The investment policy of the City of Clayton is based on state law and prudent money management principles. All funds will be invested in accordance with the City Council adopted City of Clayton Investment Policy and California Government Code Sections 53601 and 53646. The investment of bond proceeds will be governed by the provisions of relevant bond documents. The objective of the investment portfolio is to meet the short and long-term cash flow demands of the City of Clayton. To achieve this objective, the portfolio will be structured to provide safety of principal, liquidity and return on investments.
- Safety of Principal. Safety of the City’s investments is the primary objective. The City’s investment portfolio shall be built in a manner that seeks to ensure that capital losses are minimized, whether from institution default, broker-dealer default, or erosion of the market value of securities. The City shall seek to preserve principal by mitigating both credit risk and market or interest rate risk.
- Liquidity. Liquidity is the second most important objective. The City’s investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Since all possible cash demands cannot be anticipated, city funds will maintain a liquidity buffer and invest primarily in securities with active secondary or resale markets (dynamic liquidity).
- Return on Investments. Return on investment should be considered and maximized after the basic objectives of safety and liquidity have been met. The City’s investment portfolio shall be designed to attain a return on investments through budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.