HomeMy WebLinkAboutResolution Fort Worth Housing Finance Corporation (FWHFC) FWHFC-2019-04RESOLUTION NO. FWHFC-2019-04
FORT WORTH HOUSING FINANCE CORPORATION
A RESOLUTION READOPTING THE CORPORATION'S INVESTMENT POLICY
AND STRATEGY
WHEREAS, the City Council of the City of Fort Worth ("City") has adopted
development and revitalization of the City's neighborhoods and affordable housing stock as a
strategic goal, and City citizens and the City Council have determined that quality, accessible,
affordable housing is needed for moderate, low and very low income City citizens;
WHEREAS, the City Council created the Fort Worth Housing Finance Corporation (the
"Corporation") in 1979 pursuant to the Texas Housing Finance Corporations Act, Chapter 394
of the Texas Local Government Code, to facilitate neighborhood revitalization and housing
initiatives in the City;
WHEREAS, on October 24, 2017, the Corporation's Board of Directors (the "Board")
adopted an Investment Policy and Strategy in order to define the parameters in which the
Corporation's investments are to be managed and to implement reasonable standards for the
Corporation's cash management and investment operations (the "Investment Policy").
WHEREAS, the Investment Policy maintains the Corporation's compliance with the
Texas Public Funds Investment Act, Chapter 2256 of the Texas Government Code, which
requires the Board to review the Corporation's investment policy and investment strategies not
less than annually;
WHEREAS, the Board desires to readopt the Corporation's Investment Policy in
accordance with the requirements of the Public Funds Investment Act.
NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF
THE FORT WORTH HOUSING FINANCE CORPORATION:
THAT in accordance with the requirements of the Texas Public Funds Investment Act,
the Board has reviewed the Corporation's Investment Policy and Strategy, determined that there
are no changes to the Policy, and has readopted it.
AND IT IS SO RESOLVED.
Adopted October 15, 2019.
FORT WOI41IUOUSING FINANCE CORPORATION
y: •-
Kelly en Gray, Presi ent
Fort Worth Housing Finance Corporation
Investment Polic y.....and Strategy......
I. Introduction
The City Council of the City of Fort Worth ("City") created the Fort Worth Housing
Finance Corporation ("Corporation") in 1979 pursuant to the Texas Housing Finance
Corporations Act, Chapter 394 of the Texas Local Government Code. The organization
was created as a public instrumentality and nonprofit corporation for the purpose of
benefiting and accomplishing public purposes on behalf of the City by providing
financing assistance for residential ownership and development which provides decent,
safe and sanitary housing for residents of the City at prices they can afford.
It is the policy of the Corporation that the administration of its funds and the investment
of those funds shall be handled in a manner that promotes the highest public trust.
Investments shall be made in a mamner which will provide the maximum security of
principal by setting guidelines for investment diversification by both type and maturity
while meeting the Corporation's daily cash flow needs. This Investment Policy and
Strategy is established to define the parameters within which investments are to be
managed and to implement reasonable standards for the Corporation's cash management
and investment operations ("hnvestment Policy").
The purpose of this document is to establish and describe overarching investment policy,
provide investment strategy and guidelines, and set specific rules and parameters
governing investment practices. This Investment Policy formalizes the framework for the
Corporation's investment activities that must be exercised to ensure effective arid
judicious fiscal and investment management of its funds. The guidelines are intended to
be broad enough to allow the General Manager, Treasurer, and others handling the
Corporation's funds to function properly within the parameters of responsibility and
authority, yet specific enough to adequately safeguard the Corporation's investment
assets. For purposes of this Investment Policy, the term "General Manager" includes an
Assistant General Manager or other designee, and the term "Treasurer" includes an
Assistant Treasurer or other designee, if applicable.
II. Governing Authority
All investment and cash management activities shall be conducted in full compliance with
the Corporations Articles of Incorporation and its Bylaws, as may be amended from time
to time, as well as all applicable state and federal laws, rules and regulations. Texas laws
governing the investment of public funds are found in the Public Funds Investment Act,
Chapter 2256 of the Texas Government Code ("PFIA").Collateral requirements for all
public funds deposits in Texas are found in the Public Funds Collateral Act, Chapter 2257
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of the Texas Government Code. All of the Corporations investments will be made in
accordance with these statutes.
As directed by the Corporations Board of Directors ("Board"), the Corporations General
Manager and Treasurer are authorized to promulgate reasonable procedures to ensure
effective and judicious management of Corporation funds which align with this
Investment Policy.
III. Scope
This Investment Policy applies to all public funds in the custody of the Corporation that
are not required by law to be deposited in the state treasury by the PFIA and that the
Corporation has authority to invest. These funds are reported in the Corporation's Annual
Financial Report.
IV. Objectives
The Corporation shall manage and invest its assets with the following major objectives,
listed in order of priority:
1. Safety
Consistent with the requirements of the PFIA, safety of principal is the foremost
objective of the Corporations investment program. All aspects of cash and
investment management operations shall be designed to ensure the safety and
integrity of the Corporation's financial assets. Investments shall be undertaken in a
manner that seeks to ensure the preservation of principal, mitigating credit and
interest rate risk. Each investment transaction shall be conducted in a manner to
minimize principal losses. All cash and investment management activities shall be
done in a manner that promotes and is reflective of public trust.
2. Liquidity
Each investment portfolio shall be structured to timely meet expected cash flow
needs and associated obligations in a manner that results in the lowest cost to the
Corporation. This objective shall be achieved by matching investment maturities
with forecasted cash outflows and maintaining an additional liquidity buffer for
unexpected liabilities.
3. Diversification
Each portfolio shall be diversified by market sector and maturity in order to
manage market risk.
4. Yield
Each investment portfolio shall be designed with the objective of attaining a
reasonable market rate of return throughout economic cycles, taking into account
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the investment risk constraints of safety and liquidity needs. The benchmarks for
each portfolio shall be designed for their comparability to the expected average
cash flow patterns of the portfolio. The investment program shall seek to augment
returns above the applicable benchmark consistent with risk limitations identified
herein and prudent investment policies and practices.
V. Strategies
The Corporation may maintain and manage two portfolios in which funds are pooled for
investment purposes: a Short -Term Portfolio and a Long -Term Portfolio. The Short -Term
Portfolio shall be used to manage that portion of the Corporation's assets that, based on
analysis of historic cash flow patterns, is projected to be needed to meet the Corporation's
cash flow needs within the one year planning and forecast horizon. The Long -Term
Portfolio shall be used to manage that portion of the Corporation's assets that, based on
analysis of historic cash flow patterns and current projections, is not needed to meet the
Corporations cash flow needs within the one year planning and forecast horizon and is
therefore available and suitable for longer term investment.
Operating within appropriately established administrative and procedural parameters
outlined in this Investment Policy, the Corporation shall aggressively pursue optimum
financial rewards in each portfolio, while simultaneously controlling related expenditures.
Cash management functions shall be conducted in a manner that promotes the best
financial and administrative interests of the Corporation. The strategies used are intended
to ensure compliance with the statutes and address suitability of the investments,
preservation of principal, liquidity, marketability of securities, diversification controls and
reasonably attainable yield. The strategies will utilize competitive bidding practices and
other controls as established by this policy for all transactions.
The investment strategy for each portfolio incorporates the specific considerations and the
unique characteristics of the fund groups represented in that portfolio. Each portfolio shall
be invested in high credit quality investments. For the Short -Term Portfolio the
Corporation shall pursue a strategy which fully utilizes its cash assets to obtain a
competitive yield while also allowing the Corporation to meet projected cash flow needs,
to minimize the cost of liquidity, and to maintain the objectives set forth in this policy. The
investment strategy for the Long -Term Portfolio will be focused on appreciation while also
meeting the objectives set forth in this Investment Policy.
VI. Standard of Care
The standard of prudence to be used for all Corporation investments shall be the "prudent
person" standard as established by the PFIA and shall be applied in the context of overall
management of investments. The "prudent person" standard states that:
Investments shall be made with judgment and care, under prevailing
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circumstances, that a person of prudence, discretion, and intelligence would
exercise in the management of the persons own affairs, not for speculation, but for
investment, considering the probable safety of their capital and the probable
income to be derived.
Investment Officers (defined below) acting in accordance with promulgated procedures
and this Investment Policy and exercising due diligence shall be held accountable for any
individual security's credit risk or market price changes but shall not be personally liable
for deviations from expectations so long as deviations from expectations are reported in a
timely fashion and appropriate action is taken to control adverse developments.
VII. Responsibility and Delegation of Authority
A. Board of Directors
By law the Board retains ultimate fiduciary responsibility for each portfolio. The Board is
to annually review and adopt the Investment Policy. In addition, the Board is responsible
for designating one or more individuals to serve as Investment Officers.
B. Investment Officers
By adoption of this Investment Policy in accordance with the PFIA, the Board designates
and appoints the individuals holding the following positions to serve as Investment
Officers to serve in accordance with Texas law and be responsible for the investment of
Corporation funds consistent with this Investment Policy: the Corporations Treasurer
and Assistant Treasurer.
Investment Officers will be responsible for investment decisions and activities. The
Corporation may further contract with a registered Investment Advisor to advise in the
management of each portfolio. The Investment Officers and Investment Advisor shall seek
to act responsibly as custodians of the public trust. No Investment Officer may engage in
an investment transaction except as provided under the terms and procedures adopted in
accordance with this Investment Policy.
The Investment Officers and Investment Advisor are responsible for creating and
maintaining portfolios in accordance with this Investment Policy, providing timely
reporting to the Board, and establishing procedures and controls for the process and
financial counter -parties (brokers, banks, pools). The Investment Officers and Investment
Advisor shall act in accordance with established written procedures and internal controls
for the operation of the investment program consistent with this Investment Policy.
Training
In accordance with the PFIA, all Investment Officers shall attend at least one
training session within twelve months after assuming investment duties and shall
attend eight hours of training every two years thereafter, with the first such two-
year period beginning on the first day of the Corporations fiscal year after the year
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in which the Investment Officer takes the initial training. Training shall be provided
by professional organizations authorized in accordance with Texas law and
designated by the City's Investment Committee.
Ethics and Disclosures
Officers and employees (and any Corporation employees who act on the
Corporation's behalf) involved in the investment process shall refrain from any
personal activity that could conflict with the proper execution and management of
the investment program, or that could impair their ability to make impartial
investment decisions. Investment Officers shall refrain from undertaking any
personal investment transactions with the same individual with whom business is
conducted on behalf of the Corporation.
In addition, all Investment Officers shall file disclosure statements in accordance
with the requirements of the Public Funds Act as applicable.
C. Investment Advisor
The Corporation may engage the services of a Securities and Exchange Commission
registered Investment Advisor (registered under the Investment Advisors Act of 1940) to
assist in the management of an investment portfolio in a manner consistent with the
Corporations objectives and policies. All security transactions will be approved by the
Corporations Treasurer prior to the Investment Advisor taking action. Approval may be
ir1 the form of a phone call, email, facsimile or other written communication. The
Investment Advisor may not be granted total discretion in the management of funds.
VIII. Authorized Financial Institutions, Depositories, and Broker/Dealers
The Investment Officers shall use financial institutions, broker/ dealers, and depositories
that have been authorized to provide investment services by the City's Investment
Committee or by the Board. All counter -parties will be selected through a process of due
diligence. Due diligence requires competitive transactions and delivery versus payment
settlement.
The Corporation will furnish counter -parties with the Corporation action authorizing the
Investment Officers or Investment Advisor to establish and maintain accounts for the
purpose of purchasing and selling securities authorized under Texas law and this
Investment Policy.
Certification
Section 2256.005(1) of the PFIA requires that any business organization offering to engage
in an investment transaction with the Corporation must be provided with a copy of this
Investment Policy with "business organization" defined as "an investment pool or
investment management firm under contract with an investing entity to invest or manage
the entity's investment portfolio that has accepted authority granted by the entity under
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the contract to exercise investment discretion in regard to the investing entity's funds."
That provision also requires the business organization must provide the Corporation with
a written instrument (in a form acceptable to both parties) executed by a representative of
the business organization that substantially acknowledges that the business organization
has:
a. received and reviewed the Corporation's Investment Policy; and
b. implemented reasonable procedures and controls in an effort to preclude
investment transactions with the Corporation that are not authorized by this's
Investment Policy.
Any material changes to the Investment Policy will require re -certification by all
authorized firms.
IX. Authorized Investments
The PFIA lists all possible authorized investments available to Texas public entities. The
Corporation shall invest only in those investments authorized below as such investments
are further defined by the PFIA. If this Investment Policy provides for a lower stated
maximum maturity or other more restrictive condition on an authorized investment that
more restrictive requirement controls. If changes are made to state law to allow for
additional possible authorized investments, such investments will not be authorized by
the Corporation until this Investment Policy is modified and adopted by the Board. All
investment transactions will be made on a competitive basis.
1. Direct obligations of the United States Treasury.
2. Obligations of United States government agencies and instrumentalities, including
mortgage -backed securities and collateralized mortgage obligations which pass the
Federal Reserve's bank test.
3. FDIC -insured and/or collateralized certificates of deposit as allowed by law.
4. FDIC -insured brokered certificates of deposit securities from a bank in any US state,
delivered versus payment to the Corporation's safekeeping agent. Before purchase,
the Investment Officers or Investment Advisor must verify the FDIC status of the
bank to ensure that the bank is FDIC -insured.
X. Collateralization
Time and Demand Pledged Collateral
All time and demand deposits shall be secured above FDIC coverage by pledged
collateral. In order to anticipate market changes and provide a level of security for all
funds, collateral will be maintained and monitored by the pledging depository at 102% of
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market value of principal and accrued interest on the deposits. The bank shall monitor and
maintain the margins on a daily basis. All collateral shall be subject to inspection and audit
by the Corporation or its auditors.
Collateral pledged to secure deposits shall be held by an independent financial institution
outside the holding company of the depository, approved by the Investment Officers, in
accordance with a safekeeping agreement executed under the terms of the Financial
Institutions, Reform, Recovery, and Enforcement Act.
Authorized Collateral
As authorized by the Public Funds Collateral Act and further restricted by this Investment
Policy, acceptable collateral for time and demand deposits and repurchase agreements
shall include only:
Obligations of the U.S. Government, its agencies and instrumentalities, including
mortgage -backed securities and CMO that pass the bank test, and
Obligations of any U.S. state, municipal corporation, county or authority rated at
least A by two nationally recognized statistical rating organizations.
XI. Internal Controls
The Investment Officers have the responsibility of establishing and maintaining an
internal control structure designed to provide reasonable assurance that assets are
protected from loss, theft, or misuse. The concept of reasonable assurance recognizes that
the cost of a control should not exceed the benefits likely to be derived, and, the valuation
of costs and benefits requires ongoing estimates and judgments by management.
The internal controls shall address the following points at a minimum:
- Control of collusion,
- Separation of transaction authority from accounting and record keeping,
- Custodial safekeeping,
- Clear delegation of authority,
- Written documentation on all transactions, and
- Review, maintenance and monitoring of security procedures.
In accordance with the PFIA, a compliance audit of management controls on investments
and adherence to this Investment Policy shall be conducted in conjunction with the
Corporations annual external financial audit.
The Investment Officers will develop and maintain internal procedures, describing use of
bank balances, calculation of the Corporations liquidity needs, daily investment
procedures, investment transaction documentation, and distribution of reports, at a
minimum.
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XII. Safekeeping
All security transactions will be settled on a delivery versus payment basis.
Securities owned by the Corporation will be held by the Corporations depository or other
Corporation -contracted safekeeping institution independent from any security
transactions. All safekeeping contracts will be executed in writing. The safekeeping agent
shall provide documentation of all securities and evidenced by safekeeping
receipts/reports indicating ownership by the Corporation.
XIII. Reporting
Quarterly Reporting
In accordance with the PFIA, the Investment Officers or Investment Advisor will prepare
and submit a report to the Board no less than quarterly. The report will comply with the
PFIA and will contain, at a minimum, the following information for each portfolio (Short -
Term and Long -Term):
a. a detailed description of each investment position as of the date of the report,
including book and market values and purchase yield;
b. individual transactions (buy/ sell, maturities, calls) during the period;
C. summary statements for each portfolio including:
(1) beginning and ending book value for the reporting period,
(2) beginning and ending market value for the reporting period,
(3) change in market value (volatility measure) for the reporting period,
(4) total earnings for the reporting period,
(5) weighted average maturity ("WAM") at the beginning and end of the
period, and
(6) actual yield and benchmark yield for the reporting period.
d. securities lending income stated as a separate amount and also expressed as a part
of the overall actual -yield calculation, with overall yield shown in comparison to
benchmark;
e. asset allocation by maturity and market sector;
f. compensating balances maintained at depositories at its earned credit rate ("ECR")
stated as a separate amount and also expressed as a part of the overall actual -yield
calculation, with overall yield shown in comparison to benchmark; and
g. overall blended yield (taking into account both securities lending and ECR
revenues) in comparison to benchmark.
The quarterly report shall include a statement of compliance for each portfolio as it relates
to this Investment Policy and shall be signed by each Investment Officer and Investment
Advisor. In order to maintain the transparency of the program, the reports shall be made
easily available and clear and concise for the reader.
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Prices used for calculation of market values will be obtained from an independent source.
XIV, Investment Policy Adoption
The Investment Policy shall be reviewed and adopted by the Board at least annually. The
adopting instrument shall identify any changes made to the Investment Policy.
XV. Adoption
Adopted October 24 "2017.
Mary J. Kaysei
Assistant Secretary
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