investment management services request for … · alameda corridor transportation authority...

ALAMEDA CORRIDOR TRANSPORTATION AUTHORITY

Investment Management Services

REQUEST FOR PROPOSALS

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July 20, 2016

Prospective Consultants: SUBJECT: REQUEST FOR PROPOSALS FOR INVESTMENT MANAGEMENT SERVICES

The Alameda Corridor Transportation Authority (ACTA) invites the submittal of proposals from qualified investment advisors to provide Investment Management Services. The selected investment advisor will be responsible for ACTA’s portfolio providing, at a minimum, usual and customary investment and advising services as described in this Request For Proposals (RFP). It is anticipated that the agreement will begin after approval by the ACTA Governing Board and will be for a period of three years with provisions for successive annual renewals.

Instructions to be followed in preparing a proposal are found in the information included in this RFP. The schedule for this RFP will be as follows:

Request for Proposals Published July 20, 2016 Questions Due July 27, 2016 Responses Posted August 3, 2016 Proposals Due August 16, 2016

For questions regarding this RFP, please contact Phillip Le by email at [email protected]. Questions must be submitted by July 27, 2016 by 3pm. Responses will be posted on ACTA’s website at http://www.acta.org/contract_opportunities/rfp_pro_services.asp on August 3, 2016 by 5pm. It is the responsibility of any proposers to review ACTA’s website for any RFP revisions or answers to questions prior to submitting a proposal in order to ensure their proposal is complete and responsive. Sincerely,

JAMES P. PREUSCH Chief Financial Officer

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TABLE OF CONTENTS

1 INTRODUCTION ................................................................................................................ 4

1.1 Brief Overview of the Project ............................................................................................... 4

1.2 ACTA and the Alameda Corridor .......................................................................................... 4

2 PROJECT DESCRIPTION ..................................................................................................... 4

2.1 Project Goals and Objectives ............................................................................................... 4

2.2 Project Scope of Work ......................................................................................................... 5

3 PROPOSAL REQUIREMENTS ............................................................................................. 5

3.1 Proposal Submission ............................................................................................................ 5

3.2 Evaluation Process and Selection Criteria ............................................................................ 6

3.3 Proposal Content ................................................................................................................. 6

3.4 Checklist for RFP Submittal Requirements ........................................................................... 9

EXHIBITS Exhibit A – ACTA Investment Policy Exhibit B – ACTA Organization Chart Exhibit C – RFP Selection Evaluation Form

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1 INTRODUCTION

1.1 Brief Overview of the Project

The Alameda Corridor Transportation Authority (ACTA) is seeking proposals from qualified firms interested in providing Investment Management Services to ACTA.

The duration of the contract awarded as a result of this RFP is expected to be three (3) years and

four months from the later of either October 1, 2016 or the date of execution of the contract by ACTA’s Chief Executive Officer, with a provision for ACTA to exercise optional successive annual renewals.

1.2 ACTA and the Alameda Corridor ACTA is a joint powers authority formed by the Cities of Los Angeles and Long Beach through their

respective Boards of Harbor Commissioners. A joint powers authority is a governmental entity formed by two or more governmental entities for the joint exercise of their authorized governmental powers.

ACTA’s initial role was arranging for construction of the $2.4 billion Alameda Corridor, a twenty-mile freight cargo rail expressway linking the ports of Los Angeles and Long Beach with the downtown Los Angeles trans-continental rail yards, the point from which more than $200 billion of the United States international ocean-borne commerce is distributed annually throughout the country.

The Alameda Corridor began revenue operations in 2002. ACTA’s current role involves management of debt and debt service, oversight of rail operations on the Corridor, contracting for services, and collection of revenues from the commercial railroads for use of the Corridor for moving goods. In addition, ACTA provides program management services for various public works construction projects, typically on behalf of other governmental agencies.

Pursuant to an Operating Agreement with ACTA, the Union Pacific Railroad and BNSF Railway

pay Use Fees and Container Charges in connection with their use of the Corridor to move ocean-borne containers that originate or terminate at the Ports and are transported by rail into or out of Southern California. The Operating Agreement also provides for the operation, repair and maintenance of the Corridor and certain other operational matters.

ACTA’s staff consists of nine full-time employees and one part-time employee who collectively are responsible for revenue collection, contractor oversight and program management. ACTA accomplishes some of its program management through its principal subcontractor, the Alameda Corridor Engineering Team, a joint venture of DMJM Harris, Inc., Moffatt & Nichol, Inc., Jenkins/Gales & Martinez, Inc. and TELACU Construction Management, Inc. See Exhibit B.

2 PROJECT DESCRIPTION 2.1 Project Goals and Objectives

ACTA is seeking proposals from qualified firms to:

• Provide investment services in a comprehensive manner to handle the day-to-day administration of the Authority’s investment portfolio; and

• Provide discretionary investment advisory services to help govern the Authority’s investment portfolio, currently valued at approximately $140 million.

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2.2 Project Scope of Work ACTA intends to select one or more investment managers for separate accounts that will consist of remaining bond construction proceeds, debt reserve funds, debt service funds (although the 1999 Series A and Series C principal and interest payments are invested in a forward purchase agreement), occasional grant funds, and any remaining operating funds (after satisfying debt service deposit requirements) from collection of fees charged to the Railroads. These funds must be invested in compliance with California law and ACTA’s investment policy (See Exhibit A). Specific responsibilities of the selected investment manager will include, but not be limited to, the following:

Assist ACTA in the execution of an investment strategy for each investment portfolio. Manage, on a daily basis, investments of ACTA’s funds assigned to it pursuant to the specific

investment objectives of the portfolio. Review cash flow projections developed by ACTA staff and its consultants to ensure that

planned investments are consistent with cash requirements and cash flow projections. Provide monthly reports in a time frame required by the California Government Code.

Monthly reports must include a mark-to-market valuation, a beginning balance, date, amount and description of each transaction, ending balance, investment earnings accrued, and investment earnings earned. For bond proceeds, reports must be kept in a manner that allows ACTA to prepare, or have prepared on its behalf, arbitrage rebate calculations.

Maintain accurate records of all investments. These records must be available for periodic review and audit at any time, if necessary, by ACTA or other entities to whom ACTA has granted an audit right.

Prepare quarterly performance reports and be available for performance review meetings at least quarterly, if required. Assist in preparation and presentation of an annual report to the ACTA Board.

3 PROPOSAL REQUIREMENTS 3.1 Proposal Submission

One (1) original with four (4) copies of your proposal must be submitted on or before 3:00 p.m. on August 16, 2016 to: By Hand/Mail Delivery: Alameda Corridor Transportation Authority

ATTN: Phillip Le REF: Investment Management Services RFP

3760 Kilroy Airport Way, Suite 200 Long Beach, CA 90806 Electronically transmitted proposals will not be considered.

All proposals will be date stamped as ACTA receives them. The proposal opening will not be open

to the public. Proposals should not be more than 20 pages long and should use 11 point font or larger. Proposers solely are responsible for the timeliness of their submittals. As such, proposers are

cautioned to budget adequate time to ensure that their proposals are delivered at the location designated at or before the deadline set forth above. Proposers are cautioned that matters including, but not limited to, traffic congestion, security measures and/or events in or around ACTA’s office, may lengthen the amount of time necessary to deliver the proposal, whether the proposal is submitted in person or by mail.

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By submitting a proposal, proposers certify that such proposal constitutes their full and complete written response to the RFP and evidences their acknowledgement that additional written material outside of such proposal shall not be considered by ACTA in connection with this RFP, unless ACTA provides a written request that they submit additional written materials. Absent such written request, proposers are instructed to not submit to ACTA written or other materials outside of the proposal, either in a subsequent interview or otherwise.

Proposers are advised that all documentation submitted in response to this RFP will become

available to the public as a public record and may be released without further notification. Any information that the proposer considers confidential should not be submitted with the proposal.

3.2 Evaluation Process and Selection Criteria

All proposals meeting the requirements of this RFP shall be reviewed and rated by an evaluation committee according to the following criteria: 1) firm qualifications, experience, and references; 2) personnel qualifications, experience, and references; 3) project approach, work plan, and management; 4) compensation; and 5) clarity and comprehensiveness of the proposal. See Exhibit C.

Selected proposers may be contacted to arrange in-person interviews with the evaluation

committee. The evaluation committee will make the final recommendation for selecting the consultant. All recommendations are subject to the approval of ACTA’s Chief Financial Officer, ACTA’s Chief Executive Officer and ACTA’s Governing Board.

The right to reject any and all proposals shall, in every case, be reserved, as shall the right to waive any informality in the proposal when to do so would be to the advantage of ACTA.

3.3 Proposal Content

FORMAT FOR PROPOSALS Please format your response to this RFP in the following manner:

I) Organization

A) Describe your organization, date founded, ownership and other business affiliations. Specify the number of years your organization has provided investment management services.

B) Describe your organization’s revenue sources (e.g., investment management, institutional research, etc.) and comment on your organization’s financial condition.

C) Within the past three years have there been any significant developments in your organization (changes in ownership, new business ventures). Do you expect any changes in the near future?

D) Describe any SEC censure or litigation involving your organization, any officer, or employee at any time.

E) Please identify the types of accounts managed by your organization (government, non-profit, pension, endowment/foundation, corporate, etc.).

F) State the amount of professional/errors and omissions insurance coverage your firm carries.

II) Personnel

A) Identify the number of professionals employed by your organization, by classification. B) Provide an organization chart showing function, positions and titles of the investment professionals

in your organization. C) Provide biographical information, including number of years at your firm, for the investment

professionals who will be involved in the decision-making process for ACTA’s portfolio. Identify the person who will be the primary portfolio manager assigned to ACTA’s account. Provide resumes for each named professional as an appendix to the proposal.

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D) Please describe your organization’s compensation policies for investment professionals.

III) Assets Under Management

A) Summarize your organization’s institutional investment management asset totals by category for your organization’s latest reporting period. Provide the information in your organization’s proposal in the following manner:

Operating Funds Pension Funds Governmental $ $ Other Institutional $ $

B) Provide the number of accounts where the portfolio consists of bond proceeds. C) Provide in the proposal a list, in the form provided below, and by percentage of market value of

aggregate assets under management for your organization’s latest reporting period.

U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA-AA Corporate securities rated A Corporate securities rated BBB or lower Other

D) In the past 10 years, has anything happened to a portfolio that your organization was responsible

for that required disclosure to the client? E) Has your firm purchased or held any corporate security within the past 10 years that was

subsequently downgraded, during the period while it was held, to below the minimum credit rating standards required for purchase under the California Government Code? If so, please explain each circumstance.

F) Provide data on account/asset growth and other performance statistics over the past three years. Indicate the number of accounts gained and the number of accounts lost.

G) List your five largest clients. Identify those that are exclusively retirement fund relationships and/or those that are operating fund relationships, along with contact names and information for each client.

IV) Philosophy/Approach

A) Describe your organization’s investment philosophy for public clients. Briefly describe your organization’s investment management philosophy regarding average duration, maturity, investment types, credit quality and yield.

B) Please describe the maturity concentration, quality and sectors of current accounts similar to the Alameda Corridor Transportation Authority.

C) What are your organization’s primary strategies for adding value to portfolios (e.g., market timing, credit research, trading)?

D) Describe the process your organization would recommend for establishing the investment objectives and constraints for ACTA’s account.

E) Do you have, or would you recommend, any policy restrictions with respect to maturity, sector, quality or other investment policy parameters?

V) Describe your organization’s trading methodology.

A) Describe your organization’s decision-making process in terms of structure, such as committees,

membership, meeting frequency, responsibilities, integration of research ideas and portfolio management.

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B) Provide your organization’s list of approved brokers/dealers. How are brokers/dealers selected? What procedures does your organization have in place to monitor brokers/dealers after they have been approved?

C) Describe your organization’s capabilities for tracking and reporting arbitrage in compliance with the Tax Act of 1986, including computer systems and experience.

VI) Reporting

A) Describe the investment accounting and reporting system used by your organization. B) Describe the frequency and format of reports that your organization would provide to ACTA. Attach

a sample report to your organization’s proposal. C) What performance benchmarks would your organization suggest for ACTA’s portfolio? Provide

recommendations regarding performance benchmarks for a portfolio similar to ACTA’s portfolio. What experience has the organization had in developing benchmarks for a public entity portfolio?

VII) Portfolio Management

A) Are portfolios managed by your organization using teams or by one individual? B) What is the average number of accounts handled per manager? C) To which of your organization’s professionals are primary client contracts delegated? D) How frequently would your organization recommend meeting with ACTA? E) Describe procedures used by your organization to ensure that portfolios comply with client

investment objectives, policies and bond resolutions.

VIII) Compensation A) Please include with the proposal a copy of your organization’s fee schedule. B) Please indicate whether the fee schedule includes custodial fees: [Note: all funds will be held by

third parties such as ACTA’s current trustee, US Bank. The selected firm will not serve as the custodian of any ACTA funds.

C) Will a minimum annual fee be assessed? D) Please provide a statement of fees for any additional services such as arbitrage rebate related

services. E) Will any fees be charged when there is no activity in the account?

IX) References

Please provide three client references, including the length of time managing the assets, and each client’s name, address and phone number.

X) Performance Reporting (include sample copies of your organization’s reports with the proposal) A. Please describe how your organization typically reports performance. B. Please provide a performance history for the past five years for current accounts comprised of

securities with maturities, quality and sectors similar to ACTA’s portfolio. C. Will your organization be willing to develop reporting procedures in line with ACTA’s needs and

objectives (i.e., monthly, so as to conform with state reporting requirements to management and governing bodies)?

D. Are confirmations of investment transactions sent directly by the broker/dealer to the client?

XI) Insurance Coverage – minimum requirements General Liability $1,000,000 Automobile Liability $1,000,000 Umbrella Liability $5,000,000

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Professional Liability EO / DO $5,000,000 Crime $5,000,000 Investment Advisor ERISA $500,000/insured plan Cyber Liability $4,000,000

3.4 Checklist for RFP Submittal Requirements

A checklist is provided to assist in verification that all elements of the RFP have been addressed. However, firms are encouraged to review the entirety of the RFP to ensure full compliance and not rely solely on this checklist.

Cover transmittal letter, signed by an authorized principal of the proposing firm. Table of Contents, if included (not required). Proposal with the following sections, in order:

Organization, Personnel Asset Under Management Philosophy / Approach Trading Methodology Reporting Portfolio Management Compensation References Performance Reporting Insurance Coverage

Resumes for all proposed staff personnel provided in an appendix. Compensation and Fees Sample Performance Reports provided in an appendix

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Exhibit A – ACTA Investment Policy

1 Amendment Adopted October 8, 2009 Confirmed September 9, 2010

Confirmed November 11, 2011 Confirmed September 13, 2012

Amendment Adopted October 8, 2015

ALAMEDA CORRIDOR TRANSPORTATION AUTHORITY (ACTA) INVESTMENT POLICY

I. INTRODUCTION

The purpose of this document is to identify various policies and procedures that enhance opportunities for a prudent and systematic investment policy and to organize and formalize investment-related activities. The investment policies and practices of ACTA are based upon California State Law and prudent money management. It is the policy of ACTA to comply with all Federal, State and local laws governing the investment of monies under the control of ACTA. The monies entrusted to ACTA (referred to as the “Fund” throughout the remainder of this document) will be invested, reinvested administered, and reported in a timely and prudent manner. The Chief Financial Officer or Treasurer of ACTA will observe, review and react to changing conditions that effect the Fund.

II. SCOPE It is intended that this policy cover all Funds and investment activities of ACTA unless specifically excluded by the Governing Board of ACTA (ACTA).

III. OBJECTIVES

A. Safety of Principal Safety of principal is the foremost objective of ACTA. Each investment transaction shall seek to ensure that capital losses are avoided, whether from securities default, broker-dealer default, or erosion of market value. The Treasurer or Chief Financial Officer of ACTA shall seek to preserve principal by mitigating the two major types of risk: credit risk and market risk.

1. Credit Risk. Credit risk, defined as the risk of loss due to failure of the issuer of

a security, shall be mitigated by investing only with issuers whose financial strength and reputation can be verified to be highly rated by nationally recognized rating agencies (see Section VIII. Authorized Investments for detailed limitations on credit risk), and by diversifying the investment portfolio so that the failure of anyone issuer would not unduly harm ACTA’s cash flow.

2. Market Risk. Market risk, the risk of the market value fluctuations due to overall

changes in the general level of interest rates, shall be mitigated by (a) structuring the portfolio so that securities mature at or near the timing of major anticipated cash outflows, thus reducing the need to sell securities prior to their maturity; (b) prohibiting the use of leverage and margin accounts; and (c) prohibiting the use of short positions-that is, selling securities which ACTA does not own. It is explicitly recognized herein, however, that in a diversified portfolio, occasional




measured losses are inevitable, and must be considered within the context of the overall investment return.

B. Liquidity ACTA’s investment portfolio will remain sufficiently liquid to meet normal operating

and unexpected expenditures.

C. Return on Investment ACTA’s investment portfolio shall be designed to attain a market-average rate of return through economic cycles. Whenever possible, and consistent with risk limitations, as defined herein, and prudent investment principles, the Treasurer or Chief Financial Officer of ACTA shall seek to augment returns above the market average rate of return.

IV. DELEGATION OF AUTHORITY

The Board delegates its authority to invest Funds of ACTA to the Treasurer and Chief Financial Officer, who have full responsibility for transactions until the Board delegation of authority is revoked. The authority to execute investment transactions that will affect the Fund will be limited to the Treasurer, and Chief Financial Officer. ACTA may engage the services of an Independent Investment Consultant(s) to assist in the management of ACTA’s Funds. Such Independent Investment Consultant(s) may be granted discretion to purchase and sell investment securities in accordance with this investment policy. Such Independent Investment Consultant(s) must be registered under the Investment Advisers Act of 1940. All investment decisions and transactions shall be made in strict accordance with state law and this investment policy.

V. SAFEKEEPING OF SECURITIES

To protect against potential losses by collapse of individual securities dealers, all securities owned by ACTA, including collateral on repurchase agreements, shall be held in safekeeping by a bank trust department, acting as agent for ACTA under the terms of a custody agreement executed by the bank and by ACTA. All securities will be received and delivered using standard delivery versus payment procedures, i.e., ACTA’s safekeeping agent will only release payment for a security after the security has been properly delivered. The only exception to the foregoing shall be depository accounts and securities purchases made with: (i) local government investment pools; (ii) time certificates of deposit, and, (iii) money market mutual funds, since the purchased securities are not deliverable. Evidence of these instruments will be held by the Treasurer or his designee.

VI. REPORTING MONTHLY REPORTS

Monthly investment reports will be submitted by the Treasurer or CFO to the Governing




Body within 30 days of the end of the reporting period. These reports will disclose, at a minimum, the following information about the characteristics of the Agency’s portfolio: 1. An asset listing showing par value, cost and independent third-party fair market value of

each security as of the date of the report, the source of the valuation, type of investment, issuer, maturity date and interest rate.

2. Monthly transactions for the period. 3. A one-page summary report that shows:

a. Average maturity of the portfolio and modified duration of the portfolio; b. Maturity distribution of the portfolio; c. Average portfolio credit quality; and, d. Time-weighted total rate of return for the portfolio for the prior one month, three

months, twelve months and since inception compared to the Agency’s market benchmark returns for the same periods;

4. A statement of compliance with investment policy, including a schedule of any

transactions or holdings which do not comply with this policy or with the California Government Code, including a justification for their presence in the portfolio and a timetable for resolution.

5. A statement denoting ACTA’s ability to meet its expenditure requirements for the next

six months, or provide an explanation as why sufficient money shall, or shall not, be available.

ANNUAL REPORTS A comprehensive annual report will be presented to the Governing Board. This report will include comparisons of the Agency’s return to the market benchmark return, suggest policies and improvements that might enhance the investment program, and will include an investment plan for the coming year.

VII. QUALIFIED DEALERS

ACTA shall transact business only with banks, savings and loans, Federal savings bank, and investment security dealers. Independent Investment Consultant(s), if any, shall transact business with those securities firms which are on their “approved broker list” and whose annual reports are on file at the Independent Investment Consultant’s place of business.

VIII. AUTHORIZED INVESTMENTS

Generally, investments shall be made in context of the “prudent investor” rule, which states that:




“When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.”

ACTA is further governed by the California Government Code. In the event an apparent discrepancy is found between this Policy and the Government Code, the more restrictive parameters will take precedence. Percentage holding limits listed in this section apply at the time the security is purchased. Within the context of these limitations, the following investments are authorized, as further limited herein: A. Bonds issued by ACTA, including bonds payable solely out of the revenues from a

revenue-producing property owned, controlled, or operated by ACTA. There is no limitation as to the percentage of the portfolio, which can be invested in this category.

B. United States Treasury Bills, Bonds, and Notes, or “when issued” securities of the

United States Government for such securities, or those for which the full faith and credit of the United States are pledged for payment of principal and interest. There is no limitation as to the percentage of the portfolio which can be invested in this category. Maturity is not to exceed the projected dates of the ACTA’s cash needs or five years, whichever is less.

C. Registered State Warrants or Treasury notes or bonds of the State of California

(State) or any other of the 49 states of the United States of America, including bonds, payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, so long as such warrants, notes, or bonds are rated “A” or higher by a nationally recognized statistical-rating organization Although there is no percentage limitation on the dollar amount that can be invested in these issues, the “prudent investor” rule shall apply for a single issue. Maturity is not to exceed the projected dates of ACTA’s cash needs or five years, whichever is less.

D. Bonds, notes, warrants, or other evidences of indebtedness of any local agency

within this State or any other of the 49 states of the United States of America, including bonds, payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board agency, or authority of the local agency or pre-refunded bonds, notes, warrants or other evidences of indebtedness of any local agency within the State so long as such warrants, notes, or bonds are rated “A” or higher by a nationally recognized statistical-rating organization, and any pre-refunded obligations are rated in the highest rating category for such issues as rated by a nationally recognized statistical-rating organization. Although there is no percentage limitation on the




dollar amount that can be invested in these issues, the “prudent investor” rule shall apply for a single local agency. Maturity is not to exceed the projected dates of ACTA’s cash needs or five years, whichever is less.

E. Federal agency or United States government-sponsored enterprise obligations,

participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. Although there is no percentage limitation on the dollar amount that can be invested in these issues, the “prudent investor” rule shall apply for a single agency name. The amount invested in callable federal agency securities shall not exceed 20 percent of the portfolio. Maturity is not to exceed the projected dates of the ACTA’s cash needs or five years, whichever is less.

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F. Bills of exchange or time drafts drawn on and accepted by a commercial bank,

otherwise known as banker’s acceptances. Banker’s acceptances purchased may not exceed 180 days to maturity or 40% of the market value of the portfolio. No more than 10% of the market value of the portfolio may be invested in banker’s acceptances issued by anyone bank.

G. Commercial Paper. Commercial paper of “prime” quality of the highest ranking or

of the highest letter and number rating as provided for by a nationally recognized statistical-rating organization. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or paragraph (2): 1. The entity meets the following criteria: (a) Is organized and operating in the

United States as a general corporation. (b) Has total assets in excess of five hundred million dollars ($500,000,000). (c) Has debt other than commercial paper, if any, that is rated “A” or higher by a nationally recognized statistical-rating organization.

2. The entity meets the following criteria: (a) Is organized within the United States

as a special purpose corporation, trust, or limited liability company. (b) Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. (c) Has commercial paper that is rated “A-1” or higher, or the equivalent, by a nationally recognized statistical-rating organization.

Purchases of eligible commercial paper may not exceed 25% of the market value of the portfolio. No more than 10% of the market value of the portfolio may be invested in commercial paper issued by anyone corporation. Maturity is not to exceed 270 days.




H. Negotiable certificates of deposit issued by a nationally or state-chartered bank or state or federal saving and loan association. Negotiable certificates of deposit (NCDs) differ from other certificates of deposit by their deposit liquidity. They are issued against funds deposited for specified periods of time and earn specified or variable rates of interest. NCDs are traded actively in secondary markets. The maximum maturity of NCDs shall not exceed two years. Transactions in NCDs shall not collectively exceed 30% of the total portfolio. Purchases are limited to institutions which have long-term debt rated “A” or better and/or have short-term debt rated at least “A1” a nationally recognized rating service.

I. Repurchase Agreements. ACTA may invest in repurchase agreements with banks

and dealers with which ACTA has entered into a master repurchase agreement which specifies terms and conditions of repurchase agreements.

1. Transactions shall be limited to the primary dealers and banking institutions rated

“A” or better by a nationally recognized statistical-rating organization. The maturity of repurchase agreements shall not exceed 90 days. The market value of securities used as collateral for repurchase agreements shall be monitored daily by the Treasurer or Chief Financial Officer and will not be allowed to fall below 102% of the value of the repurchase agreement plus the value of collateral in excess of the value of the repurchase agreement (haircut). In order to conform with provisions of the Federal Bankruptcy Code which provide for the liquidation of securities held as collateral for repurchase agreements, the only securities acceptable as collateral shall securities that are direct obligations of, or that are fully guaranteed as to principal and interest by, the United States or any agency of the United States.

2. Not more than 50% of the portfolio may be invested in repurchase agreements

and a security interest satisfactory to ACTA shall always be maintained in the securities subject to a repurchase agreement.

J. Local Agency Investment Fund. ACTA may invest in the Local Agency Investment

Fund (LAIF) established by the State Treasurer for the benefit of local agencies up to the maximum permitted by State Law.

K. Time Deposits. ACTA may invest in non-negotiable time deposits collateralized in

accordance with the California Government Code, in those banks and savings and loan associations which meet the requirements for investment in negotiable certificates of deposit. Since time deposits are not liquid, no more than 15% of the portfolio may be invested in this category. The issuer firm should have been in existence for at least five years. Time deposits are required to be collateralized as specified under Government Code Section 53630 et. seq. ACTA may waive the first $100,000 of collateral security for such deposits if the institution is insured pursuant to federal law. Real estate mortgages may not be accepted as collateral. The maximum term for deposits shall be one year. In general, the issuer must have a minimum 6% net worth to assets ratio. The issuer’s operations must have been




profitable during their last reporting period. The financial institution must have received a minimum overall satisfactory rating for meeting the credit needs of California Communities in its most recent evaluation, as provided Government Code Section 53635.2.

L. Los Angeles County Treasurer Investment Pool. ACTA may invest in the County’s

Investment Pool as prescribed by Government Code. M. Money Market Funds. Eligible funds are those investing solely in U.S. Treasury

securities and U.S. Government Agency securities, and repurchase agreements secured by U.S. Treasury securities and U.S. Government Agency securities; and which Money Market Fund(s) must also have met either of the following criteria:

1. Attained the highest ranking or the highest letter and numerical rating provided

by not less than two nationally recognized statistical rating organizations. 2. Retained an investment adviser registered or exempt from registration with the

Securities and Exchange Commission with not less than five years' experience investing in U.S. Treasury securities and U.S. Government Agency securities and with assets under management in excess of $500 million.

No more than 20% of the portfolio may be invested in Money Market Funds, with no more than 10% invested in any one Money Market Fund.

N. Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Purchases are limited to securities rated “A” or better by a nationally recognized rating service. ACTA may invest no more than 30% of the portfolio in Corporate Bonds or Notes and no more than 10% of the portfolio with a single corporate issuer. Maturity is not to exceed the projected dates of ACTA’s cash needs.

O. Any mortgage pass-through security, collateralized mortgage obligation, mortgage-

backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through certificate, or consumer receivable-back bond of a maximum of five years maturity. Securities eligible for investment under this subdivision shall be issued by an issuer having an “A" or higher rating for the issuer’s debt by a nationally recognized statistical-rating organization and rated in a rating of category of “AA.” Purchase of securities authorized by this subdivision may not exceed 20% of the agency’s surplus money that may be invested pursuant to this section. No more than 5% of the portfolio may be invested in any single Asset-Backed or Commercial Mortgage issuer. There is no limitation on any Mortgage security where the issuer is the US Treasury of a Federal Agency/GSE. Maturity is not to exceed the projected dates of ACTA’s cash needs or five years, whichever is less.




P. Supranationals, provided that issues are US dollar denominated senior unsecured

unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank. The securities shall be rated “AA” or higher by a nationally recognized statistical-rating organization, with a maximum maturity not exceeding five (5) years. No more than 30% of the total portfolio may be invested in these securities, and no more than 10% of the portfolio may be invested in any single issuer.

Q. Ineligible Investments. Investments not described herein, including but not limited

to, reverse repurchase agreements, and common stocks are prohibited from use in this portfolio. Section 53601.6 of the Government Code specifically disallows investments in inverse floaters, range notes, interest-only strips that are derived from a pool of mortgages, or in any security that could result in zero interest accrual if held to maturity.

R. Authorized Investments for Bond Proceeds. Bond proceeds shall be invested in

securities permitted by the applicable bond documents. If the bond documents are silent as to the permitted investments, bond proceeds will be invested in securities permitted by this Policy.

In addition, to securities listed in this section, bond proceeds may be invested in Guaranteed Investment Contracts and Investment Agreements with issuers of “AA” rating or better by a nationally recognized statistical-rating organization. Such contracts are to be of no more than 5 years maturity. No more than 50% of the portfolio may be invested in such contracts and no more than 20% of the portfolio, may be placed under contract with a single entity.

With respect to maximum maturities, the Policy authorizes investing bond reserve fund proceeds beyond the five years if prudent in the opinion of the Treasurer or Chief Financial Officer.

IX. TRADING OF SECURITIES

A trade is the movement from one security to another and may be done for a variety of reasons, such as to increase yield, lengthen or shorten maturities, to take a profit, or to increase investment quality. The purchase and sale transaction must each be recorded separately and any losses or gains on the sale must be recorded.

X. PORTFOLIO ADJUSTMENTS

Should an investment percentage-of-portfolio limitation be exceeded due to an incident such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When no loss is indicated, ACTA shall consider reconstructing the portfolio basing the decision in part on the expected length of time the portfolio will be out of compliance.




XI. PORTFOLIO DURATION LIMITATION

It is the objective of this Policy to provide a system which will accurately monitor and forecast revenues and expenditures so that ACTA can invest Funds to the fullest extent possible. Funds of ACTA will be invested in accordance with sound treasury management principles. The maximum maturity of individual investments shall not exceed the limits set forth in Section VIII. Authorized Investments. However, no investment shall exceed a maturity of five years from the date of purchase unless the Board has granted express authority to make that investment either specifically, or as a part of the investment provisions relating to a bond issuance and authorized by the applicable bond documents, or as a part of an investment program approved by the Board no less than one months prior to the investment. The weighted average duration of the entire portfolio shall not exceed three (3) years.

XII. CERTIFICATE OF UNDERSTANDING

Depositories, and Independent Investment Consultant(s), who do investment-related business with ACTA, shall sign a Certification of Understanding. The Certification of Understanding shall state that the entity: A. Has read and is familiar with ACTA’s Investment Policy as well as Applicable

Federal and State Law; B. Meets the requirements as outlined in this Policy; C. Agrees to make every reasonable effort to protect the assets of ACTA from loss; D. Agrees to notify ACTA in writing of any potential conflicts of interest.

XIII. MONITORING CREDIT RATINGS Independent Investment Consultant(s), if any, shall monitor the ratings of all investments in assigned portfolios on a continuous basis and report any credit downgrades of lower than the required rating for the appropriate investment set forth in Section VIII. Authorized Investments for portfolio securities to the Chief Financial Officer in writing within 24 hours of the credit event. If an existing investment’s rating drops below the minimum allowed for new investments made pursuant to this policy, the Independent Investment Consultant(s) shall also make a written recommendation to the Treasurer and Chief Financial Officer as to whether the downgraded security should be held or sold.

XIV. POLICY REVIEW

10 Amendment Adopted October 8, 2009

Confirmed September 9, 2010 Confirmed November 11, 2011 Confirmed September 13, 2012


This investment policy shall be reviewed regularly, and submitted to the Board for its approval at least annually, to ensure its consistency with the overall objectives of preservation of principal, liquidity, and return, and its relevance to current law and financial and economic trends. The Board shall be responsible for maintaining guidance over this investment policy to ensure that ACTA can adapt readily to changing market conditions, and approve any modification to the investment policy prior to implementation. Any changes in the investment policy shall also be reviewed and approved by the Board at a public meeting.

XV. STATE LAW

The legislated authority of the Fund is covered in Section 53601, 53635, 53638, 53646, 53652, and 53653 of the Government Code. It is the policy of ACTA to comply with the State laws governing the Fund.

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Exhibit B – Organization Chart

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EXHIBIT C RFP SELECTION EVALUATION FORM

PROJECT: INVESTMENT MANAGEMENT SERVICES

SCORING GUIDELINES:

Rater’s Score: (Range 0-5) - 0=not included/non responsive; 1=Marginal Abilities, Serious Deficiencies; 2=Adequate with Minor Deficiencies; 3=Adequate, Standard-Acceptable; 4=Well Qualified; 5=Exceptionally Well Qualified.

Weighing Factor: Input using a range of 1 through 6, with 1 being of relative lower importance and 6 being relative highest importance. You may use each number (1 through 6) more than once; however, in establishing weights, the total of all the weighing factors (A –E) must equal 20. Example: 3+2+6+4+5=20 or 3+3+3+6+5=20

Weighted Score= Rater’s Score multiplied by (x) Weighing Factor. Totals should be calculated for each criterion.

Total score = Sum of all weighted scores.

Firm Name Evaluated by Date

CRITERIA TO BE

RATED

RATER’S SCORE

WEIGHING FACTOR

WEIGHTED SCORE

A. Firm Qualifications, Experience, and References

Has the firm performed work of similar scope and magnitude? Level of expertise in subject matters areas?

4

B. Personnel Qualifications, Experience, and References

Qualifications, commitment, depth of experience, and specialties of proposed service team for the requested services? Knowledgeable in California regulations of public agency fund management?

5

C. Project Approach, Work Plan, and Management

Services to be provided? Quality of proposed work plan to meet project requirements? Quality of project management?

5

D. Compensation Competitive rates and fees proposed? Are proposed fees and staff hours clearly defined?

4

E. Clarity and Comprehensiveness of the Proposal

Is the proposal clear, comprehensive, and understandable? Does the proposal meet all of the RFP service requirements?

2

Maximum points possible=100

A+B+C+D+E=20

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