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6.A. -Page 6 of 40 <br />CITY OF REDWOOD CITY <br />INVESTMENT POLICY <br />III. Investment Philosophy <br />A. The City's investment philosophy is based on the Prudent Investor Standard as setforth in California <br />Government Code 53600.3: <br />"...all governing bodies of local agencies or persons authorized to make investment <br />decisions on behalf of those local agencies investing public funds pursuant to this chapter <br />are trustees and therefore fiduciaries subject to the prudent investor standard. When <br />investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public <br />funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances <br />then prevailing, including, but not limited to, the general economic conditions and the <br />anticipated needs of the agency, that a prudent person acting in a like capacity and <br />familiarity with those matters would use in the conduct of funds of a like character and <br />with like aims, to safeguard the principal and maintain the liquidity needs of the agency. <br />Within the limitations of this section and considering individual investments as part of an <br />overall strategy, investments may be acquired as authorized by law." <br />B. The investment securities are purchased with the intention to hold until maturity. Sale of securities <br />prior to maturity is permitted where it serves the City's investment objectives. <br />IV. Objectives <br />A. The City's investment philosophy sets the tone for the policies, practices, procedures and <br />objectives that control the investment function. The investment of funds will be guided by the <br />primary objectives of safety, liquidity, and a reasonable market rate of return, in this order of <br />priority. <br />1. Safety — Safety of principal is the foremost objective of the investment program. The City will <br />undertake investments in a manner that ensures the preservation of capital in the portfolio <br />taken as a whole. To ensure the safety of principal, the City will seek to minimize credit risk <br />(defined as the risk of default on the part of the issuer of a security) by diversification and by <br />investing in high quality investments and also to minimize market risk (defined as the risk of <br />fluctuations in the market value of securities) by limiting the weighted average maturity of the <br />investment portfolio to 3 years. <br />2. Liquidity —The City will maintain sufficient cash and short-term investment instruments which, <br />together with projected revenues, will provide sufficient liquidity to meet all cash flow <br />requirements which might be reasonably anticipated including contingencies for six months. <br />3. Return on Investment (Yield) — The City's investment portfolio will be designed with the <br />objective to attain a market rate of return throughout economic cycles, commensurate <br />with the City's investment risk constraints and the cash flow characteristics of the portfolio. <br />B. The investment function will have the ongoing objectives of assuring compliance with Federal, <br />State and local laws governing the investment of public funds, providing for short term and <br />long term cash flow needs, and establishing appropriate standards and limits for the type of <br />investments made and the issuers of such investments. <br />DRAFT on 1/13/20 Approved by Council 1/14/2019 2 <br />12 <br />