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4.0 Obj1ectives. <br /> The primary objectives, in priority order, of the City's investment activities Ill <br /> shall be: <br /> 4.1 Safety. <br /> Safety of principal is the foremost objective of the investment <br /> program. Investments shall be undertaken in a manner that seeks to <br /> ensure preservation of capital in the overall portfolio. The objective <br /> will be to mitigate credit risk and interest rate risk. <br /> 4.1.1 Credit Risk <br /> • Credit Risk is the risk of loss due to the failure of the security <br /> issuer or backer. Credit risk may be mitigated by: <br /> • Limiting investments to the safest types of securities; <br /> • Pre-qualify the financial institutions broker/dealers, <br /> intermediaries, and advisors with which an entity will do <br /> business; and <br /> • Diversifying the investment portfolio so that potential losses on <br /> individual securities will be minimized. <br /> 4.1.2 Interest Rate Risk <br /> • Interest rate risk is the risk that the market value of securities <br /> in the portfolio will fall due to changes in general interest rates. <br /> Interest rate risk may be mitigated by: <br /> II • Structuring the investment portfolio so that securities mature to <br /> meet cash requirements for ongoing operations, thereby <br /> avoiding the need to sell securities on the open market prior to <br /> maturity, and <br /> • Investing operating funds primarily in shorter term securities. <br /> 4.2 Liquidity. <br /> The City's investment portfolio will remain sufficiently liquid to enable <br /> the City to meet all operating requirements which might be reasonably <br /> anticipated. <br /> 4.3 Yield. <br /> The City's investment portfolio shall be designed with the objective of <br /> attaining a market rate of return throughout budgetary and economic <br /> cycles, taking into account the City's investment risk constraints and <br /> the cash flow characteristics of the portfolio. Return on investment is <br /> of least importance compared to the safety and liquidity objectives <br /> described above. The core of investments are limited to relatively low <br /> risk securities in anticipation of earning a fair return relative to the risk <br /> being assumed. <br /> • <br /> 2 <br />