Laserfiche WebLink
ATTACHMENT <br />OBJECTIVE <br />The primary objectives, in priority order, of the City's investment action shall be: <br />a. Safety: Safety of principal is the foremost objective of the investment program. <br />Investments of the City shall be undertaken in a manner that seeks to ensure the <br />preservation of capital in the overall portfolio. To attain this objective, <br />diversification is required in order that potential losses on individual securities do <br />not exceed the income generated from the remainder of the portfolio. <br />b. Liguiditx: The City's investment portfolio will remain sufficiently liquid to enable <br />the City to meet all operating requirements which might be reasonably <br />anticipated. <br />C, Yield: The City's investment portfolio shall be designed with the objective of <br />attaining a market rate of return throughout budgetary and economic cycles, <br />taking into account the City's investment risk constraints and the cash flow <br />characteristics of the portfolio. <br />CONCENTRATION OF RISK <br />Government Accounting Standards Board (GASB) statement No. 40 recognizes that <br />there are many factors that can affect the value of investments. Investment risk factors <br />include credit risk, custodial credit risk, concentration of credit risk, interest rate risk, and <br />foreign currency risk. <br />Credit risk is the risk of loss due to failure of an issuer of a security or a financial <br />institution. The City purchases U.S. Treasuries and high-grade securities which will <br />lessen this type of risk. In addition, the portfolio will be diversified so that the failure of <br />any one issuer will not unduly harm the City's cash flow. <br />Custodial credit risk is the risk that in the event of the failure of the custodian, the <br />investments may not be returned. The City's investment securities are to be held by a <br />third party custodian designated by the City and evidenced by safekeeping receipts. <br />Concentration of credit risk is the risk associated with a lack of diversification of <br />having too much invested in a few individual issuers, thereby exposing the organization <br />to greater risks resulting from adverse economic, political, regulatory, geographic, or <br />credit developments. The City's investments will be diversified and will not exceed <br />maximum percentages allowed in the California Government Code. <br />Interest rate risk is the risk that the market value of securities in the portfolio will fall <br />due to an increase in general interest rates. Interest rate risk may be reduced by <br />structuring the portfolio so that securities are maturing periodically to meet cash <br />requirements for ongoing operations, thereby avoiding the need to sell securities on the <br />2 <br />