The primary objectives, in priority order, of investment shall be safety, liquidity and return.
(A) Safety. Safety of principle is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital. The objective will be to minimize credit risk and interest rate risk.
(1) Credit risk.
(a) The city will minimize credit risk, which is the risk of loss due to the failure of the security issuer or backer, by limiting investments to the types of securities listed under § 37.130 of this policy.
(b) Additionally, the investment officer may opt to utilize multiple depositories for investments to minimize credit risks by diversifying the portfolio. If the investment officer determines that this is appropriate, and this strategy results in choosing to utilize a bidder offering a lower yield, the investment officer will document this reasoning in writing, and maintain such documentation until the investment is matured or liquidated, or for the time required by the state records retention rules, whichever occurs later.
(2) Interest rate risk. The city will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities prior to maturity.
(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. Furthermore, since all possible cash demands cannot be anticipated, a portion of the portfolio may be placed in money market funds which offer same day liquidity for short-term funds.
(C) Yield. The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, considering the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.
(Ord. 23-11, passed 6-26-2023)