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• <br /> B. Short Term Portfolio: The Short Term Portfolio serves as a cushion to cover <br /> operating expenses or unplanned shortfalls that occur in the Daily Portfolio. The <br /> investment objectives are principal preservation, liquidity to fund cash outflows when <br /> needed and a return that exceeds the performance benchmark established in this IPS. <br /> 1. Minnesota Statutes: Investments shall satisfy Minnesota Statutes governing <br /> municipal investment, specifically Minnesota Statutes Chapter 118A, a copy of <br /> which is attached as Exhibit A. <br /> 2. Time Horizon: The Short Term Portfolio is intended to fund occasional shortfalls <br /> in the Daily Portfolio. Since the potential outflows are expected to be infrequent, <br /> the time horizon for investments is between one and three years. <br /> 3. Liquidity: Investments must provide liquidity as directed. <br /> 4. Risk Tolerance: Investments should satisfy liquidity requirements without risk of <br /> principal loss. <br /> 5. Duration: To satisfy the parameters for liquidity and risk tolerance(above),the <br /> maximum duration of the portfolio is 130%of the benchmark duration. <br /> 6. Return: The total return should exceed the total return of the Performance <br /> Benchmark, with emphasis on current income. <br /> 7. Performance Benchmark: Lehman 1-3 Year Government Index <br /> 8. Authorized Investments and Guidelines: Subject to Minnesota Statutes Chapter <br /> 118A,the following investments are authorized: <br /> Weighting Constraints <br /> U.S. Treasury Up to 100% Maximum maturity of 36 months <br /> Securities <br /> Agency Securities Up to 100% Maximum maturity of 36 months <br /> 9. Diversification: Subject to the guidelines in B 8 (above),the Short Term Portfolio <br /> should be diversified to eliminate the risk of loss resulting from over- <br /> concentration of assets in a specific maturity. <br /> • <br /> 14 <br />