Agenda Information Sheet
DEPARTMENT: Finance
ACM: Bryan Langley
Date: September 27, 2016
SUBJECT
Title
Receive a report, hold a discussion, and give staff direction regarding revisions to the City of Denton's Investment Policy.
Body
BACKGROUND
The City of Denton has a formal Investment Policy to guide decision making in managing and investing public funds. The City's Policy is modeled after, and in compliance with, the provisions of the Public Funds Investment Act (PFIA) of Texas, Government Code Chapter 2256. In accordance with the Code, and in order of importance, are the following prioritized objectives for managing the portfolio's fixed income investments: safety of principal, liquidity, and yield. Since it is the City's practice to hold securities until they mature, temporary market value gains and losses are unlikely to be realized. The general investment strategy, while taking into account the current interest rate environment, is to match maturities to cash flow needs.
The Audit/Finance Committee and the City Council are required by the PFIA to review and approve the Investment Policy at least annually. This year, the Investment Committee and the City's investment advisor (First Southwest Asset Management, LLC.) recommended three changes that are detailed below and highlighted on pages 11 and 12 of the City's red-lined version of the Investment Policy. They are as follows:
1) More clearly differentiate between local government investment pools that invest in government securities only and those that invest in prime (corporate) securities with appropriate portfolio allocations to each.
2) Increase the commercial paper (CP) portfolio exposure through direct purchases from 5% to 15% of the portfolio using the approved list of CP issuers provided by the City's investment advisor.
3) Limit the portfolio's individual issuer CP exposure to no more that 5%.
These changes are proposed in light of the increasing yield advantage of CP as SEC mone...
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