ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
Introduction
This document sets forth the investment policy for the investment portfolio available to the Other Post Employment Benefits (OPEB) 115 trust administered by Shuster Advisory Group, LLC.
In coordination with the Financial Services Director and the City Treasurer, Shuster Advisory Group, LLC has provided a custom portfolio. There will be ongoing monitoring by City Treasurer and Financial Services.
This policy should be read in conjunction with the Investment Advisory Agreement and Risk Analysis report.
Purpose
The purpose of this OPEB investment policy is to:
Ensure that all plan fiduciaries involved in the plan (City of Cathedral City OPEB Trust Account) take prudent and careful action to maintain the investment portfolios oPlan fiduciaries:
Administrator: Financial Services Director, in coordination with the Elected City Treasurer and under the guidance of the City Manager Trustee: Alta Trust
Custodian: Charles Schwab Trust Bank
Trust Administrator: Shuster Advisory Group, LLC
Investment Advisor: Mark Shuster, Managing Member
Facilitate the process of ongoing communication between the City of Cathedral City, 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 City of Cathedral City
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 are 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.
ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
Investment Advisory Authority
In accordance with the relevant terms of the documents related to Plan, the City of Cathedral City and the City Manager have delegated investment discretion and authority to Shuster Advisory Group, LLC, an independent SEC-registered investment advisor.
Except as otherwise noted in this document, Shuster Advisory Group, LLC has full investment discretion over the assets in the account that are managed. Shuster Advisory Group, LLC 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 approved by the City Council.
Investment Objectives and Constraints
The primary objectives, in order of priority, of the City’s investment activities, shall be:
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 City of Cathedral City 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 City of Cathedral City 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 City of Cathedral City. It is not anticipated the Plan will have a high level of disbursements in the next five years; however, it is anticipated a steady increase in disbursements could occur as more employees begin to retire. The goal is to manage the cash flow of the plan through the projections provided in the City of Cathedral City’s biennial actuarial valuation for the Retiree Healthcare Plan.
Risk Tolerance: Balanced - The account’s risk tolerance has been rated balanced, which demonstrates the account can accept modest price fluctuations to pursue its investment objectives.
ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
Investment Objective: Balanced – The Balanced Portfolio is a globally diversified portfolio consisting of asset classes that may include U.S. and foreign equity, commodities, 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
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%
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
ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
S&P 500 Index MSCI All Country World ex USA Index
Russell 2000 Index MSCI All Country World ex USA Index MSCI World ex USA Index MSCI EAFE Index
MSCI Emerging Markets Index S&P Global Infrastructure Index S&P Global Natural Resources 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, LLC will seek to cause the portfolio to have exposure to a complete array of global assets to fully capture risk diversification and return 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, and fixed income portfolios.
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 plan Administrator is the Financial Services Director, in coordination with the Elected City Treasurer and under the guidance of the City Manager, is responsible for:
Confirming the accuracy of this Investment Policy Statement, in writing. Advising Trustee, Custodian, and Investment Advisor of any change in The City of Cathedral City’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.
ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
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 is responsible for:
Assisting The City of Cathedral City and City Manager with the development and maintenance of this Investment Policy Statement.
Meeting with The City of Cathedral City and City Manager 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.
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.
Reporting
Shuster Advisory Group, LLC will provide a quarterly performance report for review. The Financial Services Director and City Treasurer will review the Plan portfolio structure, holdings, and performance on an
ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
ongoing, quarterly basis in coordination with the City Manager. At a minimum, semiannual reviews will be conducted with the City Manager, Financial Services Director and/or City Treasurer.
Policy Review
This investment policy shall be reviewed at least annually by the City Council.
Glossary of OPEB Investment Terminology
CAPITAL APPRECIATION: the increase in an asset's market value over time, leading to a higher price than its original purchase price. This growth can happen due to factors like increased demand, market trends, inflation, or company performance, resulting in an unrealized profit until the assets are sold.
CAPITAL MARKETS: are financial systems where long-term debt and equity securities are bought and sold to raise capital for investment and growth. These markets connect investors seeking returns with companies, governments, and entrepreneurs who need funding for projects or operations.
CASH FLOW: The total amount of money being transferred into and out of a business, especially as affecting liquidity.
EQUITY: the value of the shares issued by a company.
FIDUCIARY: An organization that holds a position of trust and acts in the best financial interest of another entity.
INVESTMENT ADVISORY: A person or firm that, for compensation, provides advice or analysis on securities, or recommends investments for clients.
INVESTMENT INCOME: includes interest income, dividends earned, and other investment gains, net of losses.
INVESTMENT TIME HORIZON: The length of time you plan to hold an investment or work toward a financial goal. Shorter horizons often require more conservative investments to avoid losses, while long horizons allow for potentially higher-growth, riskier assets that have time to recover from downturns.
LIQUIDITY: A liquid asset is one easily and rapidly converted into cash without a substantial loss of value.
MARKET CYCLES: The natural, recurring pattern of ups and downs, or expansion and contraction, in financial markets, often characterized by four distinct phases: accumulation, mark-up, distribution, and markdown.
ACCOUNTING AND FINANCE
POLICIES AND PROCEDURES MANUAL
20330
OPEB 115 Trust Investment Policy
October 2025
MARKET VOLATILITY: Measures how quickly and by how much prices change in financial markets, indicating a degree in price fluctuations over time.
OTHER POST EMPLOYMENT BENEFITS (OPEB): Non-pension retirement benefits provided to the employees after their employment ends, most commonly retiree health insurance, but can also include dental, vision, and life insurance.
PLAN ADMINISTRATOR: An individual or organization responsible for managing the day-to-day operations and ensuring compliance of an employee benefit plan, such as a retirement fund or insurance plan.
PLAN SPONSOR: Establishes and maintains an employee benefit plan. As a sponsor, they have fiduciary responsibilities to act in the best interest of the plan participants.
PLAN’S INVESTMENT: refers to how a retirement plan, such as a 401(k) or pension, is managed to grow and protect its assets, often by selecting from various investment options like stocks or bonds.
PORTFOLIO: Collection of securities held by the investor.
RISK TOLERANCE: The level of risk an investor is willing to take when investing. There are three groups:
aggressive, moderate and conservative.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation.
SHORT-TERM MARKET: Buying or selling an asset with the intention of holding it for a short period, ranging from minutes to a year or so, to profit from quick market movements or meet near-term cash needs.
TOTAL RETURN BASIS: refers to an investment or accounting approach that includes all sources of investment profit, such as capital gains (from selling an asset for more than its purchase price) and income (like dividends or interest payments) within a specific period.
TREASURY BILL: A discount security issued by the U.S. Treasury to finance the national debt maturing from three months to one year.
VOTING PROXIES: a written authorization from an individual giving a designated person or firm the power to vote on their behalf at a meeting.