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The purpose of this investment policy is to establish the investment scope, objectives, delegation of authority, standards of prudence, reporting requirements, internal controls, eligible investments and transactions, diversification requirements, risk tolerance, and safekeeping and custodial procedures for the investment of the funds of the Town of Vail, Colorado (hereby referred to as the “town”). The investment policy of the Vail Town Council for the town of Vail represents the financial boundaries within which its cash management process will operate.
(Ord. 24(2016) § 1)
The primary objectives, in priority of order, of investment activities shall be:
(A) Safety. Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk.
(1) Credit risk. Credit risk is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by restricting the types of securities which may be purchased, their credit ratings, and through diversification to reduce exposure to any one security type or issuer.
(2) Interest rate risk. Interest rate risk is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Interest rate risk may be mitigated by holding most investments to their maturity date, by limiting the types and maturities of permitted securities and, when feasible, by selecting maturities of investments to coincide with large cash outflows.
(B) Liquidity. The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity).
(C) Yield. After the objectives of safety and liquidity are met, the investment portfolio shall be managed with the objective of attaining a market rate of return throughout interest rate cycles.
(1) The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.
(2) Speculative investments will not be allowed. Speculative investments are those attempting to gain market premium appreciation through short term market volatility resulting in increased risk and loss exposure. The town will not purchase a security which cannot be held to maturity. This does not mean an investment cannot be sold prior to maturity.
(Ord. 24(2016) § 3)
(A) Prudence.
(1) The standard of prudence to be used by investment officials shall be the “prudent person” standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this policy.
(2) Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
(B) Ethics and conflicts of interest. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interest in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investments transactions with the same individual with whom business is conducted on behalf of their entity.
(C) Delegation of authority.
(1) Management responsibility for the investment program is held by the Town Manager and appointed designees. No employee may engage in an investment transaction except as provided under the terms of this policy and any procedures which may be established by the Town Manager. The Town Manager shall review the quarterly investment report (see § 2-2-8 of this chapter).
(2) There is hereby created an Investment Committee, consisting of the Town Manager, Finance Director and the Finance Controller or such comparable positions as may exist from time to time. Members of the Committee will meet at least quarterly to determine general strategies and to monitor results. Minutes of the decisions made by the Investment Committee shall be kept on file in the Town Clerk’s office. The Committee shall include in its review and deliberations such topics as: potential risks; authorized depositories; rate of return; maturity structure; and investment transactions.
(3) It shall be the duty of the Finance Director or his or her appointed designee to manage the day to day operations of the portfolio, and place actual purchase/sell orders with institutions. In the absence of the Finance Director, an appointed designee shall assume these duties. The Finance Director or his or her appointed designee shall maintain internal procedures for investing which provide appropriate investment and accounting controls and which shall be available for review annually by the independent auditor.
(4) Management of a portion of the portfolio and placing of buy/sell orders for a portion of the portfolio may be delegated to an independent investment manager designated by the Town Council. The transactions of any selected independent investment manager will be subject to the town’s investment policy and will be reviewed and verified by the Finance Department.
(5) The authority for the investment philosophy and selection of investment managers for the Town of Vail employee pension plan and the Town of Vail police and fire employees pension plan shall be the responsibility of the “pension plan trustee” as defined in the pension plan document.
(Ord. 3(1997) § 1; Ord. 24(2016) § 4)
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