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Agenda Item 7.

Investment Advisory Committee

Meeting Date:	07/24/2023
FROM:	Bill Gallardo

Subject:

Investment Policy Guidelines for the City of Brea's Other Post Employment Benefits (OPEB) Trust Fund

RECOMMENDATION

Review and approve the Investment Guidelines for the City's Other Post Employment Benefits (OPEB) Trust Fund through Public Agency Retirement Services (PARS).

BACKGROUND/DISCUSSION

On May 5, 2020, the City Council approved the Investment Guidelines as presented for the City's OPEB Trust Program ("Plan") following the Investment Advisory Committee's recommendation of a Moderate Investment Objective. The below chart summarizes the Strategic Asset Allocation for the Moderate Investment Objective:

Strategic Asset Allocation Ranges
Cash	Fixed Income	Equity
0-20%	40%-60%	40%-60%
Policy: 5%	Policy: 45%	Policy: 50%

The goal of the Plan's investment program, as identified in the Investment Guidelines, is to provide a reasonable level of growth which will result in sufficient assets to pay the present and future obligations of the Plan. The following objectives are intended to assist in achieving this goal:

The Plan should seek to earn a return in excess of its policy benchmark over the life of the Plan; and
The Plan’s assets will be managed on a total return basis which takes into consideration both investment income and capital appreciation. While the Plan Sponsor recognizes the importance of preservation of capital, it also adheres to the principle that varying degrees of investment risk are generally rewarded with compensating returns. To achieve these objectives, the Plan Sponsor allocates its assets (asset allocation) with a strategic perspective of the capital markets.

The purpose of the guidelines are to:

Facilitate the process of ongoing communication between the Plan sponsor and its plan fiduciaries;
Confirm the Plan’s investment goals and objectives and management policies applicable to the investment portfolio identified below and obtained from the Plan sponsor;
Provide a framework to construct a well-diversified asset mix that can potentially be expected to meet the account’s investment needs that is consistent with the account’s investment objectives, liquidity considerations and risk tolerance;
Identify any unique considerations that may restrict or limit the investment discretion of its designated investment managers; and
Help maintain a long-term perspective when market volatility is caused by short-term market movements.

During the COVID-19 pandemic, the initial contribution to this Plan was suspended. The Plan currently has no assets and the City Council is anticipated to discuss an initial contribution after the close of Fiscal Year 2022-23. Any initial contribution is recommended to be dollar cost averaged over a 12-month period based upon the Investment Advisory Committee's recommendation discussed at the April 27, 2020 Investment Advisory Committee meeting.

There are no new changes to this year's Investment Policy Guidelines.

FISCAL IMPACT/SUMMARY

There is no fiscal impact for approving the Investment Policy Guidelines.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Faith Madrazo, Financial Services Manager-Revenue and
Monica Lo, Deputy Director of Administrative Services
Concurrence: Kristin Griffith, Director of Administrative Services

Attachments
Attachment A - Proposed 2023 Investment Policy Guidelines for OPEB