HomeMy WebLinkAbout03.a. Review Draft Position Paper to Approve Proposed Revisions to Board Policy No. BP 005 1) Statement of Investment Policy 2) Investment Guidelines related to The Public Agencies Post-Retirement Health Care Plan TrustPage 1 of 32
Item 3.a.
DCENTRALSAN
BOARD OF DIRECTORS
POSITION PAPER
DRAFT
MEETING DATE: OCTOBER 11, 2023
SUBJECT: REVIEW DRAFT POSITION PAPER TO APPROVE PROPOSED
REVISIONS TO:
1. BOARD POLICY NO. BP 005 -STATEMENT OFINVESTMENT
POLICY, AND
2. INVESTMENT GUIDELINES DOCUMENTS (IGD) RELATED TO
THE PUBLICAGENCIES POST -RETIREMENT HEALTHCARE PLAN
TRUST, WHICH INCLUDES BOTH OF THE FOLLOWING:
IGD FOR THE EXISTING OTHER POST -EMPLOYMENT
BENEFITS TRUST (OPEB TRUST), AND
IGD FOR THE PENSION PREFUNDING TRUST
SUBMITTED BY: INITIATING DEPARTMENT:
KEVIN MIZUNO, FINANCE MANAGER ADMINISTRATION -FINANCE
REVIEWED BY: PHILIP LEIBER, DEPUTYGENERAL MANAGER -ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
ISSUE
Central San's investment policies for its assets are reviewed and approved annually by the Board of
Directors (Board) in accordance with the Central San's investment policy.
BACKGROUND
Board Policy 005 (BP 005) - Statement of Investment Policy Review.
California Government Code Section 53646 states the Treasurer or Chief Fiscal Officer of the local
agency may annually render to the legislative body of that local agency and any oversight committee of that
local agency a statement of investment policy, which the legislative body of the local agency shall consider
at a public meeting.
Although no longer required by statute, it has been Central San's practice and policy to render an annual
Statement of I nvestment Policy to the Board for review and approval (Attachment 1). As part of this annual
exercise, staff review the policy and relevant external guidance, including publications issued by the
California Debt and I nvestment Advisory Commission (CDIAC) to ensure Central San is in compliance.
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Quarterly investment reports are also provided as part of the financial package distributed to the Board,
meeting the quarterly reporting requirements specified in Central San's investment policy.
Staff has reviewed BP 005, the latest 2023 Local Agency Investment Guidelines issued by the C D I AC,
as well as California Government Code Section 53601 to ascertain whether additional revisions may be
appropriate. As part of this review, the following statutory changes pertaining to investment of local funds
were noted, effectuated through Senate Bill 1489:
• Clarifications that a public agency's investment term or remaining maturity is to be measured from the
settlement date of the investment to final maturity.
• Prohibiting the purchase of a security with a forward settlement date exceeding 45 days from the
time of investment.
• Increasing the timeline that the Treasurer or Chief Fiscal Officer has for presenting a quarterly report
to the Chief Executive Officer, Internal Auditor, and the legislative body of the local agency by 15
days, from 30 to 45 days following the end of the quarter.
Beyond changes to BP 005 necessary to comply with the relevant statutory changes listed previously, staff
also proposes changes to Section I I I "Bankers and Dealers." While BP 005 already authorizes the use of
an investment advisor, those provisions were fairly basic considering this arrangement is currently not
utilized by Central San. However, given the Board's authorization for staff to proceed with the
implementation of an in-house treasury structure on August 17, 2023, staff recommends this section be
significantly enhanced. The new language proposed to be added to Section I I I of BP 005 is consistent
with the language included in the draft Banking and Cash Management Administrative Procedure provided
to the Board on August 17, 2023. Accordingly, the provisions pertaining to the utilization of an investment
advisor will be removed from the Cash Management Administrative Procedure as that language, pertaining
to investments, is more suitable for BP 005. A copy of BP 005 with proposed track changes has been
included as an attachment to this Position Paper (Attachment 1).
Review of Retiree Benefit Trust Investment Guidelines Documents
Public Agency Retirement Services (PARS) is the trust administrator for Central San's Other Post -
Employment Benefits (OPEB) and Pension Prefunding Trusts. PARS is responsible for
record keeping/sub-trust accounting, actuarial coordination, monitoring contributions/process distributions,
monitoring plan compliance, and acting as an ongoing client liaison. US Bank is the Plan Trustee,
responsible for the safeguarding of plan assets, oversight protection, serves as a plan fiduciary, and
custodian of plan assets. HighMark Capital Management (Highmark) is the Plan Investment Manager,
serving as an investment sub -advisor to the trustee, development of the plan investment and asset
allocation strategy, and providing investment policy assistance. Staff provides reports highlighting retiree
benefit trust performance to the Finance Committee on a quarterly basis, and HighMark and/or PARS
presents highlights of any major developments to the Finance Committee twice a year.
The I nvestment Guidelines Documents (I GDs) were established for each trust, governing the investment
of trust assets and established for the following purposes:
• Facilitate the process of ongoing communication between the Plan Sponsor and its plan fiduciaries;
• Confirm the plan's investment goals and objectives and management policies applicable to the
investment portfolio identified therein and obtained from the 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 the account's investment
objectives, liquidity considerations and risk tolerance;
• Identify any unique considerations that may restrict or limit the investment discretion for its identified
investment managers;
• Help maintain a long-term perspective when market volatility is caused by short-term market
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movements.
• Assist the Plan Sponsor in formulating an Investment Policy Statement (I PS) for the account.
The following is a summary of staff's review of the OPEB and Prefunding Pension trust I GDs.
OPEB Trust IGD:
The OPEB Trust was established by Central San in 2009, to hold assets for the payment of other post -
employment benefits to retirees. The Pension Prefunding Trust IGD specifies a "moderate" investment strategy,
allowing the fund to accept average, or moderate, price fluctuations to pursue its investment objectives.
In consultation with HighMark, the following minor edits to the OPEB Trust IGD are proposed, as
summarized in Attachment 2:
• Update revised date of document to August 2023.
• Update the market value of the Trust as of June 30, 2023, to be $81.3 million.
• Change the performance benchmark for one month T-bills from "Citi" to "FTSE" ("Financial Times
Stock Exchange").
• Update investment manager contact information.
Pension Prefunding Trust IGD:
In Fiscal Year (FY) 2016-17, the Board directed staff to establish a new Internal Revenue Code Section 115
Pension Trust (Pension Trust) as an alternative funding source for Central San's pension obligations. At the
July 20, 2017 Board meeting, the Board adopted a resolution authorizing the establishment and funding of a
new trust entitled "Public Agencies Post -Employment Benefits Trust" to be initially funded with $3.359 million
from the prior year's budget variance. The Pension Prefunding Trust IGD specifies a "moderately conservative"
investment strategy, allowing the fund to accept some price fluctuations to pursue its investment objectives. The
Pension Trust was set up similarly to the OPEB Trust IGD in a single vehicle with the OPEB Trust, as part of
the Public Agencies Post -Retirement Health Care Plan Trust. This resulted in economies of scale as to the
level of fees charged by both HighMark and PARS.
Pursuant to Board direction, following the payoff of Central San's pension Unfunded Actuarially Accrued
Liability (UAAL) totaling $70.8 million in June 2021, much of the Pension Prefunding Trust ($12.8 million)
was liquidated to effectuate this transaction, leaving a subsequent balance of approximately $40,000. The
Pension Trust remains active at this time, should the Board direct additional contributions to the Trust at a
later date.
I n consultation with HighMark, the following minor edits to the Pension Prefunding Trust I GD are
proposed, as summarized in Attachment 3:
• Update revised date of document to August 2023.
• Update the market value of the Trust as of June 30, 2023 to be $43,700.
• Change the performance benchmark for one -month T-bills from "Citi" to "FTSE" ("Financial Times
Stock Exchange").
• Update investment manager contact information.
ALTERNATIVES/CONSIDERATIONS
Additional options could be added for Central San investments that fall within the permissible investments
prescribed by California Government Code. The Board could also choose not to make the proposed
changes or make other changes to the I nvestment Policy, and the OPEB and Pension Prefunding Trust
IGD.
The current "moderate" and "moderately conservative" investment strategies for the OPEB and Pension
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Prefunding Trusts respectively previously adopted by the Board could be changed to less or more
aggressive strategies. No such changes are currently recommended by staff.
FINANCIAL IMPACTS
The yield earned on Central San investments and Trust investments may be impacted by the policies and
guidelines being considered, which address the risk tolerance and investment practices of the District.
These policies and guidelines impact the goals of optimizing the return, taking into account the priorities of
safety, liquidity, and yield (in that order). That being said, the changes being proposed in this year's review
of the investment policies will not cause any known immediate fiscal impacts to Central San.
COMMITTEE RECOMMENDATION
The Administration Committee reviewed this matter at its meeting on October 11, 2023, and
recommended
RECOMMENDED BOARD ACTION
Approve proposed changes to each of the following:
1. Board Policy No. BP 005 -Statement of Investment Policy; and
2. Investment Guidelines Documents related to the Public Agencies Post -Retirement Health Care
Plan Trust, which includes both of the following:
• I G D for the existing O P E B Trust, and
• I GD for the Pension Prefunding Trust
Strategic Plan re -In
GOAL FOUR: Governance and Fiscal Responsibility
Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 3 - Maintain financial stability
and sustainability
GOAL FIVE: Safety and Security
Strategy 2 - Protect personnel and assets from threats and emergencies
ATTACHMENTS:
1. Proposed Revisions to BP 005 (strikethrough)
2. Proposed Revisions to OPEB Trust IGD (strikethrough)
2. Proposed Revisions to Pension Prefunding Trust IGD (strikethrough)
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 6 of 54
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Attachment 1
Number: BP 005
Authority: Board of Directors
Effective: September 1, 2011
Last Revised: October 6, 2022
Last Reviewed: September 6, 2022
Initiating Dept./Div.: Administration/Finance
BOARD POLICY
STATEMENT OF INVESTMENT POLICY
PURPOSE
The investment policy of the Central Contra Costa Sanitary District (Central San)
governs investments held with the following:
• Contra Costa County
• Other Post -Employment Benefits (OPEB) Trust*
• Pension Prefunding Trust*
• Debt Reserves — as indicated in the Bond Official Statement (if applicable)
*Trusts are governed by a separate Investment Guidelines Document
provided by Investment Manager on an annual basis.
Investments will be in compliance with the provisions of, but not necessarily limited to
California Government Code Section 53601 and other applicable statutes.
This investment policy is embodied in the following sections:
POLICY
Statement of Objectives
The primary objectives, in priority order, of the Central San's investment
activities shall be:
• Safety. Investments of Central San shall be undertaken in the manner
that seeks to ensure the preservation of capital in the overall portfolio.
Liquidity. Central San's portfolio will remain sufficiently liquid to enable
Central San to meet all operating requirements which might be
reasonably anticipated.
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 7 of 54
Page 6 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 2 of 8
Return on Investment. The portfolio will be invested to attain a market
average rate of return throughout budgetary and economic cycles,
taking into account the investment risk constraints, liquidity needs, and
cash flow characteristics of the portfolio.
Permissible Investments
Within the constraints prescribed by the California Government Code for
permissible investments, Central San's investment portfolio will only be
invested in the following instruments:
• United States Treasury Obligations. United States Treasury notes,
bonds, bills, or certificates of indebtedness, or those for which the full faith
and credit of the United States are pledged for the payment of principal
and interest.
• United States Government Agency Issues. 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.
• Municipal Investments. Registered state warrants or treasury notes or
bonds of this state, 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.
Registered treasury notes or bonds of any of the other 49 states in
addition to California, including bonds payable solely out of the revenues
from a revenue -producing property owned, controlled, or operated by a
state or by a department, board, agency, or authority of any of the other
49 states, in addition to California.
Eligible obligations shall be rated in category "AA" or its equivalent or
better by a nationally recognized statistical rating organization Nationally
Recognized Statistical Rating Organization (NRSRO). No more than 5%
shall be invested in any single issuer.
• Money Market Funds. Shares of beneficial interest issued by diversified
management companies that are money market funds registered with the
Securities and Exchange Commission under the Investment Company Act
of 1940 (15 U.S.C. See. 80a-1, et seq.). That invest in the securities and
obligations as authorized by California Government Code Section 53601
subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and
that comply with the investment restrictions of this article and Article 2
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 8 of 54
Page 7 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 3 of 8
(commencing with Section 53630). To be eligible for investment pursuant
to this subdivision, these companies shall either:
i. Attain the highest ranking or the highest letter and numerical
rating provided by not less than two NRSROs;
ii. Retain an investment advisor registered or exempt from
registration with the Securities and Exchange Commission with
not less than five years' experience managing money market
mutual funds with assets under management in excess of five
hundred million dollars ($500,000,000).
A maximum of 20% of Central San's portfolio may be invested in money
market funds. No more than 10% of Central San's portfolio may be
invested in any one fund.
• Bankers' Acceptances, otherwise known as bills of exchange or time
drafts, drawn on and accepted by a commercial bank. Purchases of
bankers' acceptances shall not exceed 180 days' maturity or 40% of
Central San's moneys that may be invested pursuant to this section.
However, no more than 5% of Central San's moneys may be invested in
the bankers' acceptances of any one commercial bank pursuant to this
section.
• Collateralized Time Deposits (Non -Negotiable Certificates of Deposit)
issued by a Federal or State chartered bank or a Federal or State
chartered savings and loan association. Time certificates of deposit shall
meet the requirements for deposit under California Government Code
Section 53635 et. seq., The Director of Finance and Administration, for
deposits up to the current FDIC insurance limit, may waive collateral
requirements if the institution insures its deposits with the Federal Deposit
Insurance Corporation (FDIC). No more than 20% of Central San's
moneys shall be invested in a combination of federally insured and
collateralized non-negotiable certificates of deposit.
Fully insured time certificates of deposit placed through a deposit
placement service shall meet the requirements under California
Government Code Section 53601.8.
Negotiable Certificates of Deposit issued by a nationally or state -
chartered bank, a savings association or a federal association (as defined
by Section 5102 of the Financial Code), a state or federal credit union, or
by a federally licensed or state -licensed branch of a foreign bank.
Purchases of negotiable certificates of deposit shall not exceed 30% of
Central San's moneys that may be invested pursuant to this section and
not more than 5% may be invested in any single issuer. Eligible negotiable
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 9 of 54
Page 8 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 4 of 8
certificates of deposit in excess of the FDIC insured limit shall be rated in
category "AX or its equivalent or better by a NRSRO.
• Commercial Paper of prime quality of the highest ranking or of the
highest letter and number rating as provided for by a NRSRO. The entity
that issues the commercial paper shall meet all of the following conditions
in either paragraph (a) or paragraph (b):
a) The entity meets the following criteria: (i) Is organized and operating in
the United States as a general corporation. (ii) Has total assets in
excess of five hundred million dollars ($500,000,000). (iii) Has debt
other than commercial paper, if any, that is rated "A" or higher by a
NRSRO.
b) The entity meets the following criteria: (i) Is organized within the United
States as a special purpose corporation, trust, or limited liability
company. (ii) Has program wide credit enhancements including, but
not limited to, over collateral ization, letters of credit, or surety bond. (iii)
Has commercial paper that has a short term rating of "A-1" / "P-1" /
"F1" or higher, or the equivalent, by a NRSRO.
Eligible commercial paper shall have a maximum maturity of 270 days or
less. Central San may invest no more than 25% of its moneys in eligible
commercial paper and no more than 10% of its total investment assets in
the commercial paper of any single issuer.
• 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. Notes eligible for investment under
this subdivision shall be rated "AA" (or equivalent "P-1" / "A-1" / "F1") or
better by an NRSRO. Purchases of medium -term notes shall not include
other instruments authorized by this section and shall not exceed 30% of
Central San's moneys that may be invested pursuant to this section.
Central San may invest no more than 10% of its total investment assets in
the medium -term notes of any single issuer.
• Government Pools (e.g., California Asset Management Program,
CalTrust, etc.). Shares of beneficial interest issued by a joint powers
authority organized pursuant to California Government Code Section
6509.7 that invests in securities and obligations authorized by California
Government Code Section 53601 subdivisions (a) to (q), inclusive. Each
share shall represent an equal proportional interest in the underlying pool
of securities owned by the joint powers authority. To be eligible under this
section, the joint powers authority issuing the shares shall have retained
an investment adviser that meets all of the following criteria:
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Page 9 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 5 of 8
The adviser is registered or exempt from registration with the
Securities and Exchange Commission.
The adviser has not less than five years of experience investing
in the securities and obligations authorized in California
Government Code Section 53601 subdivisions (a) to (q),
inclusive.
iii. The adviser has assets under management in excess of five
hundred million dollars ($500,000,000).
• Local Agency Investment Fund of the State of California. Investment
in LAIF may not exceed the current LAIF limit ($75,000,000) and should
be reviewed periodically.
• Supranationals, defined as United States 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, with a maximum remaining maturity of five years or
less, and eligible for purchase and sale within the United States.
Supranationals shall be rated "AX (or "P-1" / "A-1" / "71" short term rating)
or its equivalent or better by a NRSRO. Purchases of supranationals may
not exceed 30% of Central San's investment portfolio and no more than
5% may be invested in any single issuer.
A summary matrix of permissible investments and restrictions associated with
each is provided in Appendix A.
III. Bank and Dealers
Central San has the option of investing funds internally, using the services of
the Treasurer's Office of the County of Contra Costa or a registered
investment advisor to transact Central San's investments in compliance with
the requirements described in this investment policy. If Central San uses the
services of the County, the County Treasurer's Office will execute Central
San's investments through such brokers, dealers and financial institutions as
are approved by the County Treasurer, and through the State Treasurer's
Office for investment in the Local Agency Investment Fund. Ifo� ra�rurvurnr
utilizes aR external investment adviser, the adviser is autherized to traRsaG
�nin annreyed breker_deal "S n behalf of Gentral San The adviser
with ca�vrccracar�rJ�rrvcTruir'vrvcrr c�a-vravr
will nerferm all due dilinenne fer the brekers and dealers en its approved list
The General Manager, with the approval of the Board, may appoint an
independent investment advisor registered with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 and the rules
adopted thereunder, or a "Municipal Advisor" as defined by Section 975 of
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 11 of 54
Page 10 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 6 of 8
the Dodd -Frank Wall Street Reform and Consumer Protection Act, amending
Section 15B of the Securities Exchange Act of 1934, and interpreted by the
Securities and Exchange Commission in its final rules adopted September 10,
2013, to advise the Central San on investment activities. The investment
advisor will be selected through a competitive process. The terms and
conditions of such a relationship shall be set out in a contract. The duties and
responsibilities of the investment advisor at a minimum shall include the
following.
• Providing advice and analysis on the Central San's Investment Policy,
portfolio management techniques, portfolio structures, and new
investment securities and products;
• Assistance in developing or improving and implementing cash flow
modeling;
• Providing advice on investment benchmarking and performance reporting;
• Evaluation of the capabilities and usage of software utilized in
management of and accounting for the investments;
• Assisting in any investment related presentations to the Finance
Committee and/or Board, including, but not limited to, the quarterly
investment portfolio report; and
• Providing analysis, advice, and assistance on other investment -related
matters, including investment of bond proceeds.
IV. Settlements
The settlement date of an investment transaction is the date when a trade
is final. The ownership of the security is transferred to the buyer and the
payment of funds is transferred to the seller. The settlement date establishes
a legal transfer of ownership. Security purchases with a forward settlement
date exceeding 45 days from the time of the investment are prohibited.
W.-V. Maturities
To the extent possible, Central San shall attempt to match its investments
with anticipated cash flow requirements. Unless stated otherwise in this Policy
or approval made by Central San's executive body, the maximum maturity of
Central San's eligible investments will not exceed five years. The calculation
of an investment's remaining maturity/term is to be measured from the
settlement date to final maturitv.
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 12 of 54
Page 11 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 7 of 8
V.VI. Diversification
Central San's investments shall be diversified by:
• Limiting investments to avoid over concentration in securities from a
specific issuer or sector.
• Limiting investments in securities that have higher credit risks.
• Investing in securities with varying maturities.
• Continuously investing a portion of the portfolio in readily available
funds such as local government investment pools or money market
funds to ensure that appropriate liquidity is maintained in order to meet
ongoing obligations.
V4_. VII. Risk
Credit and market risks will be minimized through adherence to the list of
permissible investments, a limit on maximum maturities, and the limitation on
the total investment in a single issuer.
VUVIII. Delegation and Authority
Central San's Board of Directors (Board) is responsible for the investment of
Central San's funds. The Board hereby delegates responsibility for
investment transactions for the investment program to the General Manager
or designee, for a one-year period.
The General Manager or designee may delegate the day-to-day execution of
investments to a registered investment advisor, via written agreement
approved by the Board. The Advisor in coordination with the General
Manager or designee will manage on a daily basis Central San's investment
portfolio pursuant to the specific and stated investment objectives of Central
San. The Advisor shall follow the policy and such other written instructions
provided by the General Manager or designee.
V4w-.IX. Prudence
Prudent judgment must be exercised by the General Manager or designee
and all investment staff responsible for investment transactions undertaken in
accordance with this investment policy. The standard of prudence to be
applied by the investment officer shall be the "prudent person" rule:
"Investments shall be made with judgment and care, under
circumstances then prevailing, which persons of prudence,
discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investment, considering the
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Page 12 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 8 of 8
probable safety of their capital as well as the probable income to be
derived." The prudent person rule shall be applied in the context of
managing the overall portfolio.
I 1X_. X. Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from
personal business activity that could conflict with the proper execution and
management of the investment program, or that could impair their ability to
make impartial decisions. Employees and investment officials shall disclose
any material interests in financial institutions with which they conduct
business. They shall further disclose any personal financial/investment
positions that could be related to the performance of the investment portfolio.
Employees and officers shall refrain from undertaking personal investment
transactions with the same individual with whom business is conducted on
behalf of Central San.
X_.XI. Controls
The General Manager or designee will establish subsidiary accounting
records of each investment which will enable the determination of income
earned monthly and through maturity, and the balancing of the principal
amounts to a control account in the general ledger. Internal control
procedures require the General Manager or designee to sign all transactions,
which are then countersigned by the General Manager. Such internal
controls are to be reviewed by Central San's independent auditors annually.
X4 XII. Safekeeping and Custody
All investment transactions will be executed on a delivery versus payment
basis. Securities will be held in safekeeping by a third party custodian
designated by Central San. The custodian will be required to provide timely
(written or on-line) confirmation of receipt and monthly position and
transaction reports.
XWXIII. Reporting
The General Manager or designee will annually render a statement of
investment policy to the Board. The General Manager or designee will
eebna-i-tAdditionally a quarterly investment portfolio report to Central can's
General Manager and Beard CinanGe Gornmishall be prepared showing
the type of investment, issuer, date of maturity, par (or face), dollar amount
invested, current market value of all securities, and the source of this same
valuation, and a statement of compliance of the portfolio with the investment
policy. The quarterly investment portfolio report shall be delivered to Central
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Page 13 of 32
Attachment 1
Number: BP 005
STATEMENT OF INVESTMENT POLICY
Page 9 of 8
San's Internal Auditor. the General Manaaer. and the Board for review within
45 days of the end of the quarter to which it pertains.
Also, annually, the OPEB and Pension Prefunding Trust Investment
Guidelines Documents (IGD) will be brought before the Board Administration
Committee for review. Quarterly statements for both Trusts are reviewed by
the Board Finance Committee. At least, twice a year the investment manager
and/or the Trust Administrator meets with the Finance Committee.
X41--XIV. Performance Evaluation
The investment portfolio shall be designed with the objective of obtaining a
rate of return throughout budgetary and economic cycles, commensurate with
the investment risk constraints and the cash flow needs.
X4 VL. XV. Policy Considerations
This policy shall be reviewed on an annual basis. Any changes must be
approved by the Board after review by the Administration Committee, as well
as the individual(s) charged with maintaining internal controls.
Appendix A: Permissible Investment Restrictions Summary Matrix
[Original Retained by the Secretary of the District]
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 15 of 54
Attachment 1
Appendix A
Permissible Investment Restrictions Summary
Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the matrix below:
Authorized Investment Type
Maximum
Remaining
Maturity
Maximum
Percentage of
Portfolio
Maximum
Investment in
One Issuer
Minimum Credit
Quality
Banker's Acceptances
180 days
40%
5%
n/a
Certificates of Deposit — Collateralized /
Non-negotiable
5 years
20%
n/a
AAA
Certificates of Deposit - Negotiable
5 years
30%
5%
AA3
Commercial Paper'
270 days
25%
10%
A-1
County Investment Pool
n/a
n/a
n/a
n/a
Government Investment Pools
(CAMP, Cal Trust, etc.)
n/a
n/a
n/a
n/a
Local Agency Investment Fund (LAIF)2
n/a
n/a
n/a
n/a
Medium Term Notes
5 years
30%
10%
AA
Money Market Funds
n/a
20%
10%
A
Municipal Investments
5 years
n/a
5%
AA
Supernational
5 years
30%
5%
AA
U.S. Government Agency Issues
5 years
n/a
n/a
n/a
U.S. Treasury Obligations
5 years
n/a
n/a
n/a
1 Prime quality; limited to corporations with assets over $500,000,000.
2 As of June 30, 2022, the maximum amount an agency could invest with LAIF was $75,000,000.
3 Credit rating requirement not applicable for issuer if under FDIC insurance coverage, currently $250,000.
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 16 of 54
Page 15 of 32
Attachment 2
HIGHMARKO
CAPITAL MANAGEMENT
Investment Guidelines Document
Central Contra Costa County Sanitary District
Other Post -Employment Benefits Trust
Revised August 20222023
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 17 of 54
Page 16 of 32
Investment Guidelines Document
Scope and Purpose
The purpose of this Investment Guidelines Document is to:
• Facilitate the process of ongoing communication between the Plan Sponsor and its plan
fiduciaries;
• Confirm the Plan's investment goals and objectives and management policies applicable
to the investment portfolio identified below and obtained from the 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 the
account's investment objectives, liquidity considerations and risk tolerance;
• Identify any unique considerations that may restrict or limit the investment discretion of its
designated investment managers;
• Help maintain a long-term perspective when market volatility is caused by short-term
market movements.
• Assist the Plan Sponsor in formulating an Investment Policy Statement ("IPS") for the
account.
Key Plan Sponsor Account Information as of August 20232022
Plan Sponsor.
Central Contra Costa County Sanitary District
Governance:
Board of Directors of the Central Contra Costa County
Sanitary District
Plan Name ("Plan"):
Central Contra Costa County Sanitary District Other Post -
Employment Benefits Trust
Trustee:
US Bank
Contact: Susan Hughes, 949-224-7209
Susan. Hug hesCcDUsbank.com
Account Number ("Account"):6746055900
Type of Account:
Other Post -Employment Benefits Trust
ERISA Status:
Not subject to ERISA
Market Value of Account:
$79,860 387as of August 12, 2022$81,342,131 as of June 30,
2023
Investment Manager:
US Bank, as discretionary trustee, has delegated investment
management responsibilities to HighMark Capital Management,
Inc. ("Investment Manager"), an SEC -registered investment
adviser
Contact: Andrew Brown, CFA, 15-796-5057 or
925-683-8366
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M 2
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 18 of 54
Page 17 of 32
/ Rdrew bFC) R@h'ghmarkGapmt@' mAndrew.Brown1(cDusbank.c
om
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232422
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 19 of 54
Page 18 of 32
Investment Authority: Except as otherwise noted, the Trustee, US Bank, has delegated
investment authority to HighMark Capital Management, an SEC -registered investment adviser.
Investment Manager has full investment discretion over the managed assets in the account.
Investment Manager is authorized to purchase, sell, exchange, invest, reinvest and manage the
designated assets held in the account, all in accordance with account's investment objectives,
without prior approval or subsequent approval of any other party(ies).
Investment Objectives and Constraints
The goal of the Plan's investment program is to generate adequate long-term returns that, when
combined with contributions, 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 earn, on a long-term average basis, a rate of return equal to or in excess
of the target rate of return of 5.75%.
• The Plan should seek to earn a return in excess of its policy benchmark over the long-
term.
• The Plan's assets will be managed on a total return basis which takes into consideration
both investment income and capital appreciation. While the 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 Plan Sponsor allocates its assets (asset allocation) with a strategic, long-
term perspective of the capital markets.
Investment Time Horizon: Long-term
Anticipated Cash Flows: The Plan has modest monthly liquidity requirements for
beneficiary distributions.
Target Rate of Return: 5.75% annual target
Investment Objective: The primary objective is to maximize total Plan return, subject to
the risk and quality constraints set forth herein. The investment
objective the Plan Sponsor has selected is the Moderate
Objective, which has a dual goal to seek moderate growth of
income and principal.
Risk Tolerance: Moderate
The account's risk tolerance has been rated moderate, which
demonstrates that the account can accept average, or moderate,
price fluctuations to pursue its investment objectives.
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M
4
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 20 of 54
Page 19 of 32
Strategic Asset Allocation: The asset allocation ranges for this objective are listed below:
Strategic Asset Allocation Ranges
Cash
Fixed Income
Equity
0-20%
40%-60%
40%-60%
Policy: 5%
Policy: 45%
Policy: 50%
Market conditions may cause the account's asset allocation to vary from the stated range from
time to time. The Investment Manager 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.
Security Guidelines:
Equities
With the exception of limitations and constraints described above, Investment Manager may
allocate assets of the equity portion of the account among various market capitalizations (large,
mid, small) and investment styles (value, growth). Further, Investment Manager may allocate
assets among domestic, international developed and emerging market equity securities.
Total Equities
40%-60%
Equity Style
Range
Domestic Large Cap Equity
15%-45%
Domestic Mid Cap Equity
0%-10%
Domestic Small Cap Equity
0%-15%
International Equity (incl Emerging Markets)
0%-15%
Real Estate Investment Trust (REIT)
0%-15%
Fixed Income
In the fixed income portion of the account, Investment Manager may allocate assets among
various sectors and industries, as well as varying maturities and credit quality that are consistent
with the overall goals and objectives of the portfolio.
Total Fixed Income 40%-60%
If individual fixed income securities are purchased for the Plan, the following guidelines will be
adhered to in the management of the fixed income segment:
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 21 of 54
Page 20 of 32
Eligible Investments
• Debt obligations of the U.S. Government, its agencies, and Government Sponsored
Enterprises
• Mortgage -Backed Securities (MBS)
• Asset Backed Securities (ABS)
• Collateralized Mortgage Obligations (CMO)
• Commercial Mortgage -Backed Securities (CMBS)
• Corporate debt securities issued by U.S. or foreign entities including, but not limited to,
limited partnerships, equipment trust certificates and enhanced equipment trust
certificates
• Eligible instruments issued pursuant to SEC Rule 144(a)*
• Municipal Bonds
Quality
The individual securities portfolio will maintain a minimum weighted average effective quality of A -
at all times. At the time of purchase, individual securities shall have a minimum effective quality
rating BBB -
For purposes of determining an effective rating, when three agencies rate a security (S&P,
Moodys, Fitch) the middle rating will be used. When only two of the three agencies rate a
security the lower of the two ratings will be used. When only one agency rates a security that
rating will be used.
Duration
The manager will maintain the portfolio duration within +/- 25% of the Bloomberg U.S. Aggregate
Bond Index duration at all times for the individual securities portfolio.
Diversification
No more than 5% of the portfolio assets may be invested in any individual issuer, with the
exception of securities issued or guaranteed by the U.S. Government, its agencies, and
Government Sponsored Enterprises.
• No more than 30% of the portfolio may be invested in securities issued under Rule 144A*
without registration rights (no limit on Rule 144a securities with registration rights).
* Note: Rule 144A is an administrative rule under the SEC allowing, under certain circumstances, for qualified institutional
investors to trade certain securities with other institutional investors without registering the trade with the SEC.
Specifically, the rule allows private companies, both domestic and international, to sell unregistered securities, also known
as Rule 144 securities, to qualified institution buyers (QIBs) through a broker -dealer.
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 22 of 54
Page 21 of 32
Performance Benchmarks:
The performance of the total Plan shall be measured over a three and five-year periods. These
periods are considered sufficient to accommodate the market cycles experienced with
investments. The performance shall be compared to the return of the total portfolio blended
benchmark shown below.
Total Portfolio Blended Benchmark
26.50%
S&P500Index
5.00%
Russell Mid Cap Index
7.50%
Russell 2000 Index
3.25%
MSCI Emerging Market Index
6.00%
MSCI EAFE Index
1.75%
Wilshire REIT Index
33.50%
Bloomberg s US Aggregate Bond Index
10.00%
ICE BofA 1-3 Year US Corp/Gov't Index
1.50%
ICE BofA US High Yield Master II
5.00%
FTSE G#4 1 Mth T-Bill
Asset Class/Style Benchmarks
Over a market cycle, the long-term objective for each investment strategy is to add value to a
market benchmark. The following are the benchmarks used to monitor each investment strategy:
Large Cap Equity
S&P 500 Index
Mid Cap Equity
Russell Mid Cap Index
Growth
Russell Mid Cap Growth Index
Value
Russell Mid Cap Value Index
Small Cap Equity
Russell 2000 Index
Growth
Russell 2000 Growth Index
Value Russell 2000 Value Index
REITs Wilshire REIT Index
International Equity MSCI EAFE Index
Investment Grade Bonds Bloomberg US Aggregate Bond Index
High Yield ICE BofA US High Yield Master II
Security Selection
Investment Manager may utilize a full range of investment vehicles when constructing the
investment portfolio, including but not limited to individual securities, mutual funds, and exchange -
traded funds. In addition, to the extent permissible, Investment Manager is authorized to invest in
shares of mutual funds in which the Investment Manager serves as advisor or sub adviser.
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M
7
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 23 of 54
Page 22 of 32
Investment Limitations:
The following investment transactions are prohibited:
• Direct investments in precious metals (precious metals mutual funds and exchange -traded
funds are permissible).
• Venture Capital
• Short sales*
• Purchases of Letter Stock, Private Placements, or direct payments
• Leveraged Transactions*
• Commodities Transactions Puts, calls, straddles, or other option strategies*
• Purchases of real estate, with the exception of REITs
• Derivatives, with exception of ETFs*
*Permissible in diversified mutual funds and exchange -traded funds
Duties and Responsibilities
Responsibilities of Plan Sponsor
The Finance Committee of the Central Contra Costa Sanitary District is responsible for:
■ Confirming the accuracy of this Investment Guidelines Document, in writing.
■ Advising Trustee and Investment Manager 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.
■ Providing Trustee and Investment Manager with an approved IPS for the account and
providing any updates to the IPS.
■ Monitoring and supervising all service vendors and investment options, including
investment managers.
■ Avoiding prohibited transactions and conflicts of interest.
Responsibilities of Trustee
The plan Trustee is responsible for:
■ Valuing the holdings.
■ Collecting all income and dividends owed to the Plan.
■ Settling all transactions (buy -sell orders).
Responsibilities of Investment Manager
The Investment Manager is responsible for:
■ Assisting the Finance Committee with the development and maintenance of this
Investment Policy Guideline document annually.
■ Meeting with the Finance Committee semi-annually 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.
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 24 of 54
Page 23 of 32
■ Recommending changes to any of the above.
■ Periodically reviewing the suitability of the investments, being available to meet with the
Finance Committee at least twice a year, and being available at such other times within
reason at your request.
■ Preparing and presenting appropriate reports.
■ Informing the Finance Committee if changes occur in personnel that are responsible for
portfolio management or research.
Acknowledgement and Acceptance
I/We being the Plan Sponsor with responsibility for the account(s) held on behalf of the Plan
Sponsor specified below, designate Investment Manager 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 Manager.
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 Investment Manager. 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.
Date:
Plan Sponsor: Central Contra County Sanitary District Board President
Date:
Investment Manager: Andrew Brown, CFA, Senior Portfolio Manager, (415) 796-5057 705 7�5
Central Contra Costa County Sanitary District —Other Post -Employment Benefits Trust
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232M
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 25 of 54
Page 24 of 32
Attachment 3
HIGHMARKO
CAPITAL MANAGEMENT
Investment Guidelines Document
Central Contra Costa County Sanitary District
Pension Prefunding Trust
Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 26 of 54
Page 25 of 32
Investment Guidelines Document
Scope and Purpose
The purpose of this Investment Guidelines Document is to:
• Facilitate the process of ongoing communication between the Plan Sponsor and its plan
fiduciaries;
• Confirm the Plan's investment goals and objectives and management policies applicable
to the investment portfolio identified below and obtained from the 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 the
account's investment objectives, liquidity considerations and risk tolerance;
• Identify any unique considerations that may restrict or limit the investment discretion of its
designated investment managers;
• Help maintain a long-term perspective when market volatility is caused by short-term
market movements.
• Assist the Plan Sponsor in formulating an Investment Policy Statement ("IPS") for the
account.
Key Plan Sponsor Account Information as of August 20232022
Plan Sponsor:
Central Contra Costa County Sanitary District
Governance:
Board of Directors of the Central Contra Costa County
Sanitary District
Plan Name ("Plan"):
Central Contra Costa County Sanitary District
Employee Benefits Pension Plan
Trustee:
US Bank
Contact: Susan Hughes, 949-224-7209
Susan. Hughes(cDUsbank.com
Account Number ("Account'):6746055901
Type of Account:
Pension Plan
ERISA Status:
Not subject to ERISA
Market Value of Account:
$43,793-as ef August12, 202-2-$43,662 as of June 30, 2023
Investment Manager:
US Bank, as discretionary trustee, has delegated investment
management responsibilities to HighMark Capital Management,
Inc. ("Investment Manager"), an SEC -registered investment
adviser
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 27 of 54
Page 26 of 32
Contact: Andrew Brown, CFA, 415-796-505741 G-705-7605 or
925-683-8366 Andrew.Brown1(u-)usbank.com
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 28 of 54
Page 27 of 32
Investment Authority: Except as otherwise noted, the Trustee, US Bank, has delegated
investment authority to HighMark Capital Management, an SEC -registered investment adviser.
Investment Manager has full investment discretion over the managed assets in the account.
Investment Manager is authorized to purchase, sell, exchange, invest, reinvest and manage the
designated assets held in the account, all in accordance with account's investment objectives,
without prior approval or subsequent approval of any other party(ies).
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 long-term expected rate of return for the target allocation for the Plan's Moderately
Conservative investment objective currently is 5.14%. This should not be confused with
the expected rate of return for the CCCERA Pension 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 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 Plan Sponsor allocates its assets (asset allocation) with a strategic
perspective of the capital markets.
Investment Time Horizon: Over 10 years
Anticipated Cash Flows: The initial contribution into the Plan was $3.35 million with
subsequent contributions totaling an estimated $5.5 million. This
has resulted in a total of approximately $8.83 million in
contributions to date as of May 2020. Assets in the Plan will
seek to mitigate the impact of future rate increases from
CCCERA. On June 23, 2021 $12,763,669 was transferred to the
CCCERA Plan.
Target rate of return: 5.14% annual target
Investment Objective: The primary objective is to generate a reasonable level of
growth. The assets in this Plan will eventually be used to fund
Pension Plan obligations for assets managed in the CCCERA
Trust.
Risk Tolerance: Moderately Conservative
The account's risk tolerance has been rated moderately
conservative, which demonstrates that the account can accept
some price fluctuations to pursue its investment objectives.
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022 4
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 29 of 54
Page 28 of 32
Strategic Asset Allocation: The asset allocation ranges for this objective are listed below:
Strategic Asset Allocation Ranges
Cash
Fixed Income
Equity
0-20%
50%-80%
20%-40%
Policy: 5%
Policy: 65%
Policy: 30%
Market conditions may cause the account's asset allocation to vary from the stated range from
time to time. The Investment Manager 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.
Security Guidelines:
Equities
With the exception of limitations and constraints described above, Investment Manager may
allocate assets of the equity portion of the account among various market capitalizations (large,
mid, small) and investment styles (value, growth). Further, Investment Manager may allocate
assets among domestic, international developed and emerging market equity securities.
Total Equities
20%-40%
Equity Style
Range
Domestic Large Cap Equity
10%-30%
Domestic Mid Cap Equity
0%-10%
Domestic Small Cap Equity
0%-12%
International Equity (incl. Emerging Markets)
0%-12%
Real Estate Investment Trust (REIT)
0%-8%
Fixed Income
In the fixed income portion of the account, Investment Manager may allocate assets among
various sectors and industries, as well as varying maturities and credit quality that are consistent
with the overall goals and objectives of the portfolio.
Total Fixed Income 50%-80%
Eligible Investments
• Debt obligations of the U.S. Government, its agencies, and Government Sponsored
Enterprises
• Mortgage -Backed Securities (MBS)
• Asset Backed Securities (ABS)
• Collateralized Mortgage Obligations (CMO)
• Commercial Mortgage -Backed Securities (CMBS)
• Corporate debt securities issued by U.S. or foreign entities including, but not limited to,
limited partnerships, equipment trust certificates and enhanced equipment trust
certificates
• Eligible instruments issued pursuant to SEC Rule 144(a)
• Municipal Bonds
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 30 of 54
Page 29 of 32
Quality
The individual securities portfolio will maintain a minimum weighted average effective quality of A -
at all times. At the time of purchase, individual securities shall have a minimum effective quality
rating of BBB-.
Duration
The manager will maintain the portfolio duration within +/- 25% of the Bloomberg U.S. Aggregate
Bond Index duration at all times for the individual securities portfolio.
Diversification
No more than 5% of the portfolio assets may be invested in any individual issuer, with the
exception of securities issued or guaranteed by the U.S. Government, its agencies, and
Government Sponsored Enterprises.
• No more than 30% of the portfolio may be invested in securities issued under Rule 144A*
without registration rights (no limit on Rule 144a securities with registration rights).
* Note: Rule 144A is an administrative rule under the SEC allowing, under certain circumstances, for qualified institutional
investors to trade certain securities with other institutional investors without registering the trade with the SEC.
Specifically, the rule allows private companies, both domestic and international, to sell unregistered securities, also known
as Rule 144 securities, to qualified institution buyers (QIBs) through a broker -dealer.
Performance Benchmarks:
The performance of the total Plan shall be measured over a three and five-year periods. These
periods are considered sufficient to accommodate the market cycles experienced with
investments. The performance shall be compared to the return of the total portfolio blended
benchmark shown below.
Total Portfolio Blended Benchmark
15.5%
S&P500Index
3.00%
Russell Mid Cap Index
4.50%
Russell 2000 Index
2.00%
MSCI Emerging Market Index
4.00%
MSCI EAFE Index
1.00% Wilshire REIT Index
49.25% Bloomberg US Aggregate Bond Index
14.00% ICE BofA 1-3 Year US Corp/Gov't Index
1.75% ICE BofA US High Yield Master II
5.00% FTSEG#t `I Mth T-Bill
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 31 of 54
Page 30 of 32
Asset Class/Style Benchmarks
Over a market cycle, the long-term objective for each investment strategy is to add value to a
market benchmark. The following are the benchmarks used to monitor each investment strategy:
Large Cap Equity
S&P 500 Index
Growth
S&P 500 Growth Index
Value
S&P 500 Value Index
Mid Cap Equity
Russell Mid Cap Index
Growth
Russell Mid Cap Growth Index
Value
Russell Mid Cap Value Index
Small Cap Equity
Russell 2000 Index
Growth
Russell 2000 Growth Index
Value
Russell 2000 Value Index
REITs Wilshire REIT Index
International Equity MSCI EAFE Index
Investment Grade Bonds Bloomberg US Aggregate Bond Index
High Yield ICE BofA US High Yield Master II
Security Selection
Investment Manager may utilize a full range of investment vehicles when constructing the
investment portfolio, including but not limited to individual securities, mutual funds, and exchange -
traded funds. In addition, to the extent permissible, Investment Manager is authorized to invest in
shares of mutual funds in which the Investment Manager serves as advisor or subadviser.
Investment Limitations:
The following investment transactions are prohibited:
• Direct investments in precious metals (precious metals mutual funds and exchange -traded
funds are permissible).
• Venture Capital
• Short sales*
• Purchases of Letter Stock, Private Placements, or direct payments
• Leveraged Transactions*
• Commodities Transactions Puts, calls, straddles, or other option strategies*
• Purchases of real estate, with the exception of REITs
• Derivatives, with exception of ETFs*
*Permissible in diversified mutual funds and exchange -traded funds
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
VA
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 32 of 54
Page 31 of 32
Duties and Resaonsibilities
Responsibilities of Plan Sponsor
The Finance Committee of the Central Contra Costa Sanitary District is responsible for:
■ Confirming the accuracy of this Investment Guidelines Document, in writing.
■ Advising Trustee and Investment Manager 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.
■ Providing Trustee and Investment Manager with an approved IPS for the account and
providing any updates to the IPS.
■ Monitoring and supervising all service vendors and investment options, including
investment managers.
■ Avoiding prohibited transactions and conflicts of interest.
Responsibilities of Trustee
The plan Trustee is responsible for:
■ Valuing the holdings.
• Collecting all income and dividends owed to the Plan.
• Settling all transactions (buy -sell orders).
Responsibilities of Investment Manager
The Investment Manager is responsible for:
■ Assisting the Finance Committee with the development and maintenance of this
Investment Policy Guideline document annually.
■ Meeting with the Finance Committee semi-annually 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 twice a year, and being available at such other times within reason at
your request.
■ Preparing and presenting appropriate reports.
■ Informing the committee if changes occur in personnel that are responsible for portfolio
management or research.
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 33 of 54
Page 32 of 32
Acknowledgement and Acceptance
I/We being the Plan Sponsor with responsibility for the account(s) held on behalf of the Plan
Sponsor specified below, designate Investment Manager 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 Manager.
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 Investment Manager. 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.
Date:
Plan Sponsor: Central Contra County Sanitary District Board President
Date:
Investment Manager: Andrew Brown, CFA, Senior Portfolio Manager, (415) 796-50577,E 7605
Central Contra Costa County Sanitary District — Employee Benefits Pension Plan
Investment Guidelines Document— HighMark Capital Management, Inc.
(v. July 2018 ARB) Revised August 20232022
October 11, 2023 Special ADMIN Committee Meeting Agenda Packet - Page 34 of 54