Fort Walton Beach Council agenda — 01-08-13--regular — reading text

personnel changes Guidelines for evaluation, retention, and replacement of Portfolio Manager: mE A. Compare performance, to established benchmarks ( quarterly, annual, trailing) uc B. Compare performance to established target ( ag.: To outperform benchmark/index and to achieve investment _ returns, such as maintaining purchasing power defined as returns in excess of inflation as defined by the United Stales Consumer Price Index) A Portfolio Manager will be rated in a ` Favorable Status" if he is delivering favorable performance and there are no outstanding organizational issues. A Portfolio Manager will be in a " Caution Status" if the three year performance is trailing the established benchmark. A Portfolio Manager that falls in " Caution Stams" will undergo a formal review by the Investment Advisor. The review will address how the Portfolio Manager will move back to " Favorable Status" or recommend termination. A Portfolio Manager can move back to " Favorable Status" by improving performance m above the criteria as listed above. Highest priority will be given to a Portfolio Manager failing to meet the five- u year target and next to those failing to meet the three -year target. There may be simations where immediate >, problems, questions, or short -term performance issues arise regarding a Portfolio Manager and the priority will 62 a shift to review these simations first. Reasons for immediate termination of Portfolio Manager: A. Deviation from the City' s Investment Policy or instructions without written authority B. Substantial deviation from investment disciplines and process ommaaro 1875, Ad" smed ia„ aa, y s, 2013 Packet Pg. 65  12. 1. h City of Fort Walton Beach, FL INVESTMENT POLICY Attachment C - Glossary of Investment Terms Accrued Interest. Interest earned but which has not yet been paid or received. Agency. See " Federal Agency Securities." 0C Ask Price. Price at which a broker /dealer offers to sell a security to an investor. Also known as " offered price. ar Asset Backed Securities ( ABS). A fixed- income security backed by notes or receivables against assets other o than real estate. Generally issued by special purpose companies that " own" the assets and issue the ABS. N Examples include securities backed by auto loans, credit card receivables, home equity loans, manufactured housing loans, farm equipment loans and aircraft leases. c- o Average Life. The average length of time that an issue of serial bonds and /or term bonds with a mandatory t sinking fund feature is expected to be outstanding. aE N Bankers' Acceptance ( BA' s). A draft or bill of exchange drawn upon and accepted by a bank Frequently used c to finance shipping of international goods. Used as a short- term credit instrument, bankers' acceptances are traded us at a discount from face value as a money market instrument in the secondary market on the basis of the credit quality of the guaranteeing bank. r° Basis Point One hundredth of one percent, or 0. 01 %. Thus 1% equals 100 basis points. Bearer Security. A security whose ownership is determined by the holder of the physical security. Typically, there is no registration on the issuer' s books. Title to bearer securities is transferred by delivery of the physical m security or certificate. Also known as " physical securities." a Benchmark Bills: In November 1999, FNMA introduced its Benchmark Bills program, ashort -term debt n° securities issuance program to supplement its existing discount note program. The program includes a schedule of U larger, weekly issues in three- and six -month maturities and biweekly issues in one -year for Benchmark Bills. r 2 Each issue is brought to market via a Dutch ( single price) auction. FNMA conducts a weekly auction for each Benclunark Bill maturity and accepts both competitive and non -competitive bids through a web based auction system. This program is in addition to the variety of other discount note maturities, with rates posted on a daily c basis, which FNMA offers. FNMA' s Benchmark Bills are unsecured general obligations that are issued in book- E Ill entry form through the Federal Reserve Banks. There are no periodic payments of interest on Benchmark Bills, which are sold at a discount from the principal amount and payable at par at maturity. Issues under the uc Benchmark program constitute the same credit standing as other FNMA discount notes; they simply add in organization and liquidity to the short- term Agency discount note market. 3 Benchmark Notes /Bonds: Benchmark Notes and Bonds are a series of FNMA " bullet" maturities ( non -callable) issued according to a pre -announced calendar. Under its Benchmark Notes /Bonds program, 2, 3, 5, 10 and 30- year maturities are issued each quarter. Each Benchmark Notes new issue has a minimum size of $4 billion, 30- year new issues having a minimum size of $ 1 billion, with re- openings based on investor demand to further enhance liquidity. The amount of non- callable issuance has allowed FNMA to build a yield curve in Benchmark Notes and Bonds in maturities ranging from 2 to 30 years. The liquidity emanating from these large size issues E has facilitated favorable financing opportunities through the development of a liquid overnight and term repo is market Issues under the Benchmark program constitute the same credit standing as other FNMA issues; they a simply add organization and liquidity to the intermediate- and long -term Agency market. Benchmark. A market index used as a comparative basis for measuring the performance of an investment portfolio. A performance benchmark should represent a close correlation to investment guidelines, risk tolerance and duration of the actual portfolio's investments. Bid Price. Price at which a broker /dealer offers to purchase a security from an investor. Packet Ordinance 1875, Adopk January R, 2013  12. 1. b City of Fort Walton Beach, FL INVESTMENT POLICY Bond Market Association ( BMA). The bond market trade association representing the largest securities markets in the world. In addition to publishing a Master Repurchase Agreement, widely accepted as the industry standard document for Repurchase Agreements, the BMA also recommends bond market closures and early closes due to holidays. Bond. Financial obligation for which the issuer promises to pay the bondholder ( the purchaser or owner of the bond) a specified stream of mite cash flows, including periodic interest payments and a principal repayment. Book Entry Securities. Securities that are recorded in a customer' s account electronically through one of the financial markets electronic delivery and custody systems, such as the Fed Securities wire, DTC and PTC ( as opposed to bearer or physical securities). The trend is toward a certificate -free society in order to cut down on paperwork and to diminish investors' concerns about the certificates themselves. The vast majority of securities are now book entry securities. Book Value. The value at which a debt security is reflected on the holder' s records at any point in time. Book value is also called " amortized cost" as it represents the original cost of an investment adjusted for amortization of premium or accretion of discount. Also called " carrying value." Book value can vary over time as an investment approaches maturity and differs from " market value" in that it is not affected by changes in market interest rates. Broker/Dealer. A person or firm transacting securities business with customers. A " broker" acts as an agent between buyers and sellers, and receives a commission for these services. A " dealer" buys and sells financial m assets from its own portfolio. A dealer takes risk by owning inventory of securities, whereas a broker merely matches up buyers and sellers. See also " Primary Dealer." Bullet Notes /Bonds. Notes or bonds that have a single maturity date and are non -callable. m Call Date. Date at which a call option may be or is exercised. Call Option. The right, but not the obligation, of an issuer of a security to redeem a security at a specified value and at a specified date or dates prior to its stated maturity date. Most fixed -income calls are a par, but can be at any previously established price. Securities issued with a call provision typically carry a higher yield than similar securities issued without a call feature. There are three primary types of call options ( 1) European - one -time calls, ( 2) Bermudan - periodically on a predetermined schedule ( quarterly, semi- annual, annual), and ( 3) American - continuously callable at any time on or after the call data There is usually a notice period of at least 5 business days prior to a call date. Callable Bonds/ Notes. Securities, which contain an imbedded call option giving the issuer, the right to redeem the securities prior to maturity at a predetermined price and tune. Capital Preservation. An investment strategy where the primary goal is to preserve capital and prevent loss