HomeMy WebLinkAboutCity of Winter Springs General Employees' Retirement System (Investment Policy Statement) 2026 01 12CITY OF WINTER SPRINGS
(Plan Sponsor)
GENERAL EMPLOYEES' RETIREMENT SYSTEM
Investment Policy Statement
I. PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board of Trustees, as named fiduciaries, maintains that an important determinant of future
investment returns is the expression and periodic review of the Plan's investment objectives. To that end,
the Board has adopted this statement of Investment Policy and directs that it apply to all assets under their
control.
In fulfilling their fiduciary responsibility, the Board recognizes that the retirement system is an essential
vehicle for providing income benefits to retired participants or their beneficiaries. The Board also
recognizes that the obligations of the Plan are long-term and that investment policy should be made with a
view toward performance and return over a number of years. The general investment objective, then, is to
obtain a reasonable total rate of return - defined as interest and dividend income plus realized and unrealized
capital gains or losses - commensurate with the Prudent Investor Rule and any other applicable statute.
Reasonable consistency of return and protection of assets against the inroads of inflation are paramount.
However, the volatility of interest rates and securities markets make it necessary to judge results within the
context of several years rather than over short periods of two years or less.
The Board will employ professional Investment Management firms to invest the assets of the Plan. Within
the parameters allowed in this document, the Investment Managers shall have full discretion, including
security selection, sector weightings and investment style.
The Board, in performing their investment duties, shall comply with the fiduciary standards set forth in
Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. I I04(a) (1) (A) — (C). Incase
of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set
forth in this section shall prevail.
Adopted: December 8, 2025 Page I
II. TARGET ALLOCATIONS
In order to provide for a diversified portfolio, the Board has engaged several Investment Management firms.
The manager's are responsible for the assets and allocation of their mandate only and will be provided an
addendum to this policy with their specific performance objectives and investment criterea.
Asset Class
Target
Range
Benchmark
Domestic Equity Securities
50%
45% - 55%
Russell 3000
Foreign Equity Securities
15%
10% - 20%
MSCI ACW xUS (net)
Composite Equity Portfolio
65%
55% - 70%
Broad Market Fixed Income
10%
10% - 35%
Bloomberg Barclays
U.S. Intermediate
Aggregate
Non - Core Fixed Income*
15%
0% - 20%
Strategy Index**
Cash & Cash Equivalents
0%
0% - 5%
Citigroup 3-mth U.S. T-
bill
Composite Fixed Income Portfolio
25%
15% - 35%
Direct Real Estate*
10%
0%-15%
NFI-ODCE (egwt.)
Alternative*
0%
0%-10%
Strategy Index**
*Benchmark will default to "broad market fixed income" if these portfolios are not funded. Targets and
ranges above are based on market value of total Plan assets.
**The "strategy index" for other assets is defined as the most appropriate index, combination of indices, or
absolute return target for the investment(s) in question.
The Trustees will monitor the aggregate asset allocation of the portfolio, and will rebalance to the target
asset allocation based on market conditions. If at the end of any calendar quarter, the allocation of an asset
class falls outside of its allowable range, barring extenuating circumstances such as pending cash flows or
allocation levels viewed as temporary, the asset allocation will be rebalanced into the allowable range. To
the extent possible, cash contributions into and withdrawals from the portfolio will be executed
proportionally based on the most current market values available. The Trustees do not intend to exercise
short-term changes to the target allocation.
III. INVESTMENT PERFORMANCE OBJECTIVES
The following performance measures will be used as objective criteria for evaluating the effectiveness of
the Investment Managers.
A. Total Portfolio Performance
1. The performance of the total portfolio will be measured for rolling three and five year
periods. The Target Index for the Plan is defined in the TARGET ASSET
ALLOCATION table included within this Policy.
On a relative basis, it is expected that the total portfolio performance will rank in the top 40°i
percentile of the appropriate peer universe over three and five-year time periods.
Adopted: December 8, 2025
Page 2
3. On an absolute basis, it is expected that total return of the combined portfolio will equal or exceed
the actuarial earnings assumption and equal or exceed the Consumer Price Index plus 3% over
three to five year periods.
B. Equity Performance
The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is
expected to perform at a rate at least equal to the 77% Russell 3000 Index, 23% MSCI EAFE Index.
Individual components of the equity portfolio will be compared as outlined in Schedule A. All
portfolios are expected to rank in the top 40`" percentile of the appropriate peer universe over three and
five-year time periods.
C. Fixed Income Performance
The overall objective of the fixed income portion of the portfolio is to add stability, consistency and
safety to the total portfolio. The fixed income portion of the portfolio is expected to perform at a rate
at least equal to a blend of 60% Bloomberg Barclays Capital U.S. Intermediate Aggregate Bond
Index, a subset benchmark(s) of similarly investable securities may be applied, 40% Non -
Core Fixed Income **Strategy Index.. All portfolios are expected to rank in the top 40`" percentile
of the appropriate peer universe over three and five-year time periods.
D. Non -Core Fixed Income Non -Core Fixed Income
Non -Core Fixed Income invests in various classes of fixed income securities oriented
towards credit. The role of this pool is to provide growth of capital and income generation,
utilizing strategies that fall within the range of traditional fixed income/credit
strategies. Some of these strategies may not be liquid allowing the Plan to take advantage
of illiquidity premiums available in these markets. Investments may include Global Fixed
Income, unconstrained bond strategies, structured credit securities, high yield corporate
bonds, direct lending strategies, opportunistic credit funds, and distressed debt
strategies. Eligible investments may include both rated and non -rated securities. Rated
securities may include those rated below investment grade. The portfolio is expected to
perform at a rate at least equal to a blended index comprised of **the Strategy Index
as defined in the Asset Allocation Table.
E. Real Estate Performance
The overall objective of the real estate portfolio of the portfolio, if utilized, is to add diversification
and another stable income stream to the total find. The real estate portion of the total fund, defined as
core, open ended private real estate, is expected to perform at a rate at least equal to the NFI-ODCE
equal weight Index and rank in the top 50111 percentile of the appropriate peer universe over three and
five-year time periods. Please also see attached addendums for performance objectives.
F. Alternatives
The overall objective of the alternative portion of the portfolio, if utilized, is to reduce the overall
volatility of the portfolio and improve potential absolute returns. This portion of the fund is expected
to provide an absolute rate of return and will be benchmarked as outlined in the manager addendum
**strategy index.
Adopted: December 8, 2025 Page 3
IV. INVESTMENT GUIDELINES
A. Authorized Investments
Pursuant to the investment powers of the Board of Trustees set forth in the plan and trust
documents; and subject to governing Florida Statutes and the governing local ordinances of the
City of Winter Springs, the Board of Trustees sets forth the following investment guidelines and
limitations on investments:
I. Equities:
a. Traded on a national exchange.
b. Not more than 5% of the Plan's assets, at the time of purchase, shall be invested in the
common stock, capital stock or convertible stock of any one issuing company, nor shall the
aggregate investment in any one issuing company exceed 5% of the outstanding capital stock
of the company.
2. Fixed Income:
a. All direct investment in fixed income securities shall have a minimum rating of investment
grade or higher as determined by at least one major credit rating service.
b. The value of bonds issued by any single corporation shall not exceed 3% of the total fund.
3. Money Market:
a. The money market fund or STIF provided by the Plan's custodian.
b. Government paper backed by full faith & credit of the United States Government.
4. Real Estate:
a. Shall be limited to commingled funds. Investments must be independently appraised
annually.
5. Alternatives
a. Investments not described under any other asset class, may be utilized to reduce the overall
volatility of the portfolio and improve potential absolute returns. All alternative
investments shall be independently custodied and provide for transparency of investment.
6. Foreign Securities:
Limited to fully and easily negotiable securities, or commingled funds with investments in such
securities..
7. Commingled Funds/Mutual Funds & Exchange Traded Funds:
Adopted: December 8, 2025
Page 4
Investments made by the Board may include commingled funds. For purposes of this
policy such funds may include, but are not limited to, mutual funds, commingled funds,
exchange -traded funds.
a. Such funds may be governed by separate policy which may include investments
not expressly permitted in this Investment Policy Statement. In the event of
investment by the Plan into a pooled fund, the Board will adopt the prospectus or
governing policy of that fund as the stated addendum to this Investment Policy
Statement.
b. The asset classification of the fund will be based upon its investment objective.
B. Trading Parameters
When feasible and appropriate, all securities shall be competitively bid. Except as otherwise required
by law, the most economically advantageous bid shall be selected. Commissions paid for purchase of
securities must meet the prevailing best -execution rates. The responsibility of monitoring best price
and execution of trades placed by each manager on behalf of the Plan will be governed by the Portfolio
Management Agreement between the Plan and the Investment Managers.
C. Limitations
Investments in corporate common stock and convertible bonds shall not exceed seventy-five
percent (75%) of the Fund assets at market.
2. Foreign securities shall not exceed twenty percent (25%) of the value at market of the Fund.
Alternative investments shall not exceed 15% of the value at market of the Fund
D. Absolute Restrictions
There will be no investment activity in the following:
1. Any investment prohibited by State of Federal Law.
2. Illiquid investments in excess of limitations as described in Chapter 215.47 (15), Florida
Statutes; 2019...
The Board and its Investment Managers shall comply with the applicable requirements of Chapter
2023-28, Laws of Florida, including Section 112.662, along with regulations adopted by the
Department of Management Services. The term "pecuniary factor" is defined as a factor that a
named fiduciary "prudently determines is expected to have a material effect on the risk or returns
of an investment based on appropriate investment horizons consistent with the investment
objectives and funding policy of the investment program. The term does not include the
consideration of the furtherance of any social, political, or ideological interests." [ 112.662(1)]. In
selecting Investment Managers, only pecuniary factors may be considered and the interests of the
participants and beneficiaries of the system may not be subordinated to other objectives, including
sacrificing investment return or undertaking additional investment risk to promote any
nonpecuniary factor. The weight given to any pecuniary factor must appropriately reflect a prudent
assessment of its impact on risk or returns. [ 112.662(2)]. Only pecuniary factors may be
considered when voting proxies. [ 112.662(3)]
Adopted: December 8, 2025
Page 5
V. COMMUNICATIONS
A. On a monthly basis, the custodian shall supply an accounting statement that will include a summary
of all receipts and disbursements and the cost and the market value of all assets. On a quarterly basis,
the Investment Managers shall provide a written report affirming compliance with the security
restrictions of Section IV above and a summary of common stock diversification and attendant
schedules.
B. In addition, the Investment Managers shall deliver each quarter a report detailing the Plan's
performance, adherence to the investment policy, forecast of the market and economy, portfolio
analysis and current assets of the Plan. Written reports shall be delivered to the Board within 30 days
of the end of the quarter. A copy of the written report shall be submitted to the person designated by
the City, and shall be available for public inspection. The Investment Managers will provide
immediate written and telephone notice to the Board of any significant market related or non -market
related event, specifically including, but not limited to, any deviation from the standards set forth in
Section IV above.
C. The Investment Managers will disclose any securities that do not comply with section IV in each
quarterly report.
D. If the Plan owns investments at the end of a calendar quarter that complied with section IV at the time
of purchase, which do not satisfy the applicable investment standard, then such investment shall be
disposed of at the earliest economically feasible opportunity in accordance with the prudent man
standard of care and no additional investment may be made. However an action plan outlining the
disposition strategy shall be provided to the Board immediately.
E. The Investment Consutlant shall evaluate and report on a quarterly basis the rate of return and relative
performance of the Plan.
F. The Board will meet quarterly to review the monitoring service's performance report. The Board will
meet with the investment manager and appropriate outside consultants to discuss performance results,
economic outlook, investment strategy and tactics and other pertinent matters affecting the Plan on a
periodic basis.
G. At least annually, the Board shall provide the Investment Managers with projected disbursement needs
of the Plan so that the investment portfolio can be structured in such a manner as to provide sufficient
liquidity to pay obligations as they come due. To this end the Investment Managers should, to the
extent possible, attempt to match investment maturities with known cash needs and anticipated cash -
flow requirements.
H. The Board shall timely comply with the reporting requirement of Section 112.662 by filing a
comprehensive report by December 15 of each odd -numbered year. [112.662(4)]. Investment managers
and the Board' s Investment Consultant shall assist in the preparation of required reports and shall
annually confirm to the Board their compliance with Chapter 2023- 28.
VI. COMPLIANCE
A. It is the direction of the Board that the plan assets are held by a third party custodian, and that all
securities purchased by, and all collateral obtained by the plan shall be properly designated as Plan
assets. No withdrawal of assets, in whole or in part, shall be made from safekeeping except by an
authorized member of the Board or their designee. Securities transactions between a broker -dealer and
the custodian involving purchase or sale of securities by transfer of money or securities must be made
on a "delivery vs. payment" basis to insure that the custodian will have the security or money in hand
Adopted: December 8, 2025
Page 6
at conclusion of the transaction. Provided that all approved vendors transacting repurchase agreements
perform as stated in any Master Repurchase Agreement.
B. At the direction of the Board operations of the Plan shall be reviewed by independent certified public
accountants as part of any financial audit periodically required. Compliance with the Board's internal
controls shall be verified. These controls have been designed to prevent losses of assets that might
arise from fraud, error, or misrepresentation by third parties or imprudent actions by the Board or
employees of the plan sponsor, to the extent possible.
C. Each member of the Board shall participate in a continuing education program relating to investments
and the Board's responsibilities to the Plan. It is highly suggested that this education process begin
during each Trustee's first term.
D. With each actuarial valuation, the Board shall determine the total expected annual rate of return for the
current year, for each of the next several years and for the long term thereafter. This determination
shall be filed promptly with the Department of Management Services, the plan's sponsor and the
consulting actuary.
E. The proxy votes must be exercised for the exclusive benefit of the participants of the Plan. Each
Investment Manager shall provide the Board with a copy of their proxy voting policy for approval. On
a regular basis, at least annually, each manager shall report a record of their proxy vote.
F. Investments for which there is no generally recognized market or consistent accepted pricing
mechanism shall be valued at 50% cost. Assets without a fair market value shall be excluded from
determination of annual funding cost.
G. The Investment Consultant will provide Investment Managers for consideration based solely on
pecuniary factors as defined by Florida Statutes § 112.662.
H. If a Request for Proposals document is issued for Investment Manager services, the solicitation
document must include the following: The Board of Trustees may not request documentation of or
consider a vendor' s social, political, or ideological interests when determining if the vendor is a
responsible vendor. Additionally, the Board of Trustees may not give preference to a vendor based on
vendor' s social, political, or ideological interests.
I. The Board hereby adopts the provisions of Florida Statutes §215.4725 as regulating their investments.
Direct investment in "Entities that Boycott Israel" identified in the periodic publication by the State
Board of Administration, in conjunction with the Department of Management Services, is prohibited.
Securities identified on the list must be divested within twelve (12) months of the company's initial
appearance on the list. However, if divestiture of business activities is accomplished and the company
is subsequently removed from the list, the manager can continue to hold that security.
VII. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio
manager may be made. If, at any time, any three of the following is breached, the portfolio manager will
be warned of the Board's serious concern for the Fund's continued safety and performance. If any five of
these are violated the consultant will recommend a manager search for that mandate.
Four (4) consecutive quarters of relative under -performance verses the benchmark.
Three (3) year trailing return below the top 401" percentile within the appropriate peer group and
under performance verses the benchmark.
Adopted: December 8, 2025
Page 7
■ Five (5) year trailing return below the top 40' percentile and under performance verses the
benchmark.
■ Three (3) year downside volatility greater than the index (greater than 100), as measured by
down market capture ratio.
■ Five (5) year downside volatility greater than the index (greater than 100), as measured by down
market capture ratio.
■ Style consistency or purity drift from the mandate.
■ Management turnover in portfolio team or senior management.
■ Investment process change, including varying the index or benchmark.
■ Failure to adhere to the IPS or other compliance issues.
■ Investigation of the firm by the Securities and Exchange Commission (SEC).
■ Significant asset flows into or out of the company.
■ Merger or sale of firm.
■ Fee increases outside of the competitive range.
■ Servicing issues — key personnel stop servicing the account without proper notification.
■ Failure to attain a 60% vote of confidence by the Board.
Nothing in this section shall limit or diminish the Board's right to terminate the manager at any time for
any reason.
VIII. APPLICABLE CITY ORDINANCES
If, at any time, this document is found to be in conflict with the City Ordinances, the Ordinances shall
prevail.
IX. REVIEW AND AMENDMENTS
It is the Board's intention to review this document periodically, but no less than 3 years, and to amend
this statement to reflect any changes in philosophy, objectives, or guidelines. In this regard, the Investment
Manager's interest in consistency in these matters is recognized and will be taken into account when changes
are being considered. If, at any time, the Investment Manager feels that the specific objectives defined
herein cannot be met, or the guidelines constrict performance, the Board should be notified in writing. By
initialing and continuing acceptance of this Investment Policy Statement, the Investment Managers concur
with the provisions of this document.
City of Winter Springs General Employees' Retirement System
Kevin McCann, Mayor
ATTEST:
Christian D. Gowan, City Clerk
Adopted: December 8, 2025
Date
Page 8