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HomeMy WebLinkAboutResolution No. 2024-0610 KENAI CITY OF KENAI RESOLUTION NO. 2024-06 Sponsored by: Administration A RESOLUTION DESIGNATING THE INVESTMENT AND ALLOCATION PLAN FOR THE CITY'S PERMANENT FUNDS AND ESTABLISHING APPROPRIATE BENCHMARKS TO MEASURE PERFORMANCE FOR CALENDAR YEAR 2024. WHEREAS, pursuant to KMC 7.30.020 (a) (2) the Council of the City of Kenai annually approves an Asset Allocation Plan for investment of the City's Permanent Funds; and, WHEREAS, Kenai Municipal Code 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 provides benchmarks to measure investment performance. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, Section 1. That the Council adopts the Asset Allocation Plan for calendar year 2024 as follows: The Asset Allocation Plan and Target Weightings with range restrictions are: ASSET CLASS TARGET % WEIGHTING RANGE % Cash 3 0-10 Fixed Income: Investment Grade Domestic Bonds 26 16-36 High Yield Domestic Bonds 4 0-8 Domestic Equity: Large -Cap Domestic Equity 22 12-32 Mid -Cap Equities 10 0-18 Small -Cap Equities 5 0-10 International Emerging Markets 5 0-10 International Equity 8 4-16 Real-estate equities 2 0-4 Infrastructure equities 5 0-10 Alternative Beta 10 0-15 Section 2. The performance of the Fund and investment managers will be measured as follows: Performance measurement of the Cash allocation will be measured against the target weighting, using the Citi Group 90 Day T-Bill Index as the benchmark. Performance measurement of the Investment Grade Domestic Bond allocation will be measured against the Target weighting, using the Bloomberg Barclays U.S. Aggregate Bond Index for the benchmark. Performance measurement of the High Yield Domestic Bond allocation will be measured against the Target weighting, using the Bloomberg Barclays U.S. Corporate High Yield Very Liquid Bond index for the benchmark. New Text Underlined; [DELETED TEXT BRACKETED] Resolution No. 2024-06 Page 2 of 2 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 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 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 Real -Estate Equities allocation will be measured against the target weighting, using the Standard & Poor's US REIT Index as the benchmark. Performance measurement of the Infrastructure Equities allocation will be measured against the target weighting, using the STOXX Global Broad Infrastructure Index as the benchmark. Performance measurement of the Alternative Beta allocation will be measured against the target weighting, using the Wilshire Liquid Alternatives Index as the benchmark. Section 3. That this Resolution takes effect on immediately upon passage. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 7T" DAY OF FEBRUARY, 2024. ATTEST: �V Michelle San MM City Clerk Approved by Finance: ,'' -j , d:: _- _- -_ - 5 -,- �_� S Bra Gabriel Sr., -Mayor New Text Underlined; [DELETED TEXT BRACKETED] KF:NAI City of Kenai 1 210 Ficlalgo Ave, Kenai, AK 99611-7794 1907.283.7535 1 www.lcenaixity MEMORANDUM TO: Mayor Gabriel and Council Members FROM: Terry Eubank, City Manager DATE: January 31, 2024 SUBJECT: Resolution No. 2024-06 — Designating the Investment Allocations of and Establishing Appropriate Benchmarks to Measure Performance of the City's Permanent Funds for Calendar Year 2024. Pursuant to KMC 7.30.020 the Council annually designates by resolution, the authorized investments and allocation plan for the City's Permanent Funds. Resolution No. 2024-06 establishes the allocation plan and evaluation benchmarks to be used for calendar_ year 2024. There is no recommended change to the asset allocation from 2023. The portfolio is projected to yield 7.30% on average, a 0.70% increase from last year. The portfolio is projected to have an annual risk of 10.45% compared to last year's risk of 10.36%. This represents an increase of 0.09% of portfolio risk, a 1.37% increase of overall risk. Annual risk is the variation in the expected return of the portfolio at one standard deviation, approximately 68% of all occurrences. The risk of the portfolio is doubled at two standard deviation, 95% of all occurrences. For the proposed portfolio which has an expected annual return of 7.80% and a ten-year expected return of 7.30%, 68% of the time the portfolio should annually return between (2.60)% and 18.10% and 95% of the time the portfolio should return annually between (11.30)% and 29.70% In addition to no change in the portfolio's asset allocation, there is also no change in the portfolio's benchmarks. Benchmarks are used to evaluate the portfolio's return as compared to the return of the market. The following is the recommended 2024 asset allocation for your review. 2024 Asset Allocation Cash 3% Fixed Income Domestic Investment Grade Bonds 26% High Yield Domestic Bonds 4% Total Cash and Fixed Income 30% Domestic Equities US Large Cap 22% US Mid Cap 10% US Small Cap 5% International Equities 8% Emerging Market Equities 5% Total Equities 50% Alternative Investments Real Estate 2% Infrastructure 5% Alternative Beta 10% Total Alternative Investments 17% Total Portfolio Q% Expected Average Annual Return 7.80% Expected Risk (one Standard Deviation) 10.45% Return Range (11.30)% to 29.70% Long-term Expected Return 7.30% Your support for adoption of Resolution 2024-06 is respectfully requested. Page 2 of 2 The City of Kenai I www kenai.city