portfolio based on changing market conditions. Based on recent comments from the Federal Reserve, market expectations are for rates to
remain low for the next several years as the economy recovers from the COVID-19 pandemic.
Section V. Strategies
As noted above, the first paragraph of this section was revised to provide flexibility to more appropriately manage the overall portfolio. The
objective is to ladder out investments on the longer end of the yield curve when prevailing market conditions offer adequate return for the
corresponding interest -rate risk and loss of liquidity.
The first sentence of the second paragraph of this section was revised to better align with the City's investment policy objectives. While achieving
the highest rate of return is a strategic goal, the foremost objective of the City's investment program is safety of principal.
VII. Responsibility and Delegation of Authority, B. Investment Officer(s)
A minor revision was made to the wording of the first sentence in the second paragraph. This minor wording revision doesn't affect the substance
of this section.
Section XV. Benchmarks
Staff proposes to change the benchmark of the short-term portion of the portfolio from the two-year Treasury Note to the ICE BoAML 0-5 year US
Treasury Index and the benchmark for the long-term portion of the portfolio from the seven-year Treasury Note to ICE BoAML 0-10 year US
Treasury Index.
Based on a recommendation from the City's Investment Advisory firm, Public Trust Advisors, LLC, staff proposes to change the appropriate
benchmark from a "point -in -time" security to an index. Tracking the portfolio to the composition and duration of these indices allows for
assessment of the market risk and volatility of the underlying benchmark in addition to gauging investment performance.
The selected indices begin with zero (0) years as it is not a normal business practice to sell securities at a loss. By using an index with a range that
begins with zero years, the City's Investment Officers retain the ability to hold securities to maturity without them falling "outside of the index".
The City's Investment Committee recommends the above described changes to the General Portfolio IPS. Other changes include some relatively
minor formatting and grammatical clean up.
A redline displaying the substantive proposed changes to the current policy is attached for your convenience.
A Form 1295 is not required because: This M&C does not request approval of a contract with a business entity.
FISCAL INFORMATION / CERTIFICATION:
The Director of Finance certifies that approval of this recommendation will have no material effect on City funds.
Submitted for City Manager's Office b� Jay Chapa 5804
Originating Business Unit Head: Reginald Zeno 8517
Additional Information Contact: John Samford 2318