Financing & Treasury

 

Subject: The California State University Investment Policy

Reference: RFIN 01-97-03

RESOLVED, By the Board of Trustees of The California State University, that the chancellor, when investing funds, shall safeguard the principal through sufficient number and diversity of investments, provide adequate liquidity to meet normal cash needs and anticipate extraordinary cash demand, and maintain a consistent rate of return representative of current market yield direction; and, be it further

RESOLVED, That the chancellor shall establish and maintain, on behalf of the campuses, investment pools to invest available funds held by the California State University under the jurisdiction of the trustees; and, be it further

RESOLVED, That in addition to the investment restrictions imposed by Government Code Section 16430 and Education Code Section 89724, it is the policy of the Board of Trustees that reverse repurchase agreements used to buy investment securities shall be limited to no more than 20 percent of the investment portfolio; securities purchased with the proceeds of a reverse repurchase may not be used as collateral for another reverse repurchase while the original reverse repurchase is outstanding; the maturity of each repurchase agreement is limited to the maturity of any securities purchased with the proceeds of the repurchase (but in any event not more than one year); and reverse repurchase agreements are limited to unencumbered securities already held in the portfolio; and, be it further

RESOLVED, That the chancellor provide to the Board of Trustees annually an investment report containing a detailed description of the investment securities held, market values, and performance of the investment portfolios.


The California State University Investment Policy

The following investment guidelines have been developed for CSU campuses to use when investing funds.

Investment Policy Statement

The objective of the investment policy of the California State University (CSU) is to obtain the best possible return commensurate with the degree of risk that the CSU is willing to assume in obtaining such return. The Board of Trustees desires to provide to each campus president the greatest possible flexibility to maximize investment opportunities. However, as agents of the trustees, campus presidents must recognize the fiduciary responsibility of the trustees to conserve and protect the assets of the portfolios and by prudent management prevent exposure to undue and unnecessary risk

When investing campus funds, the primary objective of the campus shall be to safeguard the principal. The secondary objective shall be to meet the liquidity needs of the campus. The third objective shall be to return an acceptable yield.

Investment Authority

The California State University may invest monies held in local trust accounts under Education Code Section 89721 and 89724 in any of the securities authorized by Government Code Section 16430 and Education Code Section 89724 listed in Section A subject to limitations described in Section B.

A. State Treasury investment options include:

  • Surplus Money Investment Fund (SMIF)
  • Local Agency Investment Fund (LAIF)

Eligible securities for investment outside of the State Treasury as authorized by Government Code Section 16430 or Education Code Section 89724 include:

  • Bonds, notes or obligations with principal and interest secured by the full faith and credit of the United States;
  • Bonds, notes or obligations with principal and interest guaranteed by a federal agency of the United States;
  • Bonds or warrants of any county, city, water district, utility district or school district;
  • California State bonds, or bonds with principal and interest guaranteed by the full faith and credit of the State of California;
  • Various debt instruments issued by : 1) Federal land banks, 2) Central Bank for Cooperatives, 3) Federal Home Loan Bank Bd., 4) National Mortgage Association, 5) Federal Home Loan Mtg. Corp., and 6) Tennessee Valley Authority;
  • Commercial paper exhibiting the following qualities: 1) Prime" rated, 2) less than 180 days maturity, 3) issued by a U.S. Corporation with assets exceeding $500,000,000, 4) Approved by the PMIB. Investments must not exceed 10% of corporations outstanding paper, and total investments in commercial paper cannot exceed 30% of an investment pool;
  • Banker's acceptances eligible for purchase by the Federal Reserve System;
  • Certificates of deposits (insured by FDIC, FSLIC or appropriately collateralized);
  • Investment certificates or withdrawal shares in federal or state credit unions that are doing business in California and that have their accounts insured in the National Credit Union Administration;
  • Loans and obligations guaranteed by the United States Small Business Administration or the United States Farmers Home Administration;
  • Student Loan Notes issued by the Guaranteed Student Loan Program;
  • Debt issued, assumed, or guaranteed by the Inter-American Development Bank, Asian Development Bank or Puerto Rican Development Bank;
  • Bonds, Notes or debentures issued by U.S. Corporations rated within the top three ratings of a nationally recognized rating service.

B. In addition to the restrictions established in Government Code Section 16430, the CSU restricts the use of leverage in campus investment portfolios by limiting reverse repurchase agreements used to buy securities to no more than 20% of a portfolio.

Furthermore, the CSU:

1) Prohibits securities purchased with the proceeds of a reverse repurchase from being used as collateral for another reverse repurchase while the original reverse repurchase is outstanding;

2) Limits the maturity of each repurchase agreement to the maturity of any securities purchased with the proceeds of the repurchase (but in any event not more than one year); and

3) Limits reverse repurchase agreements to unencumbered securities already held in the portfolio.

Investment Reporting Requirements

A. Annually, the Chancellor will provide to the Board of Trustees a written statement of investment policy in addition to a report containing a detailed description of the investment securities held by all CSU campuses and the Chancellor's Office, including market values.

B. Each campus will provide no less that quarterly to the Chancellor a report containing a detailed description of the campus' investment securities, including market values. A written statement of investment policy will also be provided if it was modified since the prior submission. These quarterly reports are required:

1) to be submitted to the Chancellor within 30 days of the quarter's end;

2) to contain a statement with respect to compliance with the written statement of investment policy; and

3) to be made available to taxpayers upon request for a nominal charge.



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