Sample Investment Policy

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The State Treasurer's Office has also developed a template for investment policies designed for local governments for their reference and optional use.

 

Investment Policy

Requirements of Section 2.5 of the Public Funds Investment Act

  • A listing of all authorized investments,
  • A “Prudent Person” rule,
  • A Statement of Purpose,
  • Diversification Guidelines,
  • Collateral Guidelines,
  • A system of Internal Controls,
  • Identification of the Chief Investment Officer,
  • Performance Measures,
  • A schedule for periodic review of the Investment Portfolio,
  • Reporting Requirements,
  • A policy regarding the selection of financial advisors, institutions and managers; and
  • A statement on Ethics and Conflict of Interest.

 

This policy establishes governance of all monies held outside of the State Treasury for which no formal policy exists.

 

The purpose of these monies is set by the Legislature, elected Treasurer or governing body for the operation of the fund and the preservation of principal is of utmost consideration. The implementation of a policy and naming of the Chief Investment officer is the responsibility of an elected Treasurer and in the absence of such, the local governing body.

 

Authorized Investments

The following are considered suitable and authorized investments and meet the goal of preservation of principal.
 

  1. Securities issued with the full faith and credit of the United States of America as to the principal and interest;
     
  2. Repurchase Agreement of securities that have the full faith and credit of the United States of America;
     
  3. Money Market Mutual Funds registered under the Investment Company Act of 1940, provided that the portfolio is limited to a.) and b.) above;
     
  4. The Public Treasurer’s Investment Pool, commonly known as The Illinois Funds, established under Section 17 of the State Treasurer Act.
     
Diversification

The investments of the fund should be sufficiently diversified mitigating credit risk and maintaining liquidity which will ensure the preservation of principal.
 

  1. There is no limit in the percentage of the fund held in securities issued with the full faith and credit of the United States of America as to the principal and interest;
     
  2. Repurchase Agreements will be limited to no more that 75% of the balance in the fund;
     
  3. No more than 10% of the balance of the fund may be invested in any Money Market Mutual Funds registered under the Investment Company Act of 1940;
     
  4. No more than 25% of the balance of the fund may be invested in aggregate in all Money Market Mutual Funds registered under the Investment Company Act of 1940;
     
  5. There is no limit to the percentage of the fund invested in The Public Treasurer’s Investment Pool, commonly known as The Illinois Funds.
     
Performance Measurement

The elected Treasurer or governing body shall establish a set of benchmarks for which performance of the fund is to be measured against. In the absence of establishing a benchmark, the fund will be measured against the return of the 1 month U.S. Treasury yield.

 

Internal Controls

A system of procedures and Internal Controls shall be established by the elected Treasurer or governing body of the fund which at a minimum includes standards set by the Governmental Accounting Standards Board.

 
Financial Advisors, Managers, and Institutions

Every financial advisor and manager will be chosen following the procurement rules established and governed by the laws of the State of Illinois. Financial Institutions must have an Illinois presence and be in good standing with the Illinois Department of Financial and Professional Regulation as well as the appropriate federal regulator and have no enforcement action existing.

 

All advisors, managers and institutions must be approved to do business with the fund at least annually as well as maintained on a list available to the general public and published on the website of the fund/fund’s sponsor if it exists.

 

Reporting Requirement

The Chief Investment Officer will provide the elected Treasurer or governing body with reports that show at a minimum; investment holdings of the fund, rate of return of investments, change in balance and a distribution of investments.

 

Review of Fund Investments, Policies and Procedures

The elected Treasurer or governing body must review the investments of the fund quarterly, at a minimum. The policies and procedures must be reviewed and approved annually and published as prescribed by Illinois Law.

 

Ethics and Conflict of Interest

The elected Treasurer or governing body as well as all members of the funds staff will refrain from personal business activities that conflict with the proper operation of the fund. Further, they will subordinate their personal investment transactions to that of the fund’s, in particular with regard to time of purchase and sale.

 

In all manners of operation and dealings on behalf of the fund, the elected Treasurer or governing body as well as members of the funds staff will make decisions, investments and actions only that a “prudent person” would make.