Sarasota County Investment Policy 2018

Sarasota County Investment Policy 12 2. Reducing Interest Rate Risk Generally, the longer the maturity of a particular investment, the greater it’s price volatility. Accordingly, the County seeks to limit interest rate risk by maintaining an investment portfolio with limited Effective Duration volatility. Guidelines are established below. i. Pooled Cash and Investments (with no external restrictions) No security shall, at time of purchase, have an Effective Duration exceeding five (5) years or cause the weighted average Effective Duration of the portfolio to be greater than 2.5 years or as required to best meet projected cash flow needs of the County. All Collateralized Mortgage Obligations are required to pass the high-risk security test at the time of purchase and annually thereafter. The three FFIEC tests used to determine compliance analyze Average Life, Average Life Sensitivity and Price Sensitivity for a standardized set of nine scenarios +/- 300 basis points. ii. Restricted Accounts Unless otherwise stipulated, the Restricted Account’s investment portfolio will have a cash flow structure consistent with the nature of the restricted account. B. POLICIES TO ENSURE ADEQUATE LIQUIDITY 1. Maintenance of Liquidity Base A liquidity base of approximately two (2) months of anticipated disbursements, excluding bond construction payments or other bond payments made from escrow or trust accounts, will be kept in relatively short-term investments. These would include funds on deposit in the County’s depository account, investments in a stable NAV Florida Local Government Investment Pool, Repurchase Agreements and other investments maturing in less than 1 year. 2. Maximum Maturity on Repurchase Agreement The maximum maturity for any single Repurchase Agreement, except for the daily repurchase agreement with the concentration bank, will be one (1) year. 3. Purchase Securities with Active Secondary Market Many securities are legally authorized but are not very desirable from a liquidity standpoint. Accordingly, although investments may be on the authorized list, only those securities from an issuer with an active secondary market may be purchased. C. POLICIES TO ACHIEVE INVESTMENT RETURN OBJECTIVES 1. Active Portfolio Management It is the policy of the County to actively manage the investment portfolio within the constraints outlined in these investment policies. In recognition that specific investments and markets are dynamic, that relative values can change over time, and by regularly reassessing their analysis and projected performance and making timely re-allocations of investments, it is the policy to