Number: ADMIN 090
Effective: March 2, 2017
Department: Finance and Business
Last Revision: April 28, 2017

Purpose

To establish and define the authority for, objectives of, limitations applicable to, and reporting and review requirements for CWI’s investment program.

Scope

Applies to all investments of CWI funds.

Definition

Diversification: A risk management technique that mixes a wide variety of investments within a portfolio.

Liquidity: Ability to quickly convert an investment portfolio to cash with little or no loss in value.

Moody’s Rating Scale: A rating by Moody’s reflects its opinion of the credit quality of individual obligations or of an issuer’s general credit worthiness. The rating scale, running from a high of Aaa to a low of C, comprises 21 notches. It is divided into two sections, investment grade and speculative grade. The lowest investment-grade rating is Baa3.

Rate of Return: Gain or loss on an investment over a specified period, expressed as a percentage of the initial investment.

Total Return: Actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time.

Policy

This policy establishes and defines the authority for, objectives of, limitations applicable to and reporting and review requirements for CWI’s investments program. The purpose of this policy is to ensure that investments of CWI’s funds are made in a fiscally responsible manner in accordance with CWI’s mission. Accordingly, all investments of CWI’s funds are subject to the guidelines set forth below.

Guidelines 

Authority 

Investment authority for CWI funds is delegated by the Board of Trustees to the Vice President of Finance and Administration (VPFA) and those persons whom the VPFA shall designate to exercise such authority. The VPFA, and his or her designees, shall have, subject to the review and oversight of the Board of Trustees’ Finance Committee and the guidelines set forth in this policy, all authority as may be necessary for the investment of CWI funds and the periodic liquidation and reinvestment of such funds.

Investment Objectives

Safety: Preservation of principal is the single most important objective of CWI’s investment program. Investments must be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk.

Liquidity: The investment portfolio shall remain sufficiently liquid to meet all financial needs and obligations that may be reasonably anticipated. This will be accomplished by structuring the portfolio so that securities mature concurrently with anticipated cash requirements. While CWI purchases securities with the intent of holding them to maturity, it may liquidate early to maximize the total return on assets, to compensate for temporary shortfalls in liquidity, or to address changes in market conditions or the credit rating of specific investments.

Yield: The investment portfolio shall be designed with the objective of seeking maximum yield or total return throughout budgetary and financial cycles, subject to and consistent with the safety and liquidity objectives previously described above.

Standard of Conduct: CWI and its investment managers shall comply with the standard of conduct in managing the investment of CWI’s funds under the Uniform Prudent Management of Institutional Funds Act for the State of Idaho (Idaho Code §§ 33-5001, et seq.).

Limitations

Investment of CWI funds pursuant to the authority granted by this Policy shall be carried out by the VPFA and his or her designees in accordance with the following limitations and constraints:

Investment Medium: All investments will be denominated in U.S. Dollars. Permitted Investments:

1. Generally.

Except as set forth in Paragraph 2 below, funds may be invested in the following (subject always to meeting the credit requirements set forth below). The permitted investments are described in Idaho Code § 67- 1210, and include:

  • Bank accounts covered by FDIC or NCUA Insurance; certificates of deposit of a bank, savings and loan, credit union or other financial institution located within the geographical boundaries of the state of Idaho and organized under the laws of the United States of America or any state thereof
  • Bonds, treasury bills, interest-bearing notes, or other obligations of the United States Treasury or those for which the full faith and credit of the United States of America is pledged for the payment of principal and interest
  • Obligations issued by the agencies and instrumentalities of the United States, including but not limited to Federal Government-Sponsored Enterprises (GSEs) such as the Federal Farm Credit Banks, the Federal Home Loan Bank System, the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association
  • Repurchase agreements (covering assets otherwise constituting permitted investments under this policy)
  • Obligations of the State of Idaho and its Political Subdivisions:
    • General obligations or revenue bond or other obligations for which the faith and credit of the state are pledged for the payment of principal and interest
    • General obligation or revenue bonds of any county, city, metropolitan water district, municipal utility district, school district or other taxing district
    • Bonds, notes or other similar obligations issued by public corporations of the State of Idaho including, but not limited to, the Idaho State Building Authority, the Idaho Housing Authority and the Idaho Water Resource Board
    • Tax anticipation notes and/or registered warrants
    • Tax anticipation bonds or notes and income and revenue anticipation bonds or notes of a governmental unit
    • Revenue bonds of institutions of higher education of the State of Idaho
    • Investment vehicles and programs sponsored by the Idaho State Treasurer under Idaho Code §67-1210A, and pursuant to a joint powers agreement with CWI.
  • Money market funds which are rated Aaa by Moody’s Investors Service (or the equivalent by Standard & Poor’s or Fitch Ratings) which:
    • have portfolio assets of at least $5 billion
    • have an investment policy which seeks to maintain a net asset value of $1.00 per share (i.e. government money market funds)

2. Certain Exceptions to 67-1210 Limitations.

Pursuant to Idaho Code § 33-701(2), (i) all or part of any plant facilities reserve fund, (ii) any fund accumulated for the payment of interest on, and the redemption of, outstanding bonds, or other obligations, and (iii) the proceeds of any bond issue temporarily invested pending the expenditure of such proceeds for the purposes for which such bonds were issued, may be invested in, in addition to investments permitted by Section 67-1210, in investments permitted by Section and 67-1210A, Idaho Code.

3. Further Investment Vehicle Limitations.

Where CWI loan covenants, bond covenants, or applicable regulations require funds held subject to their limitations to be restricted to a subset of the forgoing investment vehicles, such restriction shall be observed with respect to the funds governed by such requirements. The fact that any such covenant or regulation may permit a broader range of investment vehicles than those set forth above shall not serve to broaden the permitted range of investment vehicles.

Credit Quality

Rating Scale: CWI will use the Moody’s Rating Scale (or the equivalent from Standard and Poor’s or Fitch Ratings) as the standard when evaluating investments in debt securities in order to limit the credit risk of such holdings.

At the time of acquisition, all investments must meet the following credit quality criteria:

  • Non-State and non-municipal short term investment holdings must have a minimum rating of “Prime-1.”
  • Non-State and non-municipal long term investment holdings must have a minimum rating of “A3” or better.
  • State and municipal entities short term investment holdings must have a minimum rating of “Prime-1.”
  • State and municipal entities’ long term investment holdings must have a minimum rating of “A3” or better.
  • Investment holdings in State of Idaho funds or State of Idaho-run funds (for example, Local Government Investment Pool [LGIP]) require no credit rating.
  • Investment holdings in U.S. government or federal agency securities, or securities guaranteed by either the U.S. government or a federal agency require no credit rating. Investments in securities unconditionally guaranteed by the U.S government or a federal agency whose obligations are guaranteed by the U.S. government or which are secured by a letter of credit issued by a federal agency whose obligations are guaranteed by the U.S. government shall not be required to meet the credit rating requirements set forth above (so long as the total amount secured by the letter of credit is not in excess of the amount of the letter of credit).

Maturity

Long-term Investment: CWI will seek to control interest rate risk in long-term investments by attempting to match anticipated cash requirements to investment maturities. Generally, in conjunction with maintaining proper liquidity, the investment program should remain flexible enough in its design to enable CWI to take advantage of opportunities in a changing interest rate environment.

The maximum maturity of any security purchase will be five years. The average weighted maturity of any managed portfolio will not exceed 36 months. For securities with puts or resets, the maturity date will be deemed the put or reset date of the security.

Diversification

Investments will be diversified in order to minimize the risk of loss resulting from the concentration of assets. Individual investments and managed portfolios shall meet the following criteria:

Security Individual Limit Aggregate Portfolio Limit
US Treasury securities and obligations issued by the agencies and instrumentalities of the United States No limit No limit
State of Idaho securities No Limit 25% of portfolio
State of Idaho investment funds (LGIP, DBF, etc.) No Limit No Limit
Bank accounts covered by FDIC Insurance Limited to FDIC Insurance Amount. No Limit
Bank certificates of deposit Limited to larger of FDIC Insurance amount or amount subject to unconditional guarantee of U.S. Government or U.S. sponsored entity including certificates secured by a letter of credit issued by such an entity. No Limit
Money market funds 5% of total money market fund value. No Limit
State of Idaho and its municipalities, including any county, city, metropolitan water district, municipal utility district, school district, institute of higher education or other taxing district. A. Limited to 20% of issue size. B. Limited by issuer (at purchase date) to 10% of the investment portfolio. 25% of portfolio
Non-government issuers A. Limited by issuer (at purchase date) to 5% of the investment portfolio. 40% of the portfolio (Includes all non-government issuers except those secured by a letter of credit issued by the U.S. Government of an entity sponsored by the U.S. Government.)

 

Non-Eligible Investments

This policy prohibits CWI from any investment activity that would be considered speculative in nature according to principles of conservative investment management, whether or not the activity is specifically prohibited elsewhere in this policy.

Safekeeping

Securities shall be held in the name of CWI by an independent safekeeping agent.

Reporting And Review

The VPFA shall prepare a written quarterly report of investment portfolio performance statistics. The report shall be reviewed by the Board of Trustees’ Finance Committee and presented to the Board of Trustees and the President of CWI with any comments of the Finance Committee within a reasonable time after the end of the quarter.

The VPFA’s Investment Performance Review shall consist of the following:

  • List of the securities held at quarter-end
  • List of transactions during the quarter that states the:
    • Beginning market value for the reporting period
    • Additions and changes to the market value during the period
    • Ending market value for the period
  • Statement of the market value and book value of each security at the beginning and end of the reporting period
  • Statement of the maturity date of each security that has a maturity date
  • Statement of the weighted average market value, book yield, maturity, and effective duration of the investment portfolio as of quarter-end
  • Report of the income accrued or received in cash during the quarter

The VPFA shall include at least annually in his or her quarterly report of investment portfolio performance statistics his or her assessment of the following factors affecting decisions concerning investment of CWI funds:

  • CWI’s ongoing ability to tolerate downturns in asset value (function of financial and cash flow considerations)
  • Any changes in CWI’s liquidity requirements
  • Any changes in CWI’s income requirements
  • Any changes in CWI’s rate of return objectives
  • Changes in CWI’s priorities