Investment Pool FAQs
The San Diego County Investment Pool is a local government money fund which ranges in size from $7 to $11.6 billion in assets on an annual basis. Originally created in 1853 by the County Board of Supervisors, the pool now invests the assets of the County, 42 K-12 school districts, 5 community colleges and over 160 other public agencies in the region.
Pool assets have nearly tripled during the past 15 years due to rising tax collections, the addition of new participants, and increased bond proceeds.
The three primary objectives of the Investment Pool are to:
- Safeguard the principal of the invested funds
- Meet the liquidity needs of Pool participants
- Achieve an investment return within the parameters of prudent risk management
Q: WHO IS INVESTED IN THE POOL?
A: The Pool is comprised of monies deposited by mandatory and voluntary participants. Mandatory participants include the County of San Diego, K-12 school districts, community college districts and fire districts. In addition to investment management, the Treasurer’s Office provides banking services to mandatory Pool participants.
Voluntary participants are those agencies that are not required to invest their monies in the County Pool and do so only as an investment option. Voluntary participants include cities and various special districts. We encourage voluntary participants to use the pool as a long-term investment vehicle.
Our office ensures that all proposed withdrawals and deposits by voluntary participants will not adversely affect the interests of the other depositors.
Q: WHAT ARE THE TYPES OF INVESTMENTS / SECURITIES IN THE POOL?
A: The Treasurer invests the Pool monies in accordance with conservative standards set forth by the California Government Code and the County Investment Policy. The Policy focuses on risk management by setting limits on principal exposure and guidelines for liquidity. The County does not invest in any securities that receive lower than an A rating.
Q: WHO OVERSEES THE POOL?
A: In accordance with State law, the authority to manage the County Pool assets is delegated to the County Treasurer’s Office. The Pool’s full-time, in-house investment team reports directly to the County Treasurer. A nine-member Oversight Committee, comprised of County officials, school district officials, a special district official and up to five public members, meets regularly to review the Pool’s investment strategy. In addition, the County Investment Policy is reviewed and approved annually by the Oversight Committee and then approved by the County Board of Supervisors.
Q: HOW IS THE POOL’S SAFETY MEASURED?
A: Fitch Ratings rates the Pool AAAf and for the past 18 years, the Pool has received an AAAf rating from nationally recognized, independent credit rating agencies. This reflects the highest possible underlying credit quality of the Pool’s investments. Fitch Ratings also assigns the Pool an S1 rating for market sensitivity, indicating very low sensitivity to changes in credit spreads and interest rates.
Q: HOW DOES THE POOL MANAGE RISK?
A: As mandated by State law, the County Pool limits investments to fixed-income securities. Therefore, the Pool is prohibited from investing in equities (stocks), index funds, and any of the following: derivative notes, inverse floaters, range notes, interest-only strips derived from a pool of mortgages, and any security that could result in zero interest accrual. The Pool’s exposure to credit risk is lessened by internal credit review and monitoring, diligent compliance with established credit guidelines, and by limiting the allocation to certain types of securities.
To meet liquidity needs of Pool Participants, 25% of the portfolio must mature within 90 days and a minimum of 50% must mature within one year. The effects of interest rate risk are managed by limiting the Pool’s maximum duration and implementing a “buy-and-hold” investment strategy. By employing this strategy, the Pool is able to avoid realized losses resulting from a rise in interest rates.
Q: HOW CAN A LOCAL AGENCY JOIN THE POOL?
A: Joining the Pool as a Voluntary Participant is a simple process. Any government agency located within San Diego County can make a deposit after signing an Investment Management Agreement, providing a resolution from its governing body authorizing the investment, and setting up the necessary accounts in the County’s system. After that, deposits and withdrawals can be placed daily and fulfilled via electronic funds transfer.