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5. To achieve a long-term level of return commensurate with contemporary economic <br /> conditions and equal to or exceeding the investment objective set forth in this Policy <br /> Statement under the section labeled "Performance Expectations". <br /> Investment Guidelines <br /> Within this section of the Policy Statement, several terms will be used to articulate various investment <br /> concepts. The descriptions are meant to be general and may share investments otherwise considered to <br /> be in the same asset class. They are: <br /> "Growth Assets" -a collection of investments and/or asset classes whose primary risk and return <br /> characteristics are focused on capital appreciation. Investments within the Growth Assets category can <br /> include income and risk mitigating characteristics, so long as the predominant investment risk and <br /> return characteristic is capital appreciation. Examples of such investments or asset classes are: <br /> domestic and international equities or equity funds, private or leveraged equity, certain real estate <br /> investments, and hedge funds focused on equity risk mitigation or equity-like returns. <br /> "Income Assets" - a collection of investments and/or asset classes whose primary risk and return <br /> characteristics are focused on income generation. Investments within the Income Assets category can <br /> include capital appreciation and risk mitigating characteristics, so long as the primary investment risk <br /> and return characteristic is income generation. Examples of such investments or asset classes are: <br /> fixed income securities, guaranteed investment contracts, certain real estate investments, and hedge <br /> funds focused on interest rate risk mitigation or income investment-like returns. <br /> II� <br /> "Real Return Assets" -a collection of investments and/or asset classes whose primary risk and return <br /> characteristics are focused on real returns, net of inflation. Investments within the Real Return <br /> category may include, but are not limited to, inflation protected securities, commodities, certain real <br /> estate investments, natural resources, liquid alternatives and hedge funds. <br /> Time Horizon <br /> The Trust's investment objectives are based on a long-term investment horizon("Time Horizon")of five <br /> years or longer. Interim fluctuations should be viewed with appropriate perspective. The Administrator <br /> has adopted a long-term investment horizon such that the risks and duration of investment losses are <br /> carefully weighed against the long-term potential for appreciation of assets. However, this portfolio of <br /> assets is viewed by the City as the first pool of assets that would be utilized to support pension expenses. <br /> As such, the time horizon for this portfolio could be less than five years based on budget conditions, or <br /> any increase in expenses arising from CaIPERS. <br /> Liquidity and Diversification <br /> In general, the Trust may hold some cash, cash equivalent, and/or money market funds for near-term <br /> Trust benefits and expenses(the"Trust Distributions"). Remaining assets will be invested in longer-term <br /> 5 <br />