Loading...
HomeMy WebLinkAboutResolution No. 2018-08Suggested by: Administration CITY OF KENAI RESOLUTION NO. 2018-08 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 FOR CALENDAR YEAR 2018. 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 2018 as follows: Section 1: The Asset Allocation Plan and Target Weightings with range restrictions are as follows: ASSET CLASS Cash Fixed Income Large-Cap Domestic Equity International Equity Mid-Cap Equities Small-Cap Equities International Emerging Markets Real-estate equities TARGET % WEIGHTING 5 40 20 10 10 5 5 5 RANGE% 0-10 35-65 15-25 5-15 5-15 0-10 0-10 0-10 Section 2: follows: The performance of the Fund and investment managers will be measured as 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 again st the Target weighting , using the Standard & Poor's 500 Index for the benchmark. Resolution No . 2018-08 Page 2 of 2 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 . Section 3. That this resolution takes effect immediately upon passage. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, th is 7th day of February 2018. BRIAN GABRIEL SR., MAYOR Approved by Finance: '1 1--- 'Vtfl'~ «11'tli a Pa.J'~ e'tt «11'tli a Fat~ JI 210 FidalgoAve, Kenai , Alaska 99611-7794 Telephone : (907) 283-75351 Fax: (907) 283-3014 www.kenai .city ME MORANDU M TO: THROUGH: FROM: DATE: SUBJECT: Mayor Brian Gabriel and Kenai City Council Paul Ostrander, City Manager \:?. c.9 .. Terry Eubank, Finance Director 1/ January 31 , 2018 Reso lution No. 2018-08 -The authorized in vestments of, the investment allocations of, and establishing appropriate benchmarks to measure performance of the City's Permanent Funds for calendar year 2018 . 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 2018-08 establishes the authorized investments and allocation plan to be used for calendar year 2018. This year's allocation plan is identical to the 2017 investment methodology. $17,281 ,88 3, the Airport Permanent Fund Balance , was invested in September 2008 and since the fund has transferred $9,043 ,509 to the Airport Special Revenue Fund for operations and had a market value of $25,751 ,998 at December 31 , 2017. $2 ,526 ,702 , the General Land Sale Permanent Fund Balance , was invested in April 2011 and since t he fund has transferred $607 ,587 to the General Fund for operations a nd had a ma rk et value of $3,231 , 126 at December 31, 2017. On November 1, 2015 , at the request of the Kenai Community Foundation 's Board of Direct ors , the $66 , 143 invested by the City on behalf of the foundation was combined w ith the City 's permanent fund in vestments . The Foundation 's December 31 , 2017 balance was $143 ,849 inclu d ing subsequent deposits by the Foundation . The three portfolios are combined and managed together to reduce investing costs. The combined portfolio has returned 8. 78 % since September 2008 . In contrast the City 's investment portfol io 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 lower proje cted total return s on the fi xed income portion of the portfolio (wh ich constitutes Page 2 of 2 Resolution No. 2018-08 40 -65% of the portfolio 's value) the current 10-year proj ected ra te of return for the portfol io is 6.2% annually . This is an increase of 0 .10 % from last year due to start of interest rate normalization . 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 annually return between (3 . 7%) and 16.0%, with an average annual return of 6 .2%. 95% (two standard deviations) of the time, the portfolio is expected to annually return between (13.6%) and 25.9%. 2018 marks the 101h year of utilizing th is investment methodology. During the next year the administration , with the assistance of Alaska Permanent Capital Management, will perform a thorough portfolio review including the annual return needed for operations , associated risk of portfolios with different return e xpectations , and different asset classes to develop an optimal portfolio for the next ten year cycle. There will likely not be significant changes to the portfolio , unless there is material change in the annual return needed for operations, but this is a needed and prudent process at the completion of each ten-year cycle.