Statement of Investment Policy
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POMPANO BEACH POLICE AND FIREFIGHTERS'
RETIREMENT SYSTEM
INVESTMENT POLICY ADOPTED MAY 16, 2007
EFFECTIVE JUNE 25, 2007
Name of Plan: Pompano Beach Police and
Firefighters' Retirement System
Plan Sponsor: Pompano Beach, Florida
Police Department Fire Department
Current Board of Trustees: Daniel M.
Christophers Richard E. Avallone
Patrick S. Fletcher Peter McGinnis
Paul D. O'Connell Jeffrey J. Valerga
Civilian Appointees
Sharra Aaronian
Ernest J. Lee, Jr.
Richard H. Samolewicz
Deputy Administrator: Lindsay Dalton
Custodian: Comerica Bank
Investment Managers: Allegiance Capital, BCOM
Investment Advisers, INVESCO, Lord, Abbett & Co., Munder Capital
Management, Sands Capital Management and Standish Mellon Asset
Management, Voyageur Asset Management
Investment Consultant: Citigroup
Institutional Consulting
Actuary: Gabriel, Roeder, Smith and Company
Accountant: Cherry, Bekaert & Holland, LLP
Legal Counsel: Sugarman & Susskind, P.A.
The Chairman of the Board of Trustees of the
Pompano Beach Police and Firefighters’ Retirement System has
reviewed the attached Statement of Investment Management
Policies, Guidelines and Objectives for completeness and has
approved them as such.
SCOPE
The Statement of Investment Policy shall apply
to all funds under control of the Board of Trustees.
1
_________________________________________________________________
INVESTMENT MANAGEMENT POLICIES, GUIDELINES AND
OBJECTIVES
For The
POMPANO BEACH POLICE & FIREFIGHTERS’
RETIREMENT SYSTEM
_________________________________________________________________
I. INTRODUCTION AND BACKGROUND
The Pompano Beach Police and Firefighters’
Retirement System is a defined employee pension benefit plan
established by Ordinance of the City of Pompano Beach to provide
retirement benefits for its police officers and firefighters.
The City of Pompano Beach is the "plan sponsor". The Plan is
administered by the Police and Firefighters’ Retirement System
Board of Trustees. The Plan is a pension plan maintained to
provide retirement, disability, termination and death benefits,
as the case may be, to participants in accordance with the
express provisions of the Plan.
The Plan and the benefits provided thereunder
are funded by contributions by the City of Pompano Beach,
Employees' contributions, state premium tax refunds, interest
income and other income in accordance with the underlying Plan
documents.
The Board of Trustees is charged by Ordinance
and Chapter 112, Florida Statutes with the responsibility of
developing a policy for the investment of the assets of the
Fund. The trustees are named fiduciaries. The investment of the
assets of our retirement plan must be consistent with the
written investment policy adopted by the board of trustees. The
policies are structured to maximize the financial return to the
retirement plan consistent with the risks incumbent in each
investment and are structured to establish and maintain an
appropriate diversification of the retirement system’s assets.
To assist the Board in this function, they are authorized to
engage the services of investment and actuarial consultants to
provide expert assistance. The Board periodically undertakes
studies to evaluate the potential consequence of alternative
investment strategies on the long term well being of the Plan.
In the view of its consultants and the Board, the investment
program defined in this Statement will produce a result over the
long term consistent with the Plan's primary objective of
preserving and enhancing the purchasing power of assets.
In the implementation of the investment
program, the Plan will employ investment managers who have
demonstrated expertise with particular asset classes.
Furthermore, the Plan's investment managers utilize a variety of
investment approaches. This diversification of managers and
investment approach should reduce the risk of loss and
contribute to the attainment of a more consistent positive
return. Nonetheless, there will be short term periods when the
fund may experience negative returns. Such periods are not
inconsistent with achievement of the targeted long term
objective.
2
II. INVESTMENT POLICY AND OBJECTIVES
Name of Plan: Pompano
Beach Police and Firefighters' Retirement System
Plan Sponsor: Pompano
Beach, Florida
Current Board of
Trustees:
Police Department
Daniel M. Christophers
Patrick S. Fletcher
Paul D. O'Connell |
Fire Department
Richard E. Avallone
Peter McGinnis
Jeffrey J. Valerga |
| |
|
Civilian
Appointees
Sharra Aaronian
Ernest J. Lee, Jr.
Richard H. Samolewicz |
|
Deputy
Administrator: Lindsay Dalton
Custodian: Comerica
Bank
Money Managers: Allegiance Capital, Freedom Capital Management, INVESCO, Lord
Abbett & Company, Munder Capital Management, Sands Capital
Management and Standish Mellon Asset Management
Investment
Consultant: Citigroup Institutional
Consulting
Actuary: Gabriel,
Roeder, Smith and Company
Accountant: Cherry, Bekaert & Holland, LLP
Legal Counsel: Sugarman & Susskind,
P.A.
The Chairman of the Board of
Trustees of the Pompano Beach Police and Firefighters’ Retirement
System has reviewed the attached Statement of Investment
Management Policies, Guidelines and Objectives for completeness
and has approved them as such.
SCOPE
The Statement of Investment
Policy shall apply to all funds under control of the Board of
Trustees.
_________________________________________________________________
INVESTMENT MANAGEMENT POLICIES,
GUIDELINES AND OBJECTIVES
For The
POMPANO BEACH POLICE &
FIREFIGHTERS’ RETIREMENT SYSTEM
_________________________________________________________________
I.
INTRODUCTION AND BACKGROUND
The Pompano Beach
Police and Firefighters’ Retirement System is a defined employee
pension benefit plan established by Ordinance of the City of
Pompano Beach to provide retirement benefits for its police
officers and firefighters. The City of Pompano Beach is the “plan
sponsor”. The Plan is administered by the Police and Firefighters’
Retirement System Board of Trustees. The Plan is a pension plan
maintained to provide retirement, disability, termination and
death benefits, as the case may be, to participants in accordance
with the express provisions of the Plan.
The Plan and the
benefits provided thereunder are funded by contributions by the
City of Pompano Beach, Employees' contributions, state premium tax
refunds, interest income and other income in accordance with the
underlying Plan documents.
The Board of
Trustees is charged by Ordinance and Chapter 112, Florida Statutes
with the responsibility of developing a policy for the investment
of the assets of the Fund. The trustees are named fiduciaries.
The investment of the assets of our retirement plan must be
consistent with the written investment policy adopted by the board
of trustees. The policies are structured to maximize the
financial return to the retirement plan consistent with the risks
incumbent in each investment and are structured to establish and
maintain an appropriate diversification of the retirement system’s
assets. To assist the Board in this function, they are authorized
to engage the services of investment and actuarial consultants to
provide expert assistance. The Board periodically undertakes
studies to evaluate the potential consequence of alternative
investment strategies on the long term well being of the Plan. In
the view of its consultants and the Board, the investment program
defined in this Statement will produce a result over the long term
consistent with the Plan's primary objective of preserving and
enhancing the purchasing power of assets.
In the
implementation of the investment program, the Plan will employ
investment managers who have demonstrated expertise with
particular asset classes. Furthermore, the Plan's investment
managers utilize a variety of investment approaches. This
diversification of managers and investment approach should reduce
the risk of loss and contribute to the attainment of a more
consistent positive return. Nonetheless, there will be short term
periods when the fund may experience negative returns. Such
periods are not inconsistent with achievement of the targeted long
term objective.
II.
INVESTMENT POLICY AND OBJECTIVES
Based on analysis of
the Plan assets and expected investment returns and risks
associated with alternative asset mix strategies, the Board
adopted the following asset class targets, based on market value:
|
|
TRADITIONAL ASSET CLASSES |
% Range |
% Target
|
|
|
EQUITY
MANAGER(S) |
|
|
|
|
Large
Capitalization Value Manager |
25.00 –
20.00% |
22.50% |
|
|
Large
Capitalization Growth Manager |
25.00 –
20.00% |
22.50% |
|
|
Large
Capitalization Asset Allocation Manager |
12.00 –
7.00% |
9.50% |
|
|
Small
Capitalization Value Manager |
12.50 – 0.00% |
0.00% |
|
|
Small
Capitalization Growth Manager |
12.50 – 0.00% |
0.00% |
|
|
International Manager
|
10.00 – 6.00% |
8.00% |
|
|
Total
Equity
|
70.00 – 55.00% |
62.50% |
|
|
FIXED INCOME
MANAGER(S) |
35.00 - 25.00% |
30.00% |
|
|
TOTAL
TRADITIONAL ASSET CLASSES |
|
92.50% |
|
|
|
|
|
|
|
ALTERNATIVE ASSET CLASSES |
% Range |
% Target |
|
|
REAL ESTATE |
|
|
|
|
Public REIT (Equity) |
5.00 – 0.00% |
2.50% |
|
|
Private Real Estate (Fixed) |
7.50 – 0.00% |
5.00% |
|
|
Total Real
Estate |
10.00 – 2.50% |
7.50% |
|
|
Hedge Fund of Funds |
0.00% |
0.00% |
|
|
Managed Futures |
0.00% |
0.00% |
|
|
TOTAL
ALTERNATIVE ASSET CLASSES |
|
7.50% |
|
|
TOTAL TRADITIONAL & ALTERNATIVE |
|
100.00% |
These ranges and
targets are established as maximum weightings in each respective
asset class. If the investment manager determines that a
percentage of their allocation should be invested in cash, then
they are permitted that flexibility and will be evaluated by their
decisions accordingly.
Over time, it is the
Board's intention to direct cash flows toward the asset class(es)
that are under-represented and away from the class(es) that are
over-represented.
The General
investment objectives of the Board are as follows:
1.
Establish a Prudent Investment Program
Although the Retirement System is not covered by the Employee
Retirement Income Security Act of 1974 (ERISA), the assets of this
fund shall be invested in a manner consistent with the fiduciary
standard set forth in ERISA, as though ERISA applied to the
Retirement System; namely, (1) in accordance with the safeguards
and diversity to which a prudent investor would adhere (2) and all
transactions undertaken on behalf of the Fund must be for the sole
interest of Plan participants and their beneficiaries in order to
provide benefits and pay the expenses of the Fund. The pension
investment program must operate in compliance with all applicable
State and Federal laws and regulations concerning the investment
of pension assets.
2.
Achieve Growth in Purchasing Power
Primary investment emphasis must be placed upon the consistent
protection of the funds assets and growth performance, i.e., the
achievement of adequate investment growth must not be at the
expense of the protection of the assets over the investment
horizon.
More specific investment objectives established by the Board
include the following:
·
The
Fund should earn a return over time exceeding the assumed
actuarial rate of 8.5%. In addition, the Fund should earn a
return greater than inflation, as measured by the Consumer Price
Index, by 3.0% per year. Meeting this objective indicates that
the active management of the various portfolio components has
added value over a passively managed fund. It is also consistent
with the Board's objective to enhance the purchasing power of the
Funds.
·
Individual investment managers will
not be measured against the aggregate fund objective stated
above. They will be compared to appropriate market indices, and
the performance of other managers who utilize a similar investment
style.
III.
TRADITIONAL ASSET CLASSES -
INVESTMENT GUIDELINES
A.
Liquidity Requirements
There is a requirement to maintain liquid reserves for the payment
of pension benefits and expenses. The Board will review these
projected cash flow requirements at least annually.
B.
Securities Permitted on an Interim Basis
Investments may be made in Exchange Traded Funds (EFTs) or iShares
on an interim basis during manager searches
C.
Equities
The investment managers are permitted to invest in equity
securities (including convertible bonds) listed on the New York,
American and principal regional and foreign (for foreign
securities) exchanges. They may also invest in over-the-counter
securities for which there is an active market maker regulated by
the National Association of Securities Dealers (NASD). For
international investing, ADRs that trade over the counter, such as
“Pink Sheet” ADRs and Bulletin Board ADRs are permissible. Any
investment that does not fall into a category listed above is
prohibited.
The equity portion of each portfolio manager shall not:
1. Be more than 10% invested in the securities of any one
company at market.
2.
Make short sales.
3.
Use margin or leverage.
4.
Be invested in commodities.
5.
Be invested in private real
estate
6.
Be invested in " investment art
objects."
7.
Invest in Options, including the purchase, sale or writing of
options unless options are "covered" by the corresponding
security.
8.
Be invested in warrants, although
warrants issued in connection with stocks held by the fund may be
sold, held, or converted by the investment manager at its
discretion.
a.) Large –Capitalization Value & Growth
Stocks
Large capitalization stocks are expected to have the greatest
weighting in the Retirement System. They are expected to provide
more consistent returns over time than our other equity styles.
The objective is to maximize investment return over a market cycle
by investing in large capitalization equities having the potential
to generate investment returns exceeding those of a passively
managed large stock index.
Large-capitalization equity manager performance
parameters include the following:
·
Performance within the top half of a Universe of Large
Capitalization Value or Growth Managers.
·
Performance comparable to the Russell 1000 Value or Growth
Indexes.
·
When
appropriate, performance comparable to the S&P 500 and S&P 500
Barra Value and/or Growth Indexes.
·
Performance comparable to the S&P 500 Stock Index. (Market &
Equal-Weighted)
·
The
risk associated with the manager's portfolio as measured by the
variability of quarterly returns (standard deviation) should not
exceed that of the market (S&P 500 Index) without a corresponding
increase in performance above the index.
·
Achieve the performance parameters within a time horizon of a
minimum of three to five years or a full market cycle.
b.) Small Capitalization Value & Growth
Stocks
Small capitalization stocks are expected to improve total
portfolio diversification and provide opportunities for higher
incremental returns in the long run. The objective is to maximize
investment return over a market cycle by investing in mid/small
capitalization equities having the potential to generate
investment returns exceeding those of a passively managed small
stock index. Small capitalization growth stock managers generally
purchase companies with a market capitalization of greater than
$500 million.
Small capitalization equity manager performance
parameters include the following:
·
Performance within the top half of a Universe of Small
Capitalization Value or Growth Managers
·
Performance comparable to the Russell 2000 or 2500 Value Index or
Russell 2000 or 2500 Growth Index.
·
Achieve the performance parameters within a time horizon of a
minimum of three to five years or a full market cycle for the
mid/small capitalization market.
c.)
International Stocks
International Stocks are expected to improve total portfolio
diversification and provide opportunities for higher
incremental returns in the long run. The objective is to maximize
investment return over a market cycle by investing in
international securities through American Depository Receipts (ADRs).
These equities should generate investment returns exceeding those
of a passively managed international index.
International equity manager performance parameters include the
following:
·
Exceed MSCI EAFE – Net Dividend or MSCI EAFE (GDP) – Gross
Dividend Index.
·
Achieve the performance parameters within a time horizon of a
minimum of three to five years or a full market cycle of the
international market.
D.
Fixed Income
Fixed income securities shall be invested entirely in marketable
debt securities issued or guaranteed by either (a) the United
States Government or its agencies, (b) domestic corporations
(including industrial and utilities) or Israel Bonds (c)
asset-backed (ABS) and commercial mortgage-backed securities (CMBS),
(d) domestic banks and other US financial institutions. All
securities must hold a rating in one of the four highest
classifications by a major rating service. Such investments shall
all be in accordance with the Code of the City of Pompano Beach.
Any investments that do not fall under the criteria listed above
are prohibited from being purchased. Securities ratings reduced
beneath the four highest classifications after purchase should be
sold by the portfolio manager within a reasonable period of time
as determined by the manager. It is the manager’s responsibility
to notify the board in writing immediately after a security is
downgraded below the policy guidelines. The written explanation
should describe the manager’s intentions regarding the disposition
of the security being downgraded. Restrictions on fixed income
include the following:
1.
Except for Treasury and Agency obligations, the debt portion of
the Fund shall contain no more than ten percent (10%) of a given
issuer irrespective of the number of differing issues. Other
diversification standards should be developed and applied by the
Investment Manager(s).
2.
If
commercial paper is used it must be only of the highest quality
(A-1 or P-1).
3.
Private placement debt is not permissible.
4.
The
maximum weighting of fixed income in BBB ratings is 10%.
Fixed
income manager(s) performance parameters include the following:
·
Performance comparable to the Lehman Brothers Intermediate
Aggregate or Lehman Brothers Aggregate Bond Index.
·
The
risk associated with the manager's portfolio as measured by the
variability of quarterly returns (standard deviation) must not
exceed that of the Lehman Brothers Intermediate Aggregate or
Lehman Brothers Aggregate Bond Index without a corresponding
increase in performance above the index.
·
Achieve the above objectives within a time horizon of a minimum of
three to five years or a full market cycle.
E.
Communications
1.
Quarterly
a.
Evaluation reports will be supplied to the Trustees to provide
most current statistics on rate of return (12 copies).
b.
Written reports should be supplied by the Investment Manager in
sufficient detail and commentary so that the Trustees are apprised
of Fund status and any changes in philosophy or investment
strategy (12 copies).
c.
Manager should provide a statement certifying compliance with
stated guidelines.
d.
Written report on proxies voted will be supplied to the Trustees
(12 copies).
2.
Meetings
On a reasonable schedule, meetings will be held
with the Investment Manager(s) at least two (2) times per year to
discuss performance results, economic outlook, investment tactics,
organizational changes and any other pertinent matters. The
Trustees may schedule an interim meeting upon reasonable request
of the Investment Manager.
3.
Immediate
Telephone and/or letter advice should be
forthcoming from the Manager to provide the Trustees with
information of an immediate nature, such as relevant personnel
changes, market activity resulting in abnormal changes in the
Fund, etc.
IV.
ALTERNATIVE ASSET CLASSES -
INVESTMENT GUIDELINES
A. Real
Estate
Real Estate Investment Trusts (REITs)
The investment managers are permitted to invest in real estate
investment trusts (REITs) listed on the New York, American and
principal regional and foreign (for foreign securities)
exchanges. They may also invest in over-the-counter securities
for which there is an active market maker regulated by the
National Association of Securities Dealers (NASD).
Private Real Estate
The investment managers are permitted to invest in private real
estate. Private real estate will be purchased through an
institutional vehicle. The institutional vehicle provides
diversification of property type and geographical location and
provides a competitive price structure.
a.) Real Estate Investment Trusts (REITs)
Real Estate Investment Trust securities are expected to improve
total portfolio diversification and provide opportunities for
higher incremental returns in the long-term. The objective is to
maximize investment return over a market cycle by investment in
real estate through REITs. These equities should generate
investment returns exceeding those of a passively managed REIT
index.
REIT equity manager performance parameters include
the following:
·
Exceed National Association of Real Estate Investment Trusts (NAREIT)
Equity REIT Index.
·
The
risk associated with the manager's portfolio as measured by the
variability of quarterly returns (standard deviation) must not
exceed that of the NAREIT Equity REIT Index without a
corresponding increase in performance above the index.
·
Achieve the performance parameters within a time horizon of a
minimum of three to five years or a full market cycle of the REIT
market.
b.) Private Real Estate
Private real estate investments are expected to improve total
portfolio diversification and provide income and opportunities for
higher incremental returns in the long-term. The objective is to
maximize investment return over a market cycle by investment in
real estate through private ownership. These private real estate
investments should generate investment returns exceeding those of
a passively managed private real estate index.
Private real estate investment performance
parameters include the following:
·
Exceed the National Council of Real Estate Investment Fiduciaries
(NCREIF) Index.
·
Performance comparable to the Lehman Brothers Aggregate Bond Index
·
The
risk associated with the manager's portfolio as measured by the
variability of quarterly returns (standard deviation) must not
exceed that of the NCREIF Index or the Lehman Brothers Aggregate
Bond Index without a corresponding increase in performance above
the index.
·
Achieve the above objectives within a time horizon of five to ten
years or a full real estate market cycle.
c.) Private Ownership of
an Office Building
Private ownership of an office building partially
or fully occupied by the Retirement System is permitted. The
investment return and risk measures discussed in private real
estate do not apply. The investment shall be managed and
controlled by a qualified plan asset manager that shall
acknowledge that it is a fiduciary with respect to the Retirement
System. Appraisals for privately owned office building are
discussed below:
(a) Purpose of
Appraisals. Appraisals of real property owned by the
Retirement System shall be obtained periodically.
(b) Timing of
Appraisals. As part of its due-diligence with respect to each
Investment, the Retirement System shall obtain an appraisal of the
real property underlying such Investment prior to entering into
such Investment. Thereafter, each such real property shall be
appraised at annual intervals.
(c) The
Appraisers. Appraisals of real property shall be performed
by one or more independent real estate appraisers. Such real
estate appraisers and financial advisers shall be selected by the
Trustees.
All appraisal reports
shall be submitted to the Trustees. Any appraiser selected shall
be licensed in compliance with any applicable state licensing
requirements and a member of that state’s Appraisal Institute.
V.
State Mandated Requirements
1.
EXPECTED ANNUAL RATE OF RETURN. The desired investment objective
is a long-term rate of return on assets of 8.50%. The target rate
of return is for the current year, for each of the next several
years and for the long-term thereafter. The target rate
of
return has been based on the assumption that future real returns
will approximate the long-term rates of return experienced for
each asset class in the Investment Guidelines. Because market
performance varies and a fixed percent return may not be
meaningful during some periods, the Board has established
performance benchmarks for Managers, as set forth in the Internal
Controls section of this Investment Policy. Over a complete
business cycle, the Plan's overall annualized total return, after
deducting investment and transaction costs, should perform above
the median of an appropriate universe and above a customized index
composed of various market indices weighted by the strategic asset
allocation of the Plan's assets.
2.
THIRD-PARTY CUSTODIAL AGREEMENTS. The securities should be held
with a third party, and all securities purchased by, and all
collateral obtained by, the board should be properly designated as
an asset of the board. No withdrawal of securities, in whole or
in part, shall be made from safekeeping except by an authorized
member of the board or the board's designee. Securities
transactions between a broker-dealer and the custodian involving
purchase or sale of securities by transfer of money or securities
must be made on a "delivery vs. payment" basis, if applicable, to
ensure that the custodian will have the security or money, as
appropriate, in hand at the conclusion of the transaction.
3.
MASTER REPURCHASE AGREEMENT. All approved institutions and
dealers transacting repurchase agreements shall execute and
perform as stated in the Master Repurchase Agreement. All
repurchase agreement transactions shall adhere to requirements of
the Master Repurchase Agreement (where applicable).
4. BID
REQUIREMENT. The board shall determine the approximate maturity
date based on cash-flow needs and market conditions, analyze and
select one or more optimal types of investment, and competitively
bid the security in question when feasible and appropriate.
Except as otherwise required by law, the most economically
advantageous bid must be selected.
5.
PORTFOLIO COMPOSITION. The Investment Guidelines establish
parameters for investments and limits on security issues, issuers
and maturities. Said Guidelines are commensurate with the nature
and size of the funds within control of the Board. The Board
believes that the Plan's risk and liquidity posture are, in large
part, a function of asset class mix. The Board has reviewed
long-term performance characteristics of various asset classes,
focusing on balancing the risks and rewards of market behavior.
6.
RISK AND DIVERSIFICATION. The Investment Guidelines provide for
appropriate diversification of the portfolio. Investments have
been diversified to the extent practical to control risk of loss
resulting from over concentration in a specific maturity, issuer,
instrument, dealer or bank through which financial instruments are
bought and sold. The Board recognizes the difficulty of achieving
the Plan's investment objectives in light of uncertainties and
complexities of contemporary investment markets. The Board also
recognizes that some risk must be assumed to achieve the Plan's
long-term investment objectives. In establishing the risk
tolerances, the Plan's ability to withstand short and intermediate
term variability has been considered. However, the Plan's strong
financial condition enables the Board to adopt a long-term
investment perspective.
7.
INTERNAL CONTROLS. The attached system of internal controls and
operational procedures has been adopted by the Board and shall be
reviewed by its independent certified public accountants as part
of any financial audit of the Plan.
In
addition, the Board has adopted the following internal controls
with reference to selection and review of Money Managers:
A. Selection of Money Managers. The Board,
with assistance from the Investment Consultant, has selected, and
will select, appropriate Money Managers to manage Plan assets.
Managers must meet the following minimum criteria:
1. Be a bank, insurance company, investment
management company or investment adviser, as defined by the
Investment Advisers Act of 1940.
2. Provide historical quarterly performance
numbers, calculated on a time-weighted basis, based on a composite
of fully discretionary accounts of similar investment style,
reported net and gross of fees.
3. Provide performance evaluation reports
prepared by an objective third party that illustrate the
risk/return profile of the manager relative to other managers of
like investment style.
4. Provide detailed information on the
history of the firm, key personnel, key clients, fee schedule and
support personnel.
5. Clearly articulate the investment
strategy that will be followed and document that the strategy has
been successfully adhered to over time.
B. Duties and Responsibilities of Money
Managers. The duties and responsibilities of each Money Manager
retained by the Board include:
1. Managing Plan assets under its care,
custody and/or control in accordance with this Investment Policy
or in accordance with separate written agreements when
modification is deemed prudent and desirable by the Board.
2. Exercising investment discretion
(including holding cash equivalents as an alternative) within the
objectives and guidelines set forth in this Investment Policy.
3. Promptly informing the Board in writing
regarding all significant and/or material matters and changes
pertaining to the investment of Plan assets, including, but not
limited to:
a. Investment Strategy
b. Portfolio Structure
c. Tactical Approaches
d. Ownership
e. Organizational
Structure
f. Financial
Condition
g. Professional Staff
h. Recommendations for
Guidelines Changes
i. All legal, SEC and
other proceedings affecting the firm
4. Timely voting all proxies and related
actions in a manner consistent with the long-term interests and
objectives of the Plan as set forth herein. Each Manager shall
keep a detailed record of said proxy voting and related actions
and will comply with all regulatory obligations related thereto.
Reports of such voting and actions shall be delivered to the Board
no less frequently than quarterly.
5. Utilizing the same care, skill, prudence
and due diligence under the circumstances then prevailing that
experienced investment professionals acting in a like capacity and
fully familiar with such matters would use like activities for
like retirement plans with like aims in accordance with all
applicable laws, rules and regulations from local, state, federal
and international political entities as they may pertain to
fiduciary duties and responsibilities.
6. Acknowledging and agreeing in writing to
their fiduciary responsibility fully to comply with this entire
Investment Policy, as same may be modified from time to time.
C. Monitoring of Money Managers. Quarterly
performance will be evaluated to test progress toward the
attainment of long-term targets. The Board understands that there
may be short-term periods during which performance deviates from
market indices. During such periods, greater emphasis shall be
placed on peer performance comparison with managers employing
similar styles.
From time to time, but no less than quarterly, the
Board will meet to focus on:
1. Manager's adherence to this Investment
Policy.
2. Material changes in the Manager's
organization, investment philosophy and/or personnel.
3. Comparisons of Manager's results to
appropriate indices and peer groups.
4. The risk associated with each Manager's
portfolio, as measured by variability of quarterly returns
(standard deviation), which should not exceed that of the
benchmark index and the peer group without a corresponding
increase in performance above the benchmark index and peer group.
In
addition, the Board will annually focus on:
1. The Manager's performance relative to
managers of like investment style or strategy. Each manager is
expected to perform in the upper half of its respective style
universe.
2. The Plan's investment performance
results compared to the Manager's overall composite performance
figures to determine unaccounted for dispersion between the
Manager's reported results and the Plan's results.
The
Board is aware that ongoing review and analysis of Money Managers
is as important as the due diligence utilized during the manager
selection process. Accordingly, a thorough review and analysis of
the Money Manager will be conducted if:
1.
A
Manager performs in the bottom quartile of its peer group over an
annual period.
2. A Manager falls in the "southeast
quadrant" of the risk/return scattergram for a three or five-year
period.
Further, a Manager may be replaced at any time and for any reason,
including but not limited to the following:
1. A Manager consistently performs below
the median of its peer group over rolling three-year periods.
2. A Manager has a negative alpha for any three-year
period.
The
following events also warrant immediate review of the Manager:
1. Changes in professional staff.
2. Significant loss of business.
3. Significant increase in business.
4. Change in ownership and/or control.
8.
CONTINUING EDUCATION. All Board members are encouraged and
expected to attend continuing education seminars concerning
matters related to investments and responsibilities of Board
members. Without limiting the foregoing, Board members are
pre-authorized to attend any in-state seminars. Attendance at
out-of-state seminars requires prior Board approval.
9.
REPORTING. The Board shall submit an annual report to the City of
Pompano Beach. The report shall include investments in the
portfolio by class or type, income earned and market value. The
annual report shall be available to the public.
10.
FILING OF INVESTMENT POLICY. Upon adoption by the Board, this
Investment Policy shall be promptly filed with the Florida
Department of Management Services, the City of Pompano Beach and
the Actuary. The effective date of this Investment Policy, and
any amendment hereto, shall be 31st calendar day
following the filing date with the City.
11. VALUATION OF ILLIQUID INVESTMENTS. Illiquid investments for
which a generally recognized market is not available or for which
there is no consistent or generally accepted pricing mechanism
shall be valued in accordance with Section 215.47(6), Florida
Statutes, when those investments are utilized. Any asset without a
fair market value shall be excluded from the determination of
annual funding costs. The Board shall notify the Florida
Department of Management Services and the City Auditor and Clerk
of the City of Pompano Beach of each such asset.
VI.
Review of Investment Managers
The Board will meet at least quarterly with the consultants and
review investment results..
These reviews will focus on:
·
the
managers' adherence to the policy guidelines;
·
comparison of managers' results against funds using similar
policies (in terms of the diversification, volatility, and style);
·
the
opportunities available in both equity and debt markets; and
·
material changes in the managers' organizations, such as
philosophical and personnel changes, acquisitions or losses of
major accounts, etc.
VII.
Performance Expectations
The most important performance expectation is the achievement of
investment results that are consistent with the Plan's investment
policy statement. A 3.0% real return is a reasonable expectation
in light of this policy. The Board recognizes that this real
return objective may not be attainable during some time periods,
it is a long term goal. In order to ensure that investment
opportunities available over a specific time period are fairly
evaluated, the Board will use comparative performance statistics
to evaluate investment results. Performance of the Plan will be
compared to other funds utilizing a similar investment policy.
VIII.
Policy Review
Periodic
reviews of the Policy Statement will be made by the Board to
evaluate its appropriateness. Any modification of policy
guidelines shall be approved by the Board of Trustees and
acknowledged in writing by the investment managers.
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