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Agenda Item 7.

Investment Advisory Committee

Meeting Date:	07/25/2022
FROM:	Bill Gallardo

Subject:

Statement of Investment Policy for the City/Brea Successor Agency to the Brea Redevelopment Agency

RECOMMENDATION

Review and approve the City of Brea/Successor Agency to the Brea Redevelopment Agency Statement of Investment Policy.

BACKGROUND/DISCUSSION

State law allows the City Council to annually adopt the Statement of Investment Policy. Thus, per the City's fiscal policies, "The City Council will review and adopt annually an investment policy as recommended by the Investment Advisory Committee." The Investment Policy serves as a guideline for the investment of City and Successor Agency funds. The Brea Investment Advisory Committee annually reviews the Statement of Investment Policy for the City of Brea and the Successor Agency to the Brea Redevelopment Agency.

The below changes and additions have been recommended by Chandler Asset Management (Chandler) for review and approval by the Investment Advisory Committee.

Clarifying the minimum “A” rating category requirement for Medium Term Corporate Notes on Page 3 of the Investment Policy.
Excluding Pass-through Securities which are issued by the U.S. Treasury, U.S. Government Agency and Instrumentality’s of Government Sponsored Corporations on Page 3 of the Investment Policy. These types of securities are captured in the US Government Agency limitation of 25% per entity as noted on Page 5 of the Investment Policy.
Increasing the allowance for Asset-Backed Securities from 10% to 20%.

The above changes will give Brea the flexibility that is permitted by State Code allowing Chandler to add the most value while still managing the City investments in a prudent manner. There has been ongoing concerns about Asset-Backed Securities. However, most of Chandler's clients currently have around 13% exposure which, per our conversation with Chandler, would mostly likely be the highest they would own even with the 20% allowance. It is Chandler's practice to stay highly diversified and ensure strong levels of liquidity.

For ease of reference, the current Investment Policy is attached along with the red-lined version with recommended changes. In addition, a clean version with the recommended changes is also attached.

FISCAL IMPACT/SUMMARY

There is no fiscal impact from the adoption of the Statement of Investment Policy.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Faith Madrazo, Financial Services Manager
Concurrence: Kristin Griffith, Administrative Services Director

Attachments
Current Investment Policy - Adopted 8/17/21
Draft Investment Policy - Redline
Draft Investment Policy - Clean Version