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Investment Policy Statement
OPEB/PENSION 115 TRUST for
The City of Cathedral City, CA OPEB Trust Account
50/50 Model Allocation
Introduction
This document sets forth the investment policy for the investment portfolio available to the OPEB/Pension 115 Trust administered by Shuster Advisory Group, LLC.
This policy should be read in conjunction with the Investment Advisory Agreement and Risk Analysis report.
Purpose
The purpose of this investment policy statement is to:
➢ Ensure that all fiduciaries involved in the plan take prudent and careful action to maintain the investment portfolios;
➢ Facilitate the process of ongoing communication between the Employer/Plan Sponsor and its plan fiduciaries;
➢ Confirm the Plan’s investment goals and objectives and management policies as well as cash flow expectations applicable to the investment portfolio identified below and obtained from the Employer/Plan Sponsor;
➢ Provide a framework to construct a well-diversified asset mix that can potentially be expected to meet the account’s short- and long-term needs that is consistent with account’s investment objectives, liquidity considerations and risk tolerance; ➢ Identify any unique considerations that may restrict or limit the investment discretion of the Investment Advisor;
➢ Maintain a long-term perspective when market volatility is caused by short-term market events.
Plan Information
Employer/Plan Sponsor: City of Cathedral City
Plan Administrator: City Manager
Plan Name (“Plan”): City of Cathedral City OPEB Trust Account Type of Account: OPEB Funding
Trustee: Alta Trust
Contact: Adam Ponder, CEO
[email protected] / (303) 996-3786
Custodian: Charles Schwab Trust Bank
Contact: Customer Service,
(800) 435-4000
Trust Administrator: Shuster Advisory Group, LLC
Contact: Mark Shuster, Managing Member
[email protected] / (626) 578-0816
Investment Advisor: Shuster Advisory Group, LLC
Contact: Mark Shuster, Managing Member
[email protected] / (626) 578-0816
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Investment Policy Statement
OPEB/PENSION 115 TRUST for
The City of Cathedral City, CA OPEB Trust Account
50/50 Model Allocation
Investment Advisor Authority
In accordance with the relevant terms of the documents related to Plan, the Employer/Plan Sponsor/Plan Administrator has delegated investment discretion and authority to Shuster Advisory Group, LLC., an independent SEC-registered investment advisor.
Except as otherwise noted in this document, Investment Advisor has full investment discretion over the assets in the account that are managed. Investment Advisor is authorized to purchase, sell, exchange, invest, re-invest and manage the designated assets held in the account without prior approval or subsequent approval of any other party to the Plan. This management shall be based upon the account’s investment objectives provided by the Employer/Plan Sponsor/Plan Administrator.
Investment Objectives and Constraints
The goal of the Plan’s investment program 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. ➢ The Plan’s assets will be managed on a total return basis which takes into consideration both investment income and capital appreciation. While the Employer/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 Employer/Plan Sponsor allocates its assets (asset allocation) with a strategic perspective of the capital markets.
Investment Time Horizon: More than 10 years
Anticipated Cash Flows: Assets in the Plan will seek to mitigate the impact of the funding of current and future unfunded OPEB liabilities to reduce the impact of future expenses on the Employer/Plan Sponsor. It is not anticipated that the Plan will have a high level of disbursements in the next five years, however it is anticipated that a steady increase in disbursements will occur as more employees begin to retire. The goal is to manage the cash flow of the plan via actuarial projections provided by the Employer/Plan Sponsor.
Risk Tolerance: Balanced - The account’s risk tolerance has been rated balanced, which demonstrates that the account can accept modest price fluctuations to pursue its investment objectives.
Investment Objective: Balanced – The Balanced Portfolio is a globally diversified portfolio consisting of asset classes that may include U.S. and foreign equity, commodities, real estate investment trusts, and bonds. This strategy is designed for the balanced investor with an investment horizon of at least 5 years who can withstand modest fluctuations in their portfolio value.
Strategic Asset Allocation: Balanced
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Investment Policy Statement
OPEB/PENSION 115 TRUST for
The City of Cathedral City, CA OPEB Trust Account
50/50 Model Allocation
Equity Fixed Income Cash
40%-60% 38%-58% 0-12%
Policy: 50% Policy: 48% Policy: 2%
Policy Weight Ranges:
Asset Classes Min. Policy Max.
Cash 0 2 12
Bonds 38 48 58
High Yield 0 0 10
US Large Cap 11 21 31
US Mid Cap 0 6 16
US Small Cap 0 3 13
International Developed Markets 10 20 30
Emerging Markets 0 0 10
Global Real Assets 0 0 10
Market conditions may cause the account’s asset allocation to vary from the stated range from time to time. The Investment Advisor will rebalance the portfolio no less than quarterly and/or when the actual weighting differs substantially from the strategic range, if appropriate and consistent with your objectives.
Performance Benchmarks: The performance of the total Plan shall be measured over a three and five-year period. These periods are considered sufficient to accommodate the market cycles experienced with investments. The performance may be compared to the return of the total portfolio blended from selected benchmarks. These benchmarks have been chosen for their relevance to the portfolio’s investment objectives and strategy. While we strive to provide a comprehensive comparison, it is important to note that other benchmarks not listed here may also be relevant for assessing the portfolio’s performance.
▪ Cash ▪ S&P 400 Index
▪ Bloomberg US Aggregate / Bloomberg US
Universal Aggregate
▪ Bloomberg Municipal Bond / MS Category
Avg – Municipal CA Intermediate
▪ S&P 500 Index ▪ MSCI All Country World ex USA Index
▪ Russell 2000 Index ▪ MSCI EAFE Index
▪ MSCI World ex USA Index ▪ S&P Global Real Assets Index ▪ MSCI Emerging Markets Index ▪ S&P Global Infrastructure Index ▪ S&P Global Real Estate Index ▪ Private Asset Index
▪ S&P Global Natural Resources Index ▪ Alternative Index ▪ ICE BofA 0-3 Month US Treasury Bills
Permitted Investments: Investment Advisor may utilize a full range of investment vehicles when constructing the investment portfolio. Given the portfolio's above-stated investment objectives and its Total Program Benchmark, Shuster Advisory Group will seek to cause the portfolio to have exposure to a complete array of global assets to fully capture risk diversification and return
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Investment Policy Statement
OPEB/PENSION 115 TRUST for
The City of Cathedral City, CA OPEB Trust Account
50/50 Model Allocation
opportunities. Variation will be permitted across tactical opportunities and in the case of Total Portfolio Approach (holistic) opportunities.
Security Selection: Investment Advisor may utilize a full range of investment vehicles when constructing the investment portfolio, including but not limited to individual securities, mutual funds, exchange- traded funds, fixed income portfolios, and alternative investments. Alternative investments, including but not limited to private equity and private debt, real assets (natural resources, real estate, infrastructure as examples) are generally not directly correlated to equity or fixed income investments and are therefore designed to lower overall portfolio volatility.
Restricted Investments: Direct Investments, other than through pooled or separately managed funds.
Margin Purchases will not be used for leverage. Direct Ownership of letter stock. Securities of the Investment Manager, its parent or subsidiaries, except when in a pooled vehicle.
Duties and Responsibilities
The Employer/Plan Sponsor/Plan Administrator is responsible for:
➢ Confirming the accuracy of this Investment Policy Statement, in writing. ➢ Advising Trustee, Custodian and Investment Advisor of any change in the plan/account’s financial situation, funding status, or cash flows, which could possibly necessitate a change to the account’s overall risk tolerance, time horizon or liquidity requirements; and thus, would dictate a change to the overall investment objective and goals for the account. ➢ Monitoring and supervising all service vendors and investment options, including investment managers.
➢ Avoiding prohibited transactions and conflicts of interest.
The plan Custodian is responsible for:
➢ Valuing the holdings.
➢ Collecting all income and dividends owed to the Plan. ➢ Settling all transactions (buy-sell orders).
The plan Trustee is responsible for:
➢ Tracking valuation of the holdings.
➢ Holding assets in Trust as directed trustee.
The Trust Administrator and Investment Advisor is responsible for:
➢ Assisting the Employer/Plan Sponsor/Plan Administrator with the development and maintenance of this Investment Policy Statement.
➢ Meeting with Employer/Plan Sponsor/Plan Administrator to review portfolio structure, holdings, and performance.
➢ Designing, recommending and implementing an appropriate asset allocation consistent with the investment objectives, time horizon, risk profile, guidelines and constraints outlined in this statement.
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Investment Policy Statement
OPEB/PENSION 115 TRUST for
The City of Cathedral City, CA OPEB Trust Account
50/50 Model Allocation
➢ Researching and monitoring investment advisers and investment vehicles. ➢ Purchasing, selling, and reinvesting in securities held in the account. ➢ Monitoring the performance of all selected assets.
➢ Voting proxies, if applicable.
➢ Recommending changes to any of the above.
➢ Periodically reviewing the suitability of the investments, being available to meet with the committee at least once each year and being available at such other times within reason at your request. ➢ Preparing and presenting appropriate reports.
Acknowledgement and Acceptance
➢ I/We being the Employer/Plan Sponsor with responsibility for the account(s) held on behalf of the Employer/Plan Sponsor specified below, designate Investment Advisor as having the investment discretion and management responsibility indicated in relation to all assets of the Plan or specified Account. If such designation is set forth in the Plan/trust, I/We hereby confirm such designation as Investment Advisor.
➢ I have read the Investment Guidelines Document, and confirm the accuracy of it, including the terms and conditions under which the assets in this account are to be held, managed, and disposed of by the Investment Advisor. This Investment Guidelines Document supersedes all previous versions of an Investment Guidelines Document or investment objective instructions that may have been executed for this account.
Client:
Name:
Title:
Signature:
Date:
Investment Advisor: Shuster Advisory Group, LLC
Name: Mark Shuster
Title: Managing Member
Signature:
Date: