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ILL GENERAL OBJECTIVES <br /> • <br /> The primaryobjectives,in priorityorder, of investment activities shall be safety,liquidity, and yield: <br /> 1. Safety <br /> Safety of principal is the foremost objective of the investment program. Investments shall be <br /> undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. <br /> The objective will be to mitigate credit risk and interest rate risk. <br /> a) Credit Risk <br /> The City will minimize credit risk,which is the risk of loss due to the failure of the security <br /> issuer or backer,by: <br /> • Limiting investments to the types of securities listed in Section VII of this <br /> Investment Policy; <br /> • Pre-qualifying the financial institutions,broker/dealers,intermediaries,and advisers <br /> with which the City will do business in accordance with Section V;and <br /> • Diversifying the investment portfolio so that the impact of potential losses from any <br /> one type of security or from any one individual issuer will be minimized. <br /> b) Interest Rate Risk <br /> The City will minimize interest rate risk,which is the risk that the market value of securities <br /> in the portfolio will fall due to changes in market interest rates,by: <br /> • Structuring the investment portfolio so that securities mature to meet cash <br /> requirements for ongoing operations,thereby avoiding the need to sell securities on <br /> the open market prior to maturity;and <br /> • Investing operating funds primarily in shorter-term securities,money market mutual <br /> funds,or similar investment pools and limiting the average maturity of the portfolio <br /> in accordance with this policy (see Section VIII). <br /> 2. Liquidity <br /> The investment portfolio shall remain sufficiently liquid to meet all operating requirements <br /> that may be reasonably anticipated. This is accomplished by structuring the portfolio so that <br /> securities mature concurrent with cash needs to meet anticipated demands (static liquidity). <br /> Furthermore, since all possible cash demands cannot be anticipated, the portfolio should <br /> consist largely of securities with active secondary or resale markets (dynamic liquidity). <br /> Alternatively,a portion of the portfolio may be placed in money market mutual funds or local <br /> government investment pools (LGIPs),which offer same-day liquidity for short-term funds. <br /> • <br /> Page 2 of 8 <br />