HomeMy WebLinkAbout881363.tiff WELD COUNTY, COLORADO
WELD COUNTY RETIREMENT PLAN
STATEMENT OF INVESTMENT POLICY
June 22, 1988
This Statement of Investment Policy approved by action of the Retirement Board
of the Weld County Retirement Plan. j/ /
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WELD COUNTY, COLORADO
WELD COUNTY RETIREMENT PLAN
STATEMENT OF INVESTMENT POLICY
June 22, 1988
I . PREAMBLE
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."
The Board of Trustees of the Weld County Retirement Plan, sometimes
hereinafter referred to as the "Board" or the "Retirement Board," is
responsible for implementing and insuring adherence to the provisions
of the Plan and for the investment of the Fund. The Board is author-
ized to retain professional investment managers to assist them in the
investment of the assets of the Fund.
II. PURPOSE
The purpose of the Statement of Investment Policy is to:
A. Set forth the investment objectives, policies, and guidelines that
are to govern the investment of the assets of the Fund.
B. Establish the criteria which the investment management organiza—
tions retained by the Board are expected to meet and against which
they are to be measured.
C. Communicate the investment objectives, guidelines, and performance
criteria to the investment managers.
D. Serve as a review document to guide the Board's ongoing oversight
of the investment of the Fund.
III. INVESTMENT OBJECTIVES
A. Real Rate of Return Objective: The long—term investment objective
for the total pool of assets that comprises the Retirement Fund is
to earn an investment return which exceeds the inflation rate, as
measured by the Consumer Price Index, by 4% per year. Investment
return means total compound return, calculated to recognize all
cash income plus realized and unrealized capital gains and losses.
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B. Cash Income Requirements: Since there are no immediate liquidity
demands on the Fund, the source of investment return is not
important. There is no preference for cash income as opposed to
realized capital gains.
C. Relative Performance: In addition to the Real Rate of Return
objective stated above, the Fund is expected to earn a rate of
return which exceeds the average rate of return earned by similarly
invested Funds.
D. Measurement Period: In most cases, a fair market cycle of from
three to five years duration is required for judging whether the
Real Rate of Return and the Relative Performance objectives have
been met.
E. Fiduciary Standards: The assets of the Fund shall be invested in a
manner that is consistent with generally accepted standards of
fiduciary responsibility. The safeguards which would guide a
prudent expert will be observed. All transactions that utilize
assets of the Fund will be undertaken for the sole benefit of the
participants in the Plan. Common sense, reasonableness and honesty
must prevail. Any laws or regulations specific to the investment
of assets of public retirement plans in the State of Colorado, or
in Weld County, will be observed.
IV. INVESTMENT GUIDELINES
A. Permissible Investments: Plan assets may be invested in publicly-
traded common and preferred stocks, convertible bonds and preferred
stocks and fixed income securities, whether interest-bearing or
discount instruments, including money market instruments, subject
to any restrictions hereinafter specified. No other securities are
permissible investments without the specific approval of the Board.
B. Asset Mix: The well-funded status of the Plan, the 4% real
rate-of-return objective and the investment preferences of the
Retirement Board imply a balanced investment approach. Specific-
ally, the Board intends to insure that the Fund conforms to the
following asset allocation guidelines:
Long-Term Allowable
Target Range
EQUITY (not including any Cash
Equivalents) 50% 35% - 50%
FIXED INCOME (including all short-term
cash reserves) 50% 50% - 65%
These percentages will be based on the cost value of investments.
The Board will also consider the market value of investments as
important.
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C. Equity Investments:
1. The Board believes that the overall management of that portion
of the Fund that is committed to equity securities ought to be
managed defensively, being characterized by all of the
following:
a. Volatility, or risk level, less than the overall stock
market (as measured by the S & P 500 Index) . Losses in
periods of market decline should be less than the loss in
the overall market.
b. Diversification should be sufficient to moderate risk but
not so excessive as to preclude attainment of optimal
results. Diversification refers to both individual stock
and industry exposure.
c. No more than 5% of the equity assets, on a cost basis, may
be invested in the stock of any one issuer.
d. An emphasis on high quality common stocks.
2. Foreign Securities: Investment in any securities whose issuer
is a foreign corporation, government, or governmental entity
shall be limited to 10% of equity assets under management.
Equity investments will include only those securities traded on
principal United States exchanges as American Depository
Receipts (ADRs) .
D. Fixed Income Investments: The portion of the Fund committed to
fixed income securities is to emphasize intermediate-maturity
bonds, such that:
1. The weighted-average maturity is always in the 2 to 10 year
range.
2. An individual bond's maturity should generally be less than 15
years. No more than 10% of the fixed income assets, including
cash, may be invested in bonds with maturities exceeding 15
years.
3. All bonds owned by the Fund should be rated 'BBB' or better by
Standard and Poor's or an equivalent rating agency.
4. Adequate diversification by issuer and sector should be
maintained. However, this diversification requirement shall
not apply to United States government securities which may be
held in unlimited amounts within the fixed income component of
the Fund.
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V. INVESTMENTS AND TRANSACTIONS THAT ARE NOT PERMITTED
A. Equity Investments: The following are not permissible investments:
1. Common stock in non-public corporations.
2. Short sales of any type.
3. Letter or restricted stock.
4. Buying or selling on margin.
B. Fixed Income Investments: The following are not permissible
investments:
1. Tax—exempt bonds.
2. Bonds, notes or other indebtedness for which there is no public
market (private placements).
3. Corporate obligations not rated at least 'BBB' by Standard and
Poor's or an equivalent, recognized rating agency. Unrated
corporate bonds are not permissible investments.
4. Commercial paper not rated Al/Pl.
5. Master notes, unless specifically approved by the Retirement
Board.
6. Any new direct placement of mortgages on real property. This
does not apply to those mortgages already part of the fund as
of January 1, 1988.
7. Letters of credit guaranteed by the Fund.
C. Options and Futures: The selling of covered—call options is
permitted provided that prior Board approval has been granted.
Other types of transactions are not permitted in options contracts
or futures contracts of any kind.
D. Securities Lending: Securities owned by the Fund, but held in
custody by another party, such as a bank custodian, will not be
loaned to any other party for any purpose, unless such securities
lending is pursuant to a separate written agreement which the Board
has approved.
E. Mortgages and Other Loans: As of January 1, 1984, investment
managers retained by the Plan are prohibited from granting mortgage
loans or entering into other types of lending agreements, with
individuals or business entities, whether secured or not, until
further advised by the Board. Investments in commingled funds
which hold any such lending commitments are likewise prohibited.
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VI. OTHER POLICIES
A. Investment Manager Structure: The Board shall retain one or more
investment management firm to implement the investment program
defined herein. Firms retained by the Board to manage balanced
portfolios of stocks and bonds will require specific asset mix
guidelines for the portion of the Fund that they manage to insure
that the asset percentage targets for the overall Fund are
observed. Unless directed otherwise, balanced managers may not
invest more than 50% of the assets they are responsible for
managing in equity securities.
B. Investment Manager Discretion: Any investment manager retained by
the Fund is to have full discretionary investment authority over
the assets he is responsible for managing, subject to the
guidelines and policies set forth in this document.
C. Use of Commingled Funds: Investment managers retained by the Board
may invest plan assets in commingled funds, provided that:
1. Such investments in commingled funds are consistent with the
guidelines established herein; and
2. Securities held in the commingled funds are permissible
investments for plan assets.
D. Guaranteed Investment Contracts: Commitments to GIC's may be made
by the Board when and if, in the Board's opinion, prevailing
economics and market conditions render such investments desirable.
E. Real Estate: The Retirement Board reserves the right to consider
investment of the Fund's assets in real property as a participant
in a commingled real estate fund managed by a bank, insurance
company, or other professional real estate investment manager.
Investment in real estate may not be undertaken at the discretion
of investment managers without written approval from the Board. In
no event shall any investment in real estate exceed 10% of the
total market value of the Fund's assets.
F. Securities Trading: The emphasis of security trading should be on
a best execution basis, i.e. , the highest proceeds to the Fund and
the lowest cost, net of all transactions expenses. Placement of
orders should be based on the financial viability of the brokerage
firm and the assurance of a prompt and efficient execution.
VII. REVIEW PROCEDURES
A. Review and Modification of Investment Policy Statement: The Board
shall review this Investment Policy Statement at least once a year
to determine if modifications are necessary or desirable. If
modifications are made, they shall be promptly communicated to all
investment managers and other interested persons.
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B. Meetings with Investment Managers: Investment managers are
expected to meet at least semi—annually with the Board to review
its portfolio and investment results in the context of this
Investment Policy Statement. Managers are expected to meet more
often with the Board if requested to do so by the Board.
Quarterly, retained investment management is expected to provide
written reports on portfolio activity, changes in investment
strategy, investment performance, and economic and market analyses.
Additionally, retained investment management is expected to keep
the Retirement Board informed of the investment management's
organization and decision-making structure. Any significant
changes in ownership, decision-making process, style or personnel
should be communicated as known.
C. Performance Measurement: The Board intends to review quarterly the
performance of the Retirement Fund and of the individual investment
managers relative to the objectives and guidelines described herein.
Such a review may include performance analysis and comparisons
compiled by individuals or firms retained by the Board. The
investment performance review will include comparisons with
unmanaged market indices, a broad universe of investment managers,
and the Consumer Price Index. In addition, dollar-weighted rates
of return will be compared to the Plan's actuarial requirements.
D. Performance Benchmarks: The Board expects that investment managers
will achieve the following performance benchmarks over a fair
market cycle of three to five years.
1. Balanced Managers:
a. A compound time-weighted rate of return in excess of the
average return earned by a representative sample of
similarly invested funds.
2. Equity Components of the Fund:
a. A compound time-weighted rate of return in excess of the
S&P 500 (with dividends).
b. A cumulative rate of return that exceeds the increase in
the Consumer Price Index by 6.0 percentage points per year.
c. Rank above average when compared to a representative sample
of other equity investment managers.
3. Fixed Income Components of the Fund:
a. A compound time-weighted rate of return in excess of the
Shearson/Lehman Government/Corporate Intermediate Term Bond
Index.
b. A cumulative rate of return that exceeds the increase in
the Consumer Price Index by 2.0 percentage points per year.
c. Rank above average when compared to a representative sample
of other fixed-income investment managers.
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