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  Agenda Item   24.    
City Council Meeting
Meeting Date: 08/15/2023  
FROM: Bill Gallardo

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

The Investment Advisory Committee, including PARS and HighMark Capital Management, annually reviews the Investment Policy Guidelines and provides recommendations (if any) on any changes for the upcoming annual review period.  As part of the annual review, there were no new changes recommended (with the exception of minor grammatical and formatting changes) to this year's Investment Policy Guidelines.

The proposed Investment Policy Guidelines for the City of Brea's Other Post Employment Benefits (OPEB) Trust Fund is attached.
On July 24, 2023, the Investment Advisory Committee reviewed the Investment Policy Guidelines and is recommended for City Council approval.
There is no fiscal impact for approving the Investment Policy Guidelines.
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
Proposed 2023 Investment Policy Guidelines for OPEB

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