HomeMy WebLinkAboutResolution No. 2016-02Suggested by: Administration
CITY OF KENAI
RESOLUTION NO. 2016 -02
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, PERTAINING TO
THE AUTHORIZED INVESTMENTS OF, THE INVESTMENT ALLOCATIONS OF, AND
ESTABLISHING APPROPRIATE BENCHMARKS TO MEASURE PERFORMANCE OF THE
CITY'S PERMANENT FUNDS.
WHEREAS, pursuant to KMC 7.30.020 (a) (2) the Council of the City of Kenai shall
annually approve an Asset Allocation Plan for investment of the City's Permanent Funds;
and,
WHEREAS, the KMC 7.30.020 (b) permits investment of the Permanent Funds in various
asset classes and the Council believes that establishing asset allocation criteria for these
various asset classes is in the best interest of the City of Kenai; and,
WHEREAS, the annually approved Asset Allocation Plan will provide benchmarks to
measure investment performance.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI,
ALASKA, that the Council adopts the Asset Allocation Plan for calendar year 2014 as
follows:
PERMANENT FUND ASSET ALLOCATION PLAN AND PERFORMANCE MEASUREMENT
TARGETS
Section 1: The Asset Allocation Plan and Target Weightings with range restrictions are
as follows:
ASSET CLASS
TARGET % WEIGHTING
RANGE %
Cash
5
0 -10
Fixed Income
40
35 -65
Large -Cap Domestic Equity
20
15 -25
International Equity
10
5 -15
Mid -Cap Equities
10
5 -15
Small-Cap Equities
5
0 -10
International Emerging Markets
5
0 -10
Real- estate equities
5
0 -10
Section 2: The performance of the Fund and investment managers will be measured as
follows:
Resolution No. 2016 -02
Page 2 of 2
Performance measurement of the Fixed Income allocation will be measured against the
Target weighting, using the Barcley's Intermediate Government/ Credit Index for the
benchmark.
Performance measurement of the Large -Cap Domestic Equity allocation will be
measured against the Target weighting, using the Standard & Poor's 500 Index for the
benchmark.
Performance measurement of the International Equity allocation will be measured
against the Target weighting, using the Morgan Stanley Capital International Europe,
Australasia and Far East (MSCI EAFE) index for the benchmark.
Performance measurement of the Mid -Cap Equity allocation will be measured against
the Target weighting, using the Standard & Poor's 400 Mid -Cap Index as the
benchmark.
Performance measurement of the Small -Cap Equity allocation will be measured against
the Target weighting, using the Standard &, Poor's 600 Small-Cap Index as the
benchmark.
Performance measurement of the International Emerging Markets allocation will be
measured against the Target weighting, using the Morgan Stanley Capital International
Emerging Markets index as the benchmark.
Performance measurement of the Real- Estate Equities allocation will be measured
against the target weighting, using the Standard & Poor's US REIT Index as the
benchmark.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 20th day of January
2016.
PAT PORTER, MAYOR
Sandra City'Clerk
Approved by Finance:
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"Vi1149e with a Past, C# with a Future's
FINANCE DEPARTMENT
210 Fidalgo Avenue, Kenai, Alaska 99611 -7794
Telephone: 907 - 283 -7535 / FAX: 907 - 283 -3014
To: Rick Koch, City Manager
✓% From: Terry Eubank
Date: January 12, 2016
Re: Permanent Fund Authorized Investments and Asset Allocation Plan for CY2016
Pursuant to KMC 7.30.020 the Council shall annually designate by resolution the authorized
investments and allocation plan for the City's Permanent Funds. Resolution 2016 -02 establishes
the authorized investments and allocation plan to be used for calendar year 2016. This year's
allocation plan is identical to the 2015 investment methodology.
$17,281,883, the Airport Permanent Fund Balance, was invested in September 2008 and since the
fund has transferred $6,636,754 to the Airport Special Revenue Fund for operations and had a
market value of $23,149,202 at December 31, 2015.
$2,526,702, the General Land Sale Permanent Fund Balance, was invested in April 2011 and since
the fund has transferred $443,333 to the General Fund for operations and had a market value of
$2,787,369 at December 31, 2015.
On November 1, 2015, at the request of the Kenai Community Foundation's Board of Directors,
the $66,143 invested by the City on behalf of the foundation was combined with the City's
permanent fund investments. The Foundation's December 31, 2015 balance was $65,004.
The three portfolios are combined and managed together to reduce investing costs. The combined
portfolio has returned 8.51% since September 2008. In contrast the City's investment portfolio
has yielded between 3.0% and 0.34% for the same period.
When originally adopted the investment model being used was projected to return 8.0% annually.
Due to depressed rates in the fixed income portion of the portfolio (which constitutes 40 -65% of
the portfolio's value) the current projected rate of return for the portfolio is 5.9% annually.
Continued low fixed income rates and reduced expectations from equity markets are responsible
for the 0.30% decrease in projected portfolio performance from this time last year.
Risk of the portfolio is measured in standard deviation from the expected rate of return. One
standard deviation is equal to about 66% of all possible outcomes and two standard deviations is
equal to about 95% of all possible outcomes. 66% (one standard deviation) of the time, the
portfolio is expected to return between (3.8 %) and 15.6 %, with an average return of 5.9 %. 95%
(two standard deviations) of the time, the portfolio is expected to return between (13.4 %) and
25.2 %.