Investments (Procedure 5.0300)

Based on board policy number and Florida Statute:Effective Date:
6A-14.0765 FAC; F.S 218.41510/05; Rev. 01/11


The Investment procedure is to outline the procedures used for the investment of college funds and to define investment options and rules pertaining to surplus funds.


  1. Definitions
    1. Surplus funds-those funds in excess of amounts needed to meet current College obligations.
    2. Internally managed funds-funds in which appropriate College employees have discretion and expertise on where funds are placed in order to maximize interest earnings while preserving operational fiscal needs.
    3. Externally managed funds-funds in which the College utilizes an external investment advisor to determine where College funds will be placed in order to maximize interest while preserving operational fiscal needs. An external investment advisor would also be responsible for executing College-approved trades.
  2. Funds appropriated by the Legislature may be deposited, as they are released by the Division of Florida Colleges, into the College’s account at the State Board of Administration Depository (SBAD) or other authorized State investment pool.
  3. If funds are held in the SBAD or other State investment pool, funds to cover college operational expenses will be transferred, as needs arise, from the pool to an interest-bearing account in the local depository by the President's designee.
  4. Other funds collected at the College will be promptly deposited in the local depository by the President's designee.
  5. All investments shall be made in accordance with the “prudence standards”. This means that investments shall be made with the same judgment and care which persons of prudence, discretion, and intelligence would use in the management of their own affairs.
  6. Internally managed surplus funds may be invested in the following instruments:
    1. Local Government Surplus Trust Fund or investment pools.
    2. Money market funds registered with the Securities and Exchange Commission with the highest credit quality rating from a nationally recognized rating company.
    3. Certificates of Deposit in state-certified qualified public depositories.
    4. Bank time deposits and savings accounts in qualified public depositories.
    5. US Treasury bills, notes, bonds and other obligations of the US Treasury whose principal and interest is fully guaranteed by the United States of America or any of its agencies or instrumentalities.
    6. Repurchase agreements collateralized by US Government obligations.
  7. Externally managed surplus funds may be invested in the same manner as internally managed funds as well as in the following instruments:
    1. Federal agencies and instrumentalities.
    2. Registered securities as long as the portfolio of the investment company is limited to US Government obligations, agencies, or instrumentalities.
    3. Repurchase agreements collateralized at 102% by US Government obligations.
    4. Mortgage-backed pass through guaranteed by the US Government or a Federal agency
    5. Corporate notes rated A-/A3 and higher by both Standard & Poor’s and Moody’s.
    6. Asset-backed securities rated AAA by either Standard & Poor’s or Moody’s.
  8. Certain securities that meet the above definition of an authorized investment but their risk characteristics, as created by their structure, may be such that a prudent investor would deem them inappropriate for the Fund. Securities of this type which are prohibited are:
    1. Reverse repurchase agreements.
    2. Floating rate securities whose coupon floats inversely to an index or whose coupon is determined based upon more than one index.
    3. Tranches of Collateralized Mortgage Obligations which receive only the interest or principal from the underlying mortgage securities, commonly referred to as IO’s and PO’s.
    4. Derivatives and other securities whose future coupon may be suspended because of the movement of interest rates or an index.
  9. The investment objective for surplus funds is to maximize income while providing minimal risk of market volatility and adequate short term liquidity to meet the needs of the College. The investments shall emphasize the preservation of capital and diversity with regards to specific investment types.
  10. The College official(s) with investment responsibility must complete a minimum of eight (8) hours of continuing education in subjects or courses of study related to investment practices and products on an annual basis.
  11. Use of an External Investment Manager
    1. Investments listed in 7 a-f above must be managed by a qualified investment manager whose services will be competitively bid.
    2. A third party custodial agreement must be in place with the investments properly designated as an asset of the College and held in safe keeping by a third party custodial institution.
    3. The investment manager shall maintain the fund in accordance with State Statutes and College policies and procedures.
    4. The external Investment Manager is responsible to report to the College monthly holdings and transactions occurring in the Fund as well as quarterly reports of the Fund’s performance.
    5. The Investment Manager will establish a system of internal controls which will be documented in writing. These controls will be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the entity. The controls will be reviewed by the appropriate College official(s).
    6. Portfolio Composition-recognizing that market volatility is a function of maturity, the Investment Manager shall maintain the Fund as a short to medium term portfolio. Additionally, it is recognized that proper diversification is considered a prudent investment approach. The following restrictions apply in the management and investment of the Fund:
      1. The maximum duration of the portfolio shall be no greater than 120% of the target benchmark’s average duration. The target benchmark will be determined at the time a custodial agreement is put in place with the external Investment Manager.
      2. The maturity of debt obligations with a call and/or put option(s) shall be considered the date on which it can be reasonably expected that the bond will be called, put, or matured.
      3. The maturity of mortgage/asset backed securities shall be considered the date corresponding to its average life. This date reflects the point at which an investor will have received back half of the original principal (face) amount. The average life may be different from the stated legal maturity included in a security’s description.
      4. The effective maturity of floating rate securities shall be considered the time until the next full reset of the coupon. The maximum final maturity of a floating rate security shall be five (5) years from the date of purchase.
      5. The maximum effective maturity of an individual security shall be five (5) years from the date of purchase.
      6. To limit principal fluctuation, the maximum average life of the portfolio shall not be greater than three (3) years.
      7. In order to provide sufficient liquidity and stability of principal, no less than 10% of the Fund shall have an effective maturity of one year or less.
      8. A maximum of 5% of the Fund may be invested in securities of any single issuer and a maximum of 30% of the Fund may be invested in any single industry. These limitations do not apply to US Government obligations.
Recommended byPresident’s CabinetDate01/11
Approved:E. Ann McGeeDate01/2011