HomeMy WebLinkAbout20043476.tiff WELD COUNTY RETIREMENT PLAN
STATEMENT OF INVESTMENT POLICY
February 11, 1994
(Revised June 1997, November 1999, February 2001, May 2002, November 2003)
This Statement of Investment Policy approved by action o Retirement Board the
Weld County Retirement Plan.
DATE: /7,09-3 APPROVED BY:
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2004-3476
Investment Policy Statement
Weld County Retirement Plan
November 2003
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 November 2003 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 classes 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
Large Cap U.S Equities 35% 30% -40%
Small Cap U.S. Equities 15% 10% - 20%
Non-U.S. Equities 15% 10% -20%
Total Equity 65% 60% - 70%
Fixed Income 35% 30% -40%
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 two 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
Investment Policy Statement November 2003 Page 2
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.
The Funds 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 the
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.
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 November 2003 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 November 2003 Page 4
APPENDIX A
INVESTMENT MANAGER STRUCTURE
Target
Investment Manager Asset Class Allocation Style
Morgan Stanley Investment Non-U.S.Equity 7.5% Value
Management U.S. Bonds 15.0% Core
Vanguard Explorer-Admiral Shares U.S.Small/Mid Cap 15.0% Core/Growth
Artisan Partners Non-U.S. Equity 7.5% Core
Deutsche Capital Management U.S. Bonds 20.0% Core
Scudder Fixed Income Fund
State Street Global Advisors U.S.Large Cap 17.5% Value Index
Vanguard Institutional Index U.S. Large Cap 17.5% Index
PERFORMANCE BENCHMARKS
Portfolio Passive Index Active Manager Peer Universe
Total Plan 8.0% N/A
Composite Index:
17.5% S&P 500/
17.5% Russell 1000 Value/
15% Russell 2500 Growth/
15% MSCI EAFE/
35% Lehman Aggregate Bond
Vanguard Institutional Index Fund S&P 500 N/A
State Street Global Advisors Russell 1000 Value N/A
Vanguard Explorer Fund-Admiral Russell 2500 Growth US Small Cap Growth Equity
Morgan Stanley Institutional
International Equity A Fund MSCI EAFE International Equity
Artisan International Fund-Instit. MSCI EAFE International Equity
Morgan Stanley Institutional Core Plus
Fixed Income Fund Lehman Aggregate Bond US Core Bond
Scudder Fixed Income Fund-
Institutional(Deutsche Cap.Mgmt.) Lehman Aggregate Bond US Core Bond
Investment Policy Statement November 2003 Page 5
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