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  Agenda Item   5.    
Investment Advisory Committee
Meeting Date: 07/26/2021  
FROM: Bill Gallardo

Investment Policy Guidelines for the City of Brea's Employee Benefits Fund Pension Plan
Review and approve the Investment Policy Guidelines for the City of Brea’s Employee Benefits Fund Pension Plan through Public Agency Retirement Services (PARS).
On November 17, 2015, the City Council approved participation within the Public Agencies Post-Employment Benefit Trust Program that established the City of Brea's Employee Benefits Fund Pension Plan ("Plan"). The Plan is administered by Public Agencies Retirement Services (PARS) to assist the City in "pre-funding" its pension obligations in an irrevocable Section 115 Trust account. Some of the benefits of participating in the program are summarized below:
  • City maintains oversight of investment management and control over the risk tolerance level of the portfolio;
  • Assets held in the PARS Section 115 Trust account allow for greater investment flexibility and risk diversification compared to the City's General Fund investments;
  • Assets could be accessed to offset unexpected CalPERS rate increases (rate stabilization);
  • Potential to improve an agency's bond rating; and
  • Flexibility to access assets at any time as long as it is used to pay employer's pension obligations.
The investment strategies for these assets are defined within the City's Investment Policy Guidelines that were developed and evaluated by PARS, HighMark Capital Management (the Plan’s Investment Advisory Firm) and the City's Investment Advisory Committee (IAC). The purpose of the Investment Policy Guidelines is to facilitate communication and confirm the City's investment objectives for the Plan. It also helps maintain a long-term perspective when market volatility is caused by short-term market movements. The policy also details the Plan's Trustee, the Investment Manager and the Investment Advisory Committee's roles and responsibilities. 

On January 19, 2016, the City Council adopted the City’s Investment Policy Guidelines for the Plan and confirmed the Investment Advisory Committee's recommendation of selecting the “Balanced” Asset Allocation Strategy of the five strategies offered by the Plan’s Investment Advisory Firm, HighMark Capital Management. This strategy provides growth of principal and income on the long term horizon. 

On April 24, 2017, the Investment Advisory Committee, including PARS and HighMark Capital Management, reviewed the Investment Policy Guidelines and recommended expanding the responsibilities of the Investment Manager to include “Notifying City Treasurer, Administrative Services Director and Investment Advisory Committee when investment portfolios demonstrate low performance, if any, which occurs between each periodic report.” 

These changes were incorporated as part of the 2016 and 2017 annual review of the Investment Policy Guidelines.  No changes are recommended as part of this annual review.  The draft Investment Policy Guidelines is included as Attachment A.  At this time, there are no changes recommended for the 2021 annual review.
There is no fiscal impact for approving the Investment Policy Guidelines.
William Gallardo, City Manager
Prepared by: Alicia Brenner, Senior Fiscal Analyst
Concurrence: Cindy Russell, Administrative Services Director
Attachment A - Draft 2021 Employee Benefits Fund Pension Plan Investment Policy Guidelines

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