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Home My WebLink About20081417.tiff WELD COUNTY RETIREMENT PLAN STATEMENT OF INVESTMENT POLICY February 11, 1994 (Revised June 1997, November 1999,February 2001, May 2002, November 2003, November 2004, February 2006, February 2008) This Statement of Investment Policy approved by action of the Retirement Board of the Weld County Retirement Plan. DATE: / "6,` ®$ APPROVED BY: 7 _ tat:c-H,Ctake--izaJ Pcoo(6 -5//a/iDDcP 2008-1417 Investment Policy Statement Weld County Retirement Plan February 2008 Overview The Weld County Retirement Plan,sometimes hereinafter referred to as the"Plan",is a defined benefit pension plan providing retirement benefits to eligible employees of Weld County, Colorado. The Plan is funded by contributions from participating employees of Weld County and by matching contributions from Weld County. These contributions are paid into the Retirement Fund of Weld County,sometimes hereinafter referred to as the"Fund". This Investment Policy Statement("IPS")was established for the investments of the Fund. The purpose of this IPS is to detail the financial goals to be achieved and to articulate the investment strategy that will be used to accomplish those goals. The IPS assists in the investment decision- making process by communicating an understanding of the goals and strategies to all parties involved and by providing discipline to the process through clearly stated guidelines. The intent of this IPS is to provide guidelines that are specific enough to be meaningful but also flexible enough to take into account practical considerations. This IPS will be reviewed at least annually, or as needed,to incorporate any changes in the Fund's circumstances. If modifications are made, they shall be promptly distributed to all investment managers and other involved parties. Responsibilities Under Article 54,Title 24, of the Colorado Revised Statutes, the County Board of Retirement shall have full and complete control and management of the Plan. The Board of Retirement shall make all necessary rules and regulations for managing and discharging its duties. The Board of Retirement is responsible for establishing and maintaining this IPS, as well as managing, monitoring and evaluating the investments of the Fund on an ongoing basis. The Board of Retirement has retained an independent investment consulting firm to assist with development,implementation and monitoring of the investment program. The Board of Retirement will retain,with the assistance of the investment consultant,qualified investment management firms to manage the assets of the investment program. Retained investment management firms will be responsible for managing their portion of the investments with full discretionary investment authority, subject to the Policies and Guidelines set forth in this document. All retained investment management firms are expected to meet at least annually with the Board and provide quarterly written reports on portfolio activity, investment performance and investment strategies. Further,the investment management firms will be responsible for notifying the Board of Retirement and the investment consultant of any significant organizational changes,such as key personnel,ownership,process or style. Investment Policy Statement February 2008 Page 1 Investment Objectives The objective of investing the assets of the Plan is to grow the assets over time at a compound rate of increase that,together with employee and County contributions,will assure payment of benefits stipulated by the Plan. The actuarial assumption for the Plan is to earn a total rate of return of 8% per annum,net of investment expenses. The Board of Retirement recognizes that the rate of return objective is long term in nature,and that actual year-to-year returns achieved will be above or below the long-term target. The Board of Retirement further expects the investments to provide a competitive return relative to other investments available that would meet the asset allocation strategy. Asset Allocation Strategy The asset allocation strategy is designed to reflect,and be consistent with, the long-term investment objective expressed in this IPS. Various asset dasses and investment manager styles are used to create a broadly diversified portfolio. The Fund's current investment manager structure is detailed in Appendix A. The following table displays the asset allocation strategy to be used to achieve the objectives described above. The percentages are based on the market value of the investments. Asset Class Long-Term Target Allowable Range U.S. Equities 40.0% 35%-45% Non-U.S. Equities 25.0% 20%-30% Total Equity 65.0% 60%-70% Fixed Income 25.0% 20%-30% Private Equity Real Estate 10.0% 5%- 15% Liquidity The allocation to cash equivalents has been segregated from the asset allocation targets and ranges as outlined above. These cash reserves will be held in money market funds in the Plan's deposit account at the Trustee bank. The appropriate level of cash reserves will depend upon anticipated liquidity needs as determined by the Board on an ongoing basis. The current cash equivalents target level is equal to approximately one months of benefit payments,or$600,000. Rebalancing The portfolio should be rebalanced to maintain the desired risk/return posture implied by the long-term target asset allocation mix. If a cash contribution is made or withdrawal is needed, the portfolio should be rebalanced toward the long-term target, as possible,given the dollar amount of the contribution or withdrawal. That is, invest contributions in underweight asset classes and withdraw from overweight asset classes. In addition, the portfolio will be rebalanced if the actual asset allocation mix falls outside of the allowable ranges noted above. Investment Policy Statement February 2008 Page 2 The Fund's asset allocation will be monitored by the Plan's directed trustee bank. The directed trustee will effect a rebalancing of the assets to the long-term target allocation whenever the month-end market value allocation falls outside the allowable ranges. Investment Guidelines Fiduciary Standard The Plan is a noninsured trust retirement plan,with a bank or trust company authorized to exercise trust powers in Colorado as trustee. As such,the Fund will be invested using the "Colorado Uniform Prudent Investor Act" found in the provisions of Part 3 of Article 1 of Title 15, C.R.S. Further,initial and subsequent sums of money available for investment shall be invested only in such investments as are specified in Section 24-54-112 of C.R.S. The Plan assets shall be invested and managed as a prudent investor would,by considering the purposes,terms,distribution requirements,and other circumstances. In satisfying this standard, all fiduciaries shall exercise reasonable care,skill and caution. Investment decisions should be evaluated within the context of the entire portfolio(rather than on an individual investment basis) and as part of an overall investment strategy having risk and return objectives reasonably suited to the Fund's purpose. Investment Discretion Investments shall be fully consistent with each manager's stated investment strategy and approach. Allowable investments are restricted by the Fiduciary Standard section and any manager specific guidelines found in Appendix B of this IPS. Investment managers will be held to the Fiduciary Standard and will be reviewed based upon the criteria found in the Review Standards section and Appendix B of this IPS. Separate accounts,mutual funds and other investment vehicles may be used based upon the most favorable approach for the Fund's circumstances,assuming the vehicle meets the Fiduciary Standard and specific guidelines for the manager. It is recognized that if a pooled fund is used, the fund's investment manager, rather than the Plan, sets the fund's investment policies,strategies,objectives, guidelines and restrictions, and therefore certain policies within this IPS may not apply or be fully met. Securities Trading Investment managers have a fiduciary obligation to obtain best execution for the Fund's investments. Transactions must be executed in such a manner that the Fund's total cost or proceeds in each transaction is the most favorable under the circumstances of the particular transaction. The manager should consider the full range and quality of a broker's services in placing trades,including,among other things, the value of research provided,execution capability, commission rate,financial responsibility,and responsiveness to the manager. The Board of Retirement may enter into a commission recapture program or discount commission program. If so,investment managers are expected to use such programs at agreed- upon levels of direction,assuming best execution is still obtainable through such programs. Investment Policy Statement February 2008 Page 3 Securities Lending The Board of Retirement may enter into a securities lending program with the custodian of the investment securities. The merits of using such a program will be based on several factors including; the lendability of the portfolio investments, the amount of rebated income, the indemnification agreement, and the custodian's capabilities such as typical amount on loan, broker/dealer credit review process,collateral investment strategies,systems,professional staff and other critical areas. Any approved securities lending activity will be subject to a separate written agreement. This guideline applies only to separately managed accounts. Proxy Voting Investment managers have a fiduciary obligation regarding proxy voting. The investment manager must consider proxies as an asset of the Plan and is expected to vote only in the best economic interest of the Plan. Review Standards Performance Benchmarks The performance benchmarks for each investment manager and the total portfolio are outlined in Appendix A. Active investment managers are expected to outperform, on a net-of-fee basis, the designated passive index,and rank above median within a peer universe of active investment managers. Index comparisons are used to measure the performance of an active manager against a passively managed index alternative. Peer universe comparisons are used to measure the performance of an active manager against alternative active investment managers who manage portfolios in a similar style. Time Horizon Active investment managers are expected to outperform their designated benchmark over rolling five-year periods. A five-year period is used to allow investment managers the opportunity to meet their performance benchmarks,given shorter-term fluctuations due to style considerations. Investment managers who fail to meet the performance benchmarks outlined in Appendix A over these time periods may be terminated. Underperformance for two consecutive years may be cause for a formal review of the investment management firm's organization,process and performance. Other Standards Any significant changes in investment philosophy and process,organizational structure, investment staff, or other non-performance reasons may be cause for termination,regardless of the status of their investment performance relative to their designated benchmarks. The Board of Retirement retains the right to terminate an investment manager for any reason subject to the terms of the agreement between the two parties. Investment Policy Statement February 2008 Page 4 APPENDIX A INVESTMENT MANAGER STRUCTURE Target Investment Manager Asset Class Allocation Style State Street Global Advisors U.S. Large Cap 10.0% Value Index Vanguard Institutional Index U.S. Large Cap 15.0% Index T.Rowe Price Associates U.S. Large Cap 5.0% Growth Fred Alger Management U.S.Small/Mid Cap 10.0% Growth Dodge&Cox International Stock fund Non-U.S. Equity 12.5% Value Artisan Partners Non-U.S. Equity 12.5% Core/Growth Aberdeen Core Fixed Income fund U.S.Bonds 25.0% Core Private Equity Real Principal U.S.Property Account Estate 10.0% Core PERFORMANCE BENCHMARKS Portfolio Passive Index Active Manager Peer Universe Total Plan 8.0% N/A Composite Index: 40%Russell 3000/ 25%MSCI ACWI ex-U.S./ 25%Lehman Aggregate Bond 10%NCREIF Property Vanguard Institutional Index Fund S&P 500 N/A State Street Global Advisors Russell 1000 Value N/A T. Rowe Price Growth fund Russell 1000 Growth US Large Cap Growth Equity Fred Alger Smid Cap Growth Russell 2500 Growth US Small Cap Growth Equity Dodge&Cox Stock fund MSCI All-Country World ex-U.S. International Equity Artisan International Fund-Instit. MSCI All-Country World ex-U.S. International Equity Aberdeen Core Fixed Income fund Lehman Aggregate Bond US Core Bond Principal U.S. Property Account NCREIF Property Private Equity Real Estate Investment Policy Statement February 2008 Page 5 Hello