HomeMy WebLinkAboutResolution No. 2014-06Suggested by: Administration
CITY OF KENAI
RESOLUTION NO. 2014 -06
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. 2014 -06
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 Financial Times Stock Exchange Developed ex
North America 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 Financial Times Stock Exchange
Emerging 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 15th day of
January 2014.
PAT PORTER, MAYOR
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Sandra o i�h, City Vlerk
Approved y Finance: 7'
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the city
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To: Rick Koch, City Manager
From: Terry Eubank
Date: January 8, 2014
lVillaye with a Past, C# with a Future"
FINANCE DEPARTMENT
210 Fidalgo Avenue, Kenai, Alaska 99611 -7794
Telephone: 907 - 283 -7535 ext 221 / FAX: 907 - 283 -3014
Re: Permanent Fund Authorized Investments and Asset Allocation Plan for CY2014.
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 2014 -06 establishes
the authorized investments and allocation plan to be used for calendar year 2014. This year's
allocation plan is identical to the 2013 investment methodology.
$17,281,883, the Airport Permanent Fund Balance, was invested in September 2008 and since
the fund has transferred $4,282,968 to the Airport Special Revenue Fund for operations and had
a market value of $24,095,421 at December 31, 2013. The portfolio has returned 10.73% 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 6.1%
annually.
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 (4.6 %) and 16.8 %, with an average return of 6.1 %. 95%
(two standard deviations) of the time, the portfolio is expected to return between (15.3 %) and
27.5 %.
Over time it is expected that the fixed income markets will return to historic rates of return and
should return the portfolios performance to the 8% level.