(a) General. The Board of Trustees of the Boynton Beach General Employees’ Pension Fund has established this Statement of Investment Policy. This policy has been identified by the Board as having the greatest expected investment return, and the resulting positive impact on asset values, funded status, and benefits, without exceeding a prudent level of risk. The Board determined this policy after evaluating the implications of increased investment return versus increased variability of return for several potential investment policies with varying commitments to different asset classes.
(b) Purpose. This Statement of Investment Policy is intended to complement the investment guidelines provided in applicable State Statutes, and local ordinances. The purpose to this Statement is to:
(1) Provide the investment manager a more accurate understanding of the trustees’ investment objectives; and
(2) Indicate the criteria by which the investment manager’s performance will be evaluated.
(c) General objectives. The primary investment objective of the Boynton Beach General Employees' Pension Fund is to achieve the absolute return objective over the near-term, intermediate-term and longer-term time periods. The secondary objective is to achieve moderate long-term real growth of the assets while minimizing the volatility of returns. To achieve these objectives, the Board of Trustees seeks to create a conservative, well diversified and balanced portfolio of asset classes managed in separate accounts, mutual funds, commingled funds, and/or limited partnerships. The Board has determined that one or more outside investment managers shall be retained to assure that all investments are managed in both a prudent and professional manner and in compliance with the stated investment guidelines. The Board of Trustees will make direct investments in fund structured investments and acknowledges that no guidelines may be imposed on these investments.
(d) Investment manager responsibilities.
(1) Within the guidelines and restrictions set forth herein, it is the intention of the Board to give the investment manager full investment discretion, with respect to assets under its management. The investment manager shall discharge its responsibilities in the same manner as it would if the fund were governed by the fiduciary, responsibility provisions of the Employee-Retirement Income Security Act of 1974 (ERISA). Although the fund trustees acknowledge that ERISA does not apply to a governmental fund, it hereby imposes the fiduciary provisions of ERISA upon each investment manager whose performance shall conform to the statutory provisions, rules, regulations, interpretations, and case law of ERISA. The investment manager shall acknowledge, in writing, that it is a named fiduciary of the fund.
(2) Each investment manager is expected to provide any reasonable information requested by the Board of Trustees. At a minimum, each manager shall provide a quarterly report detailing their investment activity, the portfolio’s current value, and any changes in investment philosophy or strategy. Each investment manager is expected to meet with the Board of Trustees or their designated representatives periodically to review investment performance and philosophy.
(3) Unless otherwise provided by the Fund’s custodian, each investment manager will monitor portfolio activity to minimize uninvested cash balances.
(4) Each investment manager shall be responsible only for those assets under their management.
(5) It will be the responsibility of each investment manager to review the monthly valuations provided by the Fund’s custodian and to note, in writing, any significant discrepancies from the valuations provided in their own reports.
(e) Florida Statute 112.
(1) Expected annual rate of return. With consideration to rates of return from different asset classes, the Board of Trustees has crafted its investment program in order to deliver an expected rate of return similar to that of the actuarial assumed rate. The Board shall determine for each actuarial valuation, the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. The total expected annual rate of return is anticipated to be similar to the actuarial assumed rate of return. This determination is to be filed with the Department of Management Services and with the plan sponsor and consulting actuary.
(2) Continuing education. The Board of Trustees relies on its consultants and professionals to provide continuing education on pension and investment issues. The Board of Trustees also recognize state and regional conferences as a source of continuing education. The Trustees are encouraged to attend conferences, schools, and other functions periodically in order to fulfill this requirement.
(3) Filing of investment policy. The investment policy is to be promptly filed with the Department of Management Services, plan sponsor and consulting actuary. The effective date of the investment policy and any amendment thereto shall be the 31st calendar day following the filing date with the plan sponsor.
(f) Investment objectives. Given the above stated purpose of the Boynton Beach General Employees' Pension Fund, the Board of Trustees recognizes the necessity of a long-term horizon when formulating investment policies and strategies. However, shorter-term investment goals have been established and are intended to provide quantifiable benchmarks to measure and evaluate portfolio return and risk.
(1) Most investment styles require a full market cycle to allow an investment manager to demonstrate his abilities. A full market cycle is generally defined as a three-to-five-year time period. As a result, performance results will be measured over a three-to- five-year period. Performance over shorter time periods will be monitored as a means of identifying the trend of results.
(2) The specific investment objectives of the Boynton Beach General Employees’ Pension Fund are as follows:
a. Absolute Return Objective: The goal of the Boynton Beach General Employees' Pension Fund shall be to achieve an average annual rate of return greater than the applicable actuarial assumed rate of return net of investment expenses over the longer term (3 to 5 years),
b. Market Return Objective: In order to provide a reference of fund return and risk relative to a similar basket of passive assets, the board has developed a "Target Index". The fund's objective is to achieve a rate of return over the long term (3 to 5 years), which exceeds the return of a Target Index.
1. The Target Index for the Boynton Beach General Employees' Pension Fund is defined as a 35% investment in the Russell 1000 Stock Index, a 15% investment in the Russell 2000 Stock Index, a 10% investment in the MSCI Europe, Australasia and Far East Stock Index, a 20% investment in the NCREIF Property Index and a 15% investment in the Bloomberg Barclays Capital Aggregate Bond Index.
c. Peer Return Objective: It is expected that the total rate of return earned by the Fund and the returns earned by the stock and bond portions of the portfolio will each rank in the top 50% when compared to a representative universe of other, similarly managed portfolios.
(g) Investment guidelines.
(1) The Board of Trustees has established the following target asset allocation for the entire Boynton Beach General Employees’ Pension Fund:
Target Allocation (at market)
|
Target Range (at market) |
Representative Benchmark
|
Target Allocation (at market)
|
Target Range (at market) |
Representative Benchmark
| |
Equity: | |||
Domestic Large Cap equity | 35% | 25% - 60% | Russell 1000 |
Domestic Small/Mid Cap | 15% | 5% - 20% | Russell 2000/2500 |
Foreign equity | 10% | 5% - 25% | MSCI EAFE |
Total Equity | 60% | ||
Fixed income & equivalents | |||
Fixed income | 20% | 10% - 70% | Bloomberg Barclays Agg/Int |
Direct real estate | 20% | 5% - 30% | NCREIF Property Index ODCE |
Cash equivalents | 0% | 0% - 10% | T-bills |
It may be necessary to rebalance the portfolio periodically to maintain policy targets and diversification. The Board of Trustees will monitor each component of the Retirement Plan (including asset class, mutual fund, and portfolio manager asset values) and will adjust as necessary at quarterly meetings. To implement this strategy, the Board has chosen to hire one or more professional investment managers. The following guidelines and restrictions apply to all fund investments. In accordance with the policies established by the Board of Trustees, the assets of the Boynton Beach General Employees’ Pension Fund shall be invested in a diversified portfolio of fully securities, funds, or pooled assets, provided they meet the following criteria:
a. Equity securities:
1. Investments in equity securities shall be limited to no more than 65% at cost valuation of the fund’s total asset value;
2. All equity investments shall be limited to fully and easily negotiable equity securities;
3. Investments in foreign securities shall be limited to 25% (at market) of the total investment portfolio. The Board may achieve diversification in foreign equity through commingled fund or institutional mutual fund vehicles. These pooled investments are considered an investment in foreign securities. American Depository Receipts (ADRs) and foreign ordinary securities traded on domestic exchanges are United States dollar-denominated securities listed and traded on a United States exchange and are considered part of the ordinary investment strategy of the Board. These securities are not considered foreign securities;
4. Exchange traded funds (ETFS) may be utilized but may not exceed 10% (at market valuation) of any equity managers portfolio.
5. No more than 20% of the equity securities are to be invested in small or mid-cap stocks. The Board defines small and mid-cap stocks the stocks whose market capitalization is less than $5 billion dollars.
6. No more than 5% at cost value of an investment manager's equity portfolio may be invested in the shares of a single corporate issuer.
b. Fixed income securities:
1. The fixed income portfolio shall comply with the following guidelines:
(A) The average credit quality of the bond portfolio shall be rated “A” or higher; and
(B) The duration of the fixed income portfolio shall not exceed 135% of the duration of the market index. The market index is defined as the Bloomberg Barclays Capital Aggregate Bond Index.
2. Investments in all corporate fixed income securities shall be limited to:
(A) Those securities rated "BBB" shall not exceed 20% of the entire fixed income portfolio.
(B) No more than 5% at cost of an investment manager’s total fixed income' portfolio shall be invested in the securities of any single corporate issuer.
3. Futures contracts may be used on a non-levered basis for duration adjustment and yield curve positioning purposes.
4. There is no limit imposed on investments in fixed income securities issued directly by the United States government or any agency or instrumentality thereof.
5. Commingled vehicles managed by the investment adviser may be used to assist with the efficient implementation of portfolio strategy.
6. Index ETF's may be used for the efficient implementation of portfolio strategy.
c. Real Estate:
1. Investments in real estate shall not exceed 30% (at market valuation) of the value of the total Fund assets.
2. All real estate investments shall be made through participation in diversified commingled funds of real properties. These funds shall be broadly diversified as to property type and geography.
3. Experienced and professional real property investment managers shall manage all real estate investments.
d. Absolute Return:
1. Investments in absolute or real return strategies shall not exceed 20% of the value of the total Fund assets.
2. All absolute or real return investments shall be made through participation in diversified commingled funds, mutual fund or limited partnership vehicles.
3. The board shall endeavor to consider those investments that offer liquidity, transparency and low relative fees.
e. Private Equity/Private Credit:
1. Investments in private equity and credit strategies shall not exceed 15% of the value of the total Fund assets.
2. All private equity and private credit investments shall be made through participation in diversified limited partnership vehicles.
3. The board shall endeavor to consider those investments that offer liquidity, transparency and low relative fees.
f. Cash equivalent securities:
1. The investment manager may invest only in the following short-term investment vehicles:
(A) The money market or STIF provided by the plan’s custodian;
(B) Direct obligations of the United States government with a maturity of one year or less;
(C) Commercial paper with a maturity of 270 days or less that is rated A-1 or higher by Standard & Poor’s or P-1 or higher by Moody’s; and
(D) Bankers acceptances issued by the largest 50 banks in the United States (in terms of total assets).
(4) Mutual Funds/Commingled Funds/Limited Partnerships. The Board of Trustees recognizes and accepts that commingled, mutual fund and limited partnership investments will be dictated by the investment policies and guidelines of those funds and that no additional constraints may be imposed on them. The decision to make a direct investment in any vehicle will only be made by the Board of Trustees after a thorough review of the policies of the governing documents of those funds and after it has been determined that those policies are appropriate and materially consistent with the investment objectives.
(5) Prohibited securities. Only those derivative securities expressly described herein are permissible. Trading on margin and short selling are prohibited for separate account managers.
(6) Performance Evaluation. The Board of Trustees intends to review investment performance and compliance with stated investment policies on a quarterly basis.
(7) Review of policy. It is the intention of the Board of Trustees of the Boynton Beach General Employees’ Pension Fund to review this statement of investment policy and its addenda periodically to amend it by policy to reflect any changes in philosophy or objectives. However, if at any time the investment manager believes that the specific objectives defined herein cannot be met or that these guidelines unnecessarily constrict performance, the Board shall be so notified in writing.
(Code 1958, § 21-71; Ord. No. 80-16, § 1, 4-1-80; Ord. No. 94-56, § 1, 1-3-95; Ord. No. 00- 74, § 3, 1-2-01; Ord. No. 04-069, § 2, 8-3-04; Ord. No. 10-006, § 11, 2-16-10; Ord. No. 22-019, § 2, 11-1-22)