FAS-002 - Investment Policy_2017(P
SA NT 101 M
Title: Investment Policy
Subject: Investment Policy
Category: Policy
Policy No.: 2017-05-31
M&C Report No.:
Effective Date: 2017-06-12
Next Review Date:
Area(s) this policy applies to: Investments
Office Responsible for review of this Policy: Finance
Related Instruments:
Policy Sponsors: Commissioner of Finance and
Administrative Services
Document Pages: This document consists of 12 pages.
Revision History:
Common Clerk's Annotation for Official Record
Date of Passage of Current Framework: 2017-06-16
1 certify that this Policy was adopted by Common Council as indicated
above.
Common Clerk Date
Date Created:
Common Council Approval Date:
Contact:
2017-05-31
2017-06-12
Commissioner Finance and Administrative
TABLE OF CONTENTS
1. POLICY........................................................................................................................... 2
DEFINITIONS........................................................................................................2
SCOPE..................................................................................................................3
OBJECTIVES..........................................................................................................3
STANDARD OF CARE............................................................................................4
ETHICS AND CONFLICT ON INTEREST..................................................................4
2. INDIVIDUAL RESPONSIBILTIES........................................................................................5
DELEGATION OF AUTHORITY...............................................................................5
AUTHORIZED INVESTMENT DEALERS AND FINANCIAL INSTITUTIONS ................6
3. INVESTMENT OPPORTUNITIES........................................................................................6
4. RATINGS AND CONSTRAINTS..........................................................................................7
RISK TOLERANCE..................................................................................................7
PORTFOLIO CONTRAINTS....................................................................................7
OTHER CONTRAINTS............................................................................................8
5. REPORTING.....................................................................................................................8
REPORTING..........................................................................................................8
DEPARTMENT INVESTMENT POLICY GUIDELINE ADOPTION...............................8
6. APPENDICES.................................................................................................................. 9
City of Saint John
Investment Management Policy Guidelines
SA INT IO1.1
SECTION I: POLICY
1. POLICY STATEMENT
The City of Saint John invests funds not required for operating cash flow, to ensure maximized
return on its investment for the desired risk level.
2. RESPONSIBILITY
It is the responsibility of the Commissioner of Finance and Administrative Services to ensure
that this Policy is followed.
PURPOSE OF THE POLICY GUIDELINES
The purpose of this policy guideline is to document a framework for the prudent management of the
City of Saint John's investment portfolio "Funds" within an acceptable investment risk tolerance level.
It is the policy of the City of Saint John to invest public funds in a manner which will provide the
optimal blend of investment returns and principal protection while meeting the daily cash flow and
liquidity demands of the City of Saint John, and complying with statutory requirements of the
Municipalities Act, the Control of Municipalities Act, and the Trustees Act of the Province of New
Brunswick.
1. DEFINITIONS
Funds: For investment purposes, funds are defined as cash which is not required for day to day
operations.
Benchmarks: For the purpose of measuring the performance of the portfolios, the following
comparators will be used.
• Short-term investments — Government of Canada 3 month Treasury Bill average
• Medium-term investments— Government of Canada 3 year Benchmark Bond average
• Long-term investments — Government of Canada long-term Benchmark Bond average
Investments:
• Short-term investment portfolio consists of cash or liquid securities with a maturity date of one
year or less.
• Medium-term investment portfolio consists of securities with an original maturity date from
one to five years.
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City of Saint John
Investment Management Policy Guidelines
SA INT IO1.1
• Long-term investment portfolio consists of securities with an original maturity date that
exceeds five years.
Liquidity: defined to the City of Saint John as the ability to access funds within a maximum of 30 days
after requesting redemption of investments funds.
2. SCOPE
This Policy Guideline applies to the investment of all cash assets held for short-term, medium, and
long-term uses in the City's various funds.
Investment Portfolio of Funds
• General, and Water and Sewer Operating Funds
• Operating and Capital Reserve Funds
• Land Sales, Subdivision, Parking Land, and other separate funds
• Retirement allowance account, development obligations, and other deposits held for
future payment of long-term liabilities
The City's funds will be invested according to the liquidity needs for operating cash flow, return on
investment requirements of long-term obligations, and the protection of principal for medium term
uses.
3. OBJECTIVES
Principal Protection
Safety of principal is the foremost objective of the investment program. Investments shall be
undertaken in a manner that seeks to ensure the safety of principal, and the preservation of the
purchasing power of principal in the overall Fund in the short, medium, and long-term. The goal is to
manage credit risk, interest rate risk, and inflation risk.
Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may
be reasonably anticipated.
Return on Investment
The Fund shall be constructed with the objective of attaining, at minimum, a benchmark rate of return
throughout varying budgetary and economic cycles, taking into account investment risk constraints
and liquidity needs. Return on investment is of secondary importance compared to the preservation of
capital and liquidity objectives.
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City of Saint John
Investment Management Policy Guidelines
SA INT IO1.1
4. STANDARD OF CARE
Prudence
Investments shall be made exercising the care, diligence and skill that a person of ordinary prudence
would exercise in dealing with the property of another person, considering the probable safety of
principal as well as the probable income to be derived, and having regard to the circumstances of the
funds, including:
(a) its assets,
(b) its beneficiaries or purposes,
(c) its probable duration, and
(d) a reasonable balance between risk and return.
The carrying out of investment activities in accordance with this policy guideline, and with the
judgment, diligence, and care, under circumstances then prevailing, which persons of prudence,
discretion and intelligence exercise in the management of their own affairs, not for speculation, but for
investment, shall relieve the investment officers of personal liability, provided deviations from
expectations are reported in a timely fashion and appropriate action is taken to control adverse
developments.
Internal Controls
Management shall establish a system of internal controls, which shall be documented in writing. The
internal controls shall be reviewed by the independent auditor. The controls shall be designed to
prevent the loss of public funds arising from fraud, employee error, and misrepresentation by third
parties.
S. ETHICS & CONFLICT OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity
with the same individual(s) with whom business is conducted on behalf of the City.
Individuals involved with the investment process shall refrain from personal business activity that
could conflict with proper execution and management of the investment program or impair their
ability to make impartial investment decisions.
Individuals involved with the investment process shall not knowingly permit a situation to arise in
which:
(a) the individual's personal interest conflicts with the exercise of the powers or performance of
this policy, or where
(b) the individual may derive any personal benefit or a benefit for any other person.
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City of Saint John
Investment Management Policy Guidelines
SA INT I01-1
SECTION II: INDIVIDUAL RESPONSIBILITIES
1. DELEGATION OF AUTHORITY
Authority to manage the City of Saint John's investment program is derived from the Investment
Management Policy Statement.
The City delegates the management of the Funds to various agents including certain Officers of the
City. The agents and Officers of the City include:
• the Commissioner of Finance and Administrative Services,
• the Comptroller, and
• the Senior Manager of Financial Planning, Reporting & Analysis and
• the Assistant Comptroller
Management of the investment portfolio Funds and responsibilities have been allocated as follows:
Council
• State the goals of the Corporate Program and articulate the desired results for the community.
• Receive and adopt an Investment Policy to achieve those results.
Officers' Responsibilities
• Review the Policy and if appropriate make recommendations to Common Council for changes.
• Ensure that the Cash-flow and Investment Management Service provided by the City meets
the goals of the Corporate Program and achieves desired community results and policy
objectives.
• Select investment dealers and institutions (the "Brokers") to assist the Commissioner in
meeting performance objectives for the Fund.
• Review the Fund's performance on a regular basis and provide a report to the Finance
Committee annually.
• To be responsible for the delegation of any responsibility not specifically mentioned in the
policy or policy guideline.
• Validate and report the rates of return on the Funds, based on book and market value.
• Select specific investments for the Funds, recognizing the quality and diversification
requirements established in this policy guideline, and subject to approved signing authority.
• Seek to maximize and preserve the investment return on the Funds, after ensuring that the
foregoing liquidity, quality and diversification requirements have been satisfied.
• Manage the securities held by the Funds in accordance with the Policy, policy guidelines, and
applicable legislation.
• Work to meet the benchmarks and targets.
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City of Saint John
Investment Management Policy Guidelines
The designated Officers of City of Saint John may from time to time engage consultants or other
advisors to assist them in fulfilling their responsibilities.
2. AUTHORIZED INVESTMENT DEALERS AND FINANCIAL INSTITUTIONS
All investment dealers and financial institutions used for investment transactions will be members in
good standing of the Investment Industry Regulatory Organization of Canada ("IIROC"), Mutual Fund
Dealers Association ("MFDA") or the New Brunswick Securities Commission.
Preference will be given to investment dealers and financial institutions who are members of the
Responsible Investment Association ("RIA").
SECTION III: INVESTMENT OPPORTUNITIES
The following are the investments permitted in the Fund.
• Eligible Securities as defined in the policy guideline.
• Investments in internally financed City of Saint John's projects.
All investments must be denominated in Canadian dollars.
Investments in derivatives, swaps, options, forward contracts, or futures are prohibited, unless they
are an interest rate or exchange rate hedging strategy related to a specific transaction, or group of
transactions, and authorized by the Commissioner of Finance and Administrative Services.
Investments in shares, warrants, convertible debt securities, or other equities, are prohibited unless
they are equity securities of a Canadian Schedule "I" Chartered Bank.
Funds may be invested or reinvested in one or more of the following:
a) securities of the New Brunswick Municipal Finance Corp;
b) securities that are obligations of, or are guaranteed by Canada or a province;
c) investments guaranteed by a Canadian chartered bank;
d) deposits in a savings institution, or non -equity shares of a credit union whose deposits are
100% guaranteed by a Provincial Government or the Federal Government;
e) commercial paper or bonds issued by a company incorporated under the laws of Canada or a
province, the securities of which are rated in the highest rating category by at least 2
recognized security rating institutions;
All investment categories that are not explicitly permitted are prohibited.
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City of Saint John
Investment Management Policy Guidelines
SA INT I01-1
SECTION IV: RATINGS AND CONSTRAINTS
1. RISK TOLERANCE
Investments shall be made with the degree of judgement and care that persons of prudence, discretion
and intelligence would exercise in the management of their own affairs, not for speculation, but with
priority given firstly to safety of capital, secondly liquidity and thirdly to investment yield. The standard
of prudence to be executed by City staff making investment decisions shall be the "prudent person"
standard. Staff who act in accordance with the City's investment policy and exercise due diligence shall
be relieved of personal responsibility for an individual security's credit risk or market price changes
provided that deviations from expectations are promptly reported in a timely manner and appropriate
action is taken to limit losses in the event of adverse developments.
Investments held in the Fund must be rated by at least one rating agency, namely Moody's, Standard &
Poor's (S&P) or Dominion Bond Rating Service (DBRS). All investments must be Investment Grade (at
least A by S&P, or equivalent by DBRS or Moody's.), as classified in Appendix A. In the case where a
security is rated by more than one agency listed, the higher ratings will apply.
The total Fund will be limited to the following credit rating thresholds on a weighted average basis (as
defined by S&P or equivalent):
Rating
Up to
AAA
100%
AA
90%
A
70%
The maximum exposure to a single investment security is defined in Appendix II. Due to market
fluctuations, maximum percentages may be exceeded at a point in time. Securities need not be
liquidated to rebalance the portfolio; however, consideration should be given to this matter when
future purchases are made to ensure that appropriate diversification is maintained.
2. PORTFOLIO CONSTRAINTS
The primary constraints relate to safety of invested capital and maintaining the liquidity of the
portfolio.
• All securities held in the portfolio shall have a maturity as defined by short-term, medium
term and long-term investments.
• Cash & Marketable Securities: The deemed rating for cash, including the current account,
High Interest Savings Accounts, redeemable GICs, Bankers' Acceptance (BA's), Bank Deposit
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City of Saint John
Investment Management Policy Guidelines
Note (BDA's) and marketable securities will be equal to the rating of the institution it is being
held in.
• Credit Union Deposits: The deemed rating for securities issued by a Credit Union will be
equal to the rating of the province that the credit union resides in and is guaranteed by.
• Bank Deposits: The deemed rating for securities issued by a bank will be equal to the credit
rating of that bank.
• Securities issued by a Government entity: The deemed rating for securities issued by a
Government entity will be equal to the credit rating of that province, country, or equivalent.
3. OTHER CONSTRAINTS
• The Fund shall not borrow funds to acquire securities or otherwise deal in margin trading.
• All investments are to follow the above listed constraints laid out per this policy guideline.
An exception can be made when the Officers for City of Saint John listed under delegation of
authority are in agreement that there is an investment opportunity that lies outside the
constraints governing this policy guideline. Any such investment must comply as an eligible
investment defined in this policy guideline. A maximum investment allocation not exceeding
15% of the City of Saint John's total portfolio will be permitted.
SECTION V: REPORTING
1. REPORTING
The designated officers will provide an annual report to the Finance Committee on the performance of
the portfolio the following year.
2. DEPARTMENT INVESTMENT POLICY GUIDELINE ADOPTION
The City of Saint John's investment policy guidelines shall be implemented by the Commissioner of
Finance and Administrative Services. The policy guidelines shall be reviewed periodically as required
due to changes in the economy or City's requirements and any modifications made thereto must be
approved by the City Manager.
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City of Saint John
Investment Management Policy Guidelines
SA I NT IO1.1 N
SECTION VI: APPENDICES
Appendix I
City of Saint John
Short Term Investments - Credit Risk Criteria
Investment Credit
DBRS
Moody's
S&P
Term
and Guarantees
Government of Canada
per issuer 100% )
(Minimum 10% per portfolio; max.
of portfolio per issuer 100%; max. % of portfolio per category 100%)
Bonds
AAA
Aaa
AAA
1 year or less
Aa
AA
Aa
AA
1 year or less
Treasury Bills
R1 -High
P-1
A-1
1 year or less
P-1
R1 -Middle
P-1
A-1
1 year or less
Guarantees and Crown
A-1
1 year or less
R1- Low
Corporations
R1 -High
P-1
A-1
1 year or less
R1 -Middle
P-1
A-1
1 year or less
Provincial Governments
and Guarantees
(Max. 50% of portfolio; max. of portfolio
per issuer 100% )
Bonds
AAA
Aaa
AAA
1 year or less
AA
Aa
AA
1 year or less
A
A
A
1 year or less
Treasury Bills. Promissory Notes,
R1 -High
P-1
A-1
1 year or less
Guarantees
R1 -Middle
P-1
A-1
1 year or less
R1- Low
P -1/P-2
A -1/A-2
1 year or less
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City of Saint John
Investment Management Policy Guidelines
SA INT i01-1 N
City of Saint John
Short Term Investments - Credit Risk Criteria
Investment Credit DBRS Moody's
S&P
Term
Major Canadian Bank "Schedule I"
(Maximum 50% of portfolio; max. of portfolio per issuer $50M)
R1 -High P-1
A-1
1 year or less
R1 -Middle P-1
A-1
6 months or less
111- Low P -1/P-2
A -1/A-2
3 months or less
Commercial Paper
(Maximum 25% of portfolio; max. of portfolio per issuer 25%)
Asset -Backed Commercial Paper AAA (111 High) Aaa (P-1)
AAA (A-1)
1 year or less
(Secured by a Schedule 1 Bank
Guarantee)
City of Saint John
Medium and Long- Term Investments - Credit Risk Criteria
Government of Canada
(Minimum 25% of portfolio; max. of portfolio per issuer 20%)
AAA Aaa
AAA
Unlimited
AA Aa
AA
Unlimited
Provincial Governments
and Guarantees
(Maximum 50% of portfolio; max. of portfolio per issuer 50%)
AAA Aaa AAA Unlimited
AA Aa AA 30 years or less
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City of Saint John
Investment Management Policy Guidelines
Appendix II
Eligible List of Counterparties (Investment Entities)
Investments by or on behalf of the City of Saint John shall be made in accordance with the Investment
Policy. The City of Saint John may invest in the following entities:
The Government of Canada and its Guarantees
Federal Government
Business Development Bank
Canada Mortgage and Housing Corporation
Canadian Wheat Board
Export Development Canada
Farm Credit Corporation
Provincial Governments and their Guarantees
Province of Alberta and its Guarantees
Province of Ontario and its Guarantees
Province of British Columbia and its Guarantees
Province of Quebec and its Guarantees
Province of Manitoba and its Guarantees
Province of Saskatchewan and its Guarantees
Province of New Brunswick and its Guarantees
Province of Nova Scotia and its Guarantees
Financial Institutions and their Guarantees
Bank of Montreal and its Guarantees
Royal Bank of Canada and its Guarantees
Bank of Nova Scotia and its Guarantees
Toronto Dominion Bank and its Guarantees
CDP Financial Inc.
National Bank of Canada
Desjardins Group
Caisse Central Desjardins
Canadian Imperial Bank of Commerce and its Guarantees
Credit Unions whose deposits are 100% guaranteed by a Provincial or the Federal Government
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