7.30.020 Investments.
(a) The Permanent Funds shall be managed by the Finance Director, with the following conditions:
(1) The City will contract for the management of the investments for each Permanent Fund with one (1) or more professional investment managers with experience handling institutional endowment investments subject to Council approval.
(2) The Permanent Funds shall be invested in such types of income producing investments as limited by subsection (b) of this section, Authorized Investments for the Permanent Funds. The investments for each Permanent Fund shall be approved by resolution annually, usually during the City budget process, in the form of an asset allocation plan, with each Permanent Fund following the same asset allocation plan. The asset allocation plan shall have specific categories of investments for the funds with percentage targets that allow for reasonable fluctuations above and below the target percentage. The plan will establish benchmarks for evaluating the performance of each investment manager and asset classification. Investments shall be managed such that the target ranges of the asset allocation plan are adhered to.
(3) Investments of the Permanent Funds will take a conservative posture on derivative securities by recognizing that derivatives may be utilized within investment vehicles as a portfolio management tool to create or enhance exposure to an asset class or implementation strategy while requiring that any embedded leverage created by their use be fully collateralized. Net exposure exceeding the asset value of the investment vehicle is prohibited. Exposure must be net long at all times.
(4) All income derived from investment of each Permanent Fund, including interest income, realized gains, and undistributed earnings, can be distributed or reinvested into the respective Permanent Fund and shall be invested in accordance with subsection (b) of this section, Authorized Investments for the Permanent Funds.
(5) Appropriations from the Airport Land Sale Permanent Fund may be made as follows:
(i) In any fiscal year, the amount available for appropriation for airport operations and capital needs will be based upon the five (5) year average of the fund’s calendar year end market value. An amount not to exceed three and four-fifths percent (3.8%) of the five (5) year average market value may be distributed if the average market value is less than the fund’s inflation adjusted principal balance. An amount not to exceed four and one-fifth percent (4.2%) of the five (5) year average market value may be distributed if the average market value is greater than the fund’s inflation adjusted principal balance.
(6) Appropriations from the General Fund Land Sale Permanent Fund shall be limited to the lesser of the cumulative earnings at calendar year end for the fund or four percent (4%) of the fund’s fair market value as of December 31st of each year. “Cumulative earnings” is defined as the market value at calendar year end minus the fund’s inflation adjusted principal balance.
(7) Appropriations from the Kenai Senior Center, Cone Memorial Trust Permanent Fund may be made as follows:
(i) In any fiscal year, the amount available for appropriation for Kenai Senior Center capital needs shall be limited to the fund’s cumulative earnings at the previous calendar year end for the fund. “Cumulative earnings” is defined as the market value at calendar year end minus the fund’s inflation adjusted principal balance.
(b) Authorized Investments for the Permanent Funds.
(1) Investments authorized by KMC 7.22.030.
(2) Corporate obligations of investment-grade quality as recognized by a nationally recognized rating organization. If, after purchase, these obligations are downgraded below investment grade, the obligations shall be sold in an orderly manner within ninety (90) days of downgrading.
(3) Domestic equities which, taken as a whole, attempt to mirror the characteristics or replicate the Standard and Poor’s 500 Index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including both mutual funds and exchange traded funds (ETFs).
(4) Domestic equities which, taken as a whole, attempt to replicate the Standard and Poor’s 400 Mid-Cap Index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including both mutual funds and exchange traded funds (ETFs).
(5) Domestic equities which, taken as a whole, attempt to replicate the Standard and Poor’s 600 Small-Cap Index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including both mutual funds and exchange traded funds (ETFs).
(6) International equities which, taken as a whole, attempt to replicate the Financial Times Stock Exchange Developed ex North America Index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including both mutual funds and exchange traded funds (ETFs).
(7) Equities which, taken as a whole, attempt to replicate the universe of domestic real estate investment trusts as represented by the Standard and Poor’s REIT composite index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including both mutual funds and exchange traded funds (ETFs).
(8) Emerging market equities which, taken as a whole, attempt to replicate the Financial Times Stock Exchange Emerging Index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including both mutual funds and exchange traded funds (ETFs).
(9) Global infrastructure equities which, taken as a whole, attempt to replicate the STOXX Global Broad Infrastructure Index, or a substantially similar index, including both mutual funds and exchange traded funds.
(10) Investment grade domestic bonds which, taken as a whole, attempt to mirror the characteristics or replicate the Bloomberg Barclays Aggregate bond index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, including individual securities, mutual funds and exchange traded funds (ETFs).
(11) High yield domestic bonds which, taken as a whole, attempt to mirror the characteristics or replicate the Bloomberg Barclays U.S. Corporate High Yield Very Liquid bond index or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, utilizing mutual funds and/or exchange traded funds (ETFs).
(12) Alternative beta funds which, taken as a whole, attempt to provide systematic exposure to trading strategies included in, or similar to, those within the Wilshire Liquid Alternatives Index, or another index of similar characteristics and approved by resolution of the Council as a component of the annual Permanent Funds Asset Allocation Plan, utilizing mutual funds and/or exchange traded funds (ETFs) that adhere to the limitations identified in subsection (a)(3) of this section.
(c) Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Such employees and officers shall disclose to the City Manager any material financial interests in financial institutions that conduct business with the City and such information shall be kept confidential to the extent otherwise allowed by law. Employees and officers shall subordinate their personal investment transactions to those of the City, particularly with regard to the timing of purchases and sales. A “material financial interest” in an entity is a financial interest of any kind, which, in view of all the circumstances, is substantial enough that it would, or reasonably could, affect the employee’s or officer’s judgment with respect to transactions to which the entity is a party.
(d) The Finance Director shall submit to the City Council a quarterly investment report that summarizes recent and anticipated market conditions and that describes the City’s investment portfolio in terms of transactions during the quarter, maturities, risk characteristics, and investment return compared with both benchmark performance returns and with the City’s budgetary expectations.
(e) The Finance Director shall establish custody and safekeeping procedures with regard to all investments authorized by this chapter. All such investment securities, or their related collateral securities, shall be either held by the City or by a custodial agent for the City.
(Ords. 2326-2008, 2529-2011, 2670-2013, 3058-2019, 3269-2022, 3318-2022)