RULES OF THE BOARD OF TRUSTEES
NUMBER
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TITLE
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Investment of Surplus Funds
4-8
(1)
The Board shall approve a policy statement for the investment of surplus funds of the College.
(2)
The policy shall be consistent with Florida Statutes and Rules as promulgated by the State Board
of Education.
(3)
The Vice President of Business Services and the Chief Financial Officer (CFO), together with the
Chief Business Affairs Officer and the Director of Budgeting and Financial Planning shall
constitute the College Investment Committee (the Committee).
(4)
The Board shall periodically approve the selection of an Investment Manager who may be
responsible for all or certain activities associated with the management of the portfolio, which may
include but not be limited to the buying and selling of securities on a day-to-day basis, the
settlement of transactions, performance measuring, compliance monitoring and regulatory and
internal reporting.
(5)
The CFO shall be principally responsible for making day-to-day investment decisions, and shall
annually complete not less than eight (8) hours of continuing education in subjects or courses of
study related to investment practices and products.
(6)
The CFO must submit an annual investment report to the College President and the District Board
of Trustees.
(7)
The Investment Policy Statement is shown below:
A. Scope and General Guidelines:
1. This Investment Policy applies to the surplus funds (Fund) managed by the CFO and the
Investment Manager(s) for the benefit of Florida State College at Jacksonville (College).
2. Subject to the limitations provided herein, the CFO and the Investment Manager(s) shall
have full discretion in terms of asset mix, security selection and timing of transactions.
3. Investments shall be made in accordance with the “prudent man rule,” wherein
investments shall be made with the same judgment and care which persons of
prudence, discretion and intelligence would use in the management
RULES OF THE BOARD OF TRUSTEES
NUMBER
6Hx7-4.7
TITLE
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Investment of Surplus Funds
4-8.1
of their own affairs. The Fund shall not be used for speculation, rather for investment
in which consideration is given to the probable safety of capital and the probable
income to be derived.
4. Management of the Fund shall be in accordance with Florida Statute 218.415, State
Board of Education rule 6A-14.0765 and as may be superseded by this policy, local
statute(s), bond trust indenture(s) or resolution(s).
B.
Investment Objective:
1. The Fund’s primary objective is to maximize income (Book Yield) while providing
minimal risk of market value volatility and adequate short-term liquidity to meet the
demands of the College. Investments shall emphasize preservation of capital and
diversity with regards to specific security types, issuers and maturity.
2. As a secondary objective, the Fund seeks to outperform its benchmark on a total return
basis. The target benchmark to be used for maturity and risk management is the
Merrill Lynch 1-5 Year Government/Corporate A Index. Recognizing that varying
market conditions may affect this long-term objective, the portfolio should also rank
within the top 50 percentile of other fixed-income managers with similar objectives
over a market cycle (4 to 7 years).
C. Authorized Investments:
Investments shall be limited to fixed income securities selected from the following types:
1. U.S. Treasury Bills, Notes, Bonds, and Strips and other obligations whose principal
and interest are fully guaranteed by the United States of America or any of its
agencies.
2. Government Sponsored Enterprises (Federal instrumentalities) including but not
limited to: Federal Farm Credit Bank (FFCB), Federal National Mortgage Association
(FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal Home Loan
Bank (FBLB), Student Loan Marketing Association (SLMA), Financing Corporation
(FICO), The Resolution Funding Corporation (REFCO), Farm Credit System
Financial Assistance Corporation, the Federal Housing Finance Board and all other
government sponsored agencies and enterprises.
RULES OF THE BOARD OF TRUSTEES
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Investment of Surplus Funds
4-8.2
3. Repurchase Agreements: collateralized at 102% by U.S. Treasuries.
4. Certificates of Deposit in state-certified qualified public depositories.
5. Mortgage-backed securities guaranteed by the U.S. Government or a Federal agency.
6. All references to credit rating in this policy shall mean either Standard and Poor’s or
Moody’s or other nationally recognized credit rating organizations.
7. Money Market Instruments: securities rated “A1/P1” or the equivalent as a minimum
(Tier 1 as defined by 2(a) 7 money market funds) at the time of purchase, included but
not limited to commercial paper, time deposits and banker’s acceptances.
8. Corporate notes rated “A” or better.
9. Money market funds registered with the SEC with the highest credit quality rating
from a nationally recognized rating company.
10. Any intergovernmental investment pool authorized pursuant to the Florida Interlocal
Cooperation Act, as provided in F.S. 163.01, which maintains a similar investment
objective.
11. It should be recognized that certain securities may meet the above definition of an
authorized Investment but their performance risk, as created by their structure, may be
such that a prudent investor would deem them inappropriate for the Fund. Securities
of this type which are prohibited:
a. Reverse repurchase agreement.
b. Floating rate securities whose coupon floats inversely to an index or whose coupon
is determined based upon more than one index.
c. Branches of Collateralized Mortgage Obligations (CMO) which receive only the
interest or principal from the underlying mortgage referred Securities Commonly
referred to as “IO’s” and “PO’s.”
d. Securities whose future coupon may be suspended because of the movement of
interest rates or an index.
e. Asset backed commercial paper notes.
RULES OF THE BOARD OF TRUSTEES
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Investment of Surplus Funds
4-8.3
D. Portfolio Construction:
Recognizing that market value volatility is a function of maturity, the CFO and the
Investment Manager shall maintain the Fund as an intermediate term maturity
portfolio. Additionally, it is recognized that proper diversification is considered a prudent
investment approach. Specifically, the following restrictions apply in the management
and investment of the Fund:
1. The maximum average duration of the portfolio shall be no greater than 125% of the
target benchmark’s average duration.
a. The maturity of debt obligations with a call and/or put option(s) shall be
considered the date on which it can be reasonably expected that the bond will be
called, put or mature.
b. The maturity of mortgage securities shall be considered the date corresponding to
its average life. This date reflects the point at which an investor will have received
back half of the original principal (face) amount. The average life may be
different from the stated legal maturity included in a security’s description.
c. The effective maturity of floating rate securities shall be considered the time until
the next full reset of the coupon. The maximum final maturity of a floating rate
security shall be five (5) years from the date of purchase.
d. The maximum effective maturity of an individual security shall be five (5) years
from the date of purchase.
e. To limit principal fluctuation, the maximum average life of the portfolio shall not
be greater than three (3) years.
f. To the extent possible, known cash needs and anticipated cash-flow requirements
will be met with matching investment maturities.
2. U.S. Government and government agency backed securities are not subject to any
limitations. A maximum of 80% of the Fund may be invested in Federal
instrumentalities or mortgage backed securities subject to an additional limit of 20%
of any single issuer. A maximum of 35% of the Fund may be directly
invested in corporate notes and commercial paper subject to the additional limit of 5%
in any individual issuer.
RULES OF THE BOARD OF TRUSTEES
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Investment of Surplus Funds
4-8.4
3. The Fund must maintain a total quality rating of 8.0 or higher on the following scale:
U.S. Government fully guaranteed:
Government sponsored enterprises (GSE):
“AAA”-rated corporate securities:
“AA”-rated corporate securities:
“A”-rated corporate securities:
10.0
9.0
8.0
7.0
6.0
E. Expectations of the Investment Manager:
1. Monthly reporting of holdings and transactions occurring in the Fund. This report is
to include at least (1) all assets held by the Fund with their book value, approximate
market value, accrued income and (2) all transactions occurring in the Fund during the
month.
2. Quarterly reporting of the Fund’s performance. The Investment Manager shall report
the Fund’s total rate of return which reflects the true earnings of the Fund and
incorporates cash flows, changes in market value and income earned. Calculation of
the Fund’s total rate of return will comply with the performance measurement
standards as defined by the Association of Investment Management and Research
(AIMR).
3. The Investment Manager shall maintain an approved list of investment institutions and
dealers for the purchase and sale of securities.
4. The Investment Manager shall execute purchases and sales in a competitive bid
environment wherein at least three (3) offers or bids are obtained for each security.
Exceptions to this approach may be made when
a. prices for purchases/sales are compared to systems providing current market prices
and deemed reasonable;
b. when the security to be purchased is unique to one institution or
c. the security has recently been issued and is trading at the same price by all
financial institutions.
5. The Investment Manager shall maintain a master repurchase agreement and require all
approved institutions and dealers transacting repurchase agreements to adhere to the
requirements of the master repurchase agreement.
RULES OF THE BOARD OF TRUSTEES
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Investment of Surplus Funds
4-8.5
F. Custodial Arrangement(s) and Agreement(s):
1. All securities purchased by the College or by its approved Investment Manager under this
Policy shall be properly designated as an asset of the College and (except for those related
to overnight repurchase agreements) held in safe keeping by a third party custodial bank or
other third party custodial institution. If a bank or trust company serves in the capacity of
investment Advisor, said bank or trust company could also perform required custodial and
reporting services. The only exception to this will be for overnight repurchase agreements
whose underlying securities are held by the originating institutions. Those agreements
shall have the following limitations:
a. Made with primary securities dealers or authorized depositories meeting such
credit quality standards as established by the Investment Manager or the College.
b. Made with only those dealers and authorized depositories with whom the
Investment Manager or College has executed a master repurchase agreement.
2. No withdrawal of such securities, in whole or in part, shall be made from safekeeping
except by designated employees of the Investment Manager, and as prescribed in the
Custodial Agreement by and between the Investment Manager and the College. In the
event the Investment Manager is not the custodian of the securities, the College shall
execute a separate Custodial Agreement with the trustee guaranteeing the same safekeeping provisions listed above.
G. Internal Controls:
1. The CFO shall establish a system of internal controls and procedures, which will be
documented in writing and maintained by the College Controller. The controls and
procedures will be designed to prevent losses of public funds arising from fraud,
employee error, misrepresentation by third parties, unanticipated changes in financial
markets, or imprudent actions by employees and officers of the College or other
entities.
(General Authority: F.S. 163.01, 218.415, 1001.64, SBE Rule 6A-14.0765)
(Adopted 07/01/72, Revised 07/01/74, 06/23/80, 11/17/82, 11/14/84, 10/21/93, 11/02/99, 01/11/00,
12/02/03, 04/04/06, 1/13/09, 02/11/14, 08/11/15 Formerly 2.14)