Definitions. For the purposes of this section, the following definitions shall apply:
"Asset backed commercial paper (ABCP)"means a short-term investment vehicle with a maturity that is typically between 30 and 270 days. The security itself is typically issued by a bank or other financial institution. Unlike commercial paper, the notes are backed by physical assets such as trade receivables, and are generally used for short-term financing needs.
"Bank"means a state or federally chartered commercial or mutual bank, savings and loan association or credit union located in the United States and having insurance of accounts through the appropriate federal insuring agency of the United States.
"Broker/dealer"means a qualified institution including depository banks, any Federal Reserve Bank, government securities dealers, or broker dealer registered in compliance with the Securities Exchange Act of 1934.
"Certificate of deposit"means a nonnegotiable certificate of deposit or other depository agreement issued or to be issued to the Municipality by a Bank.
"Collateralized debt obligation (CDO)"means an investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds. Similar in structure to a collateralized mortgage obligation (CMO) or collateralized bond obligation (CBO), CDOs are unique in that they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as "tranches" or "slices." Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays.
"Commodities"means bulk goods such as grains, metals, and foods traded on a commodities exchange or on the spot market.
"Contingency reserve portfolio"means that portion of the Portfolio used as a defensive fixed income portfolio, with an average duration within half a year of its benchmark. The Contingency Reserve Portfolio is intended as a buffer between the Working Capital Portfolio and the Strategic Reserve Portfolio. The objective of this fixed income portfolio is to provide a high level of current income consistent with low volatility of principal. The Contingency Reserve Portfolio is not designed to provide daily liquidity yet seeks higher returns with some preservation of principal by employing a broader range of sectors and tactically managing duration.
"Derivatives"means a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include, but are not limited to, stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage. Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts and can be used as an underlying asset. Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes.
"Equity investments"means investments in foreign or domestic stocks or mutual funds that have investments in foreign or domestic stocks.
"FDIC"means the Federal Deposit Insurance Corporation.
"Fitch"means Fitch Ratings, Inc., a nationally recognized statistical rating organization (NRSRO).
"Forward contract"means a cash market transaction in which delivery of the commodity is deferred until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date. (Most forward contracts do not have standards and are not traded on exchanges. A farmer would use a forward contract to "lock-in" a price for his grain for the upcoming fall harvest.)
"Futures contract" or "futures"means a contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. Futures contracts detail the quality and quality of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.
"IBRD"means the International Bank for Reconstruction and Development.
"Index fund"means a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.
"Interfund loan"means a loan from a MCP to a Municipal Fund extending outside a fiscal year.
"Moody's"means Moody's Investors Service, Inc., a nationally recognized statistical rating organization (NRSRO).
"Municipal cash pool or MCP"means that portion of the Portfolio that is invested by external managers and represents the Duration/Risk Portfolio investment objective of this part of the Code.
"Mutual fund"means a diversified mutual fund, including index funds, registered under the Securities Act of 1933 and Investment Company Act of 1940.
"NRSRO"means a nationally recognized statistical rating organization.
"Options"means a contract between a buyer and a seller that gives the buyer the right—but not the obligation—to buy or to sell a particular asset (the underlying asset) at a later day at an agreed price. In return for granting the option, the seller collects a payment (the premium) from the buyer.
"Portfolio"means aggregate balance of all Municipal funds currently under investment. It excludes real estate owned by the Municipality, including real estate owned by the Heritage Land Bank and any component unit of the Municipality. Portfolio excludes debt proceeds in escrow for defeased debt. Portfolio excludes assets invested within the MOA Trust Fund, the Police and Fire Pension, the Municipal Prefunding Trust, and the Police and Fire Medical Trust.
"Portfolio benchmark"means a blended benchmark consisting of the individual portfolios respective benchmarks, weighted at their beginning-of-period market values throughout budgetary and economic cycles, taking into account the Municipality's investment risk constraints and the cash flow characteristics of the Portfolio.
"Rated bank"means:
1. A bank whose short term debt issues are rated at least A-1 or P-1 or F-1, or whose long term debt issues are rated at least A by S&P, Moody's, or Fitch or the equivalent by a nationally recognized statistical rating organization; or
A bank whose letters of credit secure third-party debt issues rated at least A by S&P or its equivalent by a nationally recognized statistical rating organization; or
A bank which is a subsidiary of a one-bank holding company, all of whose commercial paper is rated at least "A-1" by S&P or "P-1" by Moody's or "F-1" by Fitch or the equivalent by a nationally recognized statistical rating organization.
"Real estate investments"means land and all physical property associated with it. This includes all investments that have an interest in land ownership including real estate investment Trusts.
"Securities"means any authorized investment listed in subsection
D.
means an investment strategy in which investors make short-term loans of their securities to generate incremental revenues from their portfolios. Loans are typically collateralized by at least 102 percent with cash or government backed securities.
"Short sales" or "Selling short"means the sale of a security or contract related to a security not owned by the seller. Selling Short is a technique used to take advantage of an anticipated price decline in the security.
"Split rated" or "Split rating"means when a debt security or a debt issuer has ratings from two or more NRSROs that are different. In this situation, the lowest rating applies for the purposes of this section of the Anchorage Municipal Code when determining if an investment is an Authorized Investment.
"Strategic reserve portfolio"means that portion of the Portfolio that is analogous to an intermediate fixed income portfolio, managed with a maximum duration no greater than one-year in excess of its benchmark. The Strategic Reserve Portfolio is intended for residual cash balances for which the Municipality does not foresee utilizing over a rolling three-year forecast period. The objective of the Strategic Reserve Portfolio is to generate excess return through effective sector selection, issue selection, and duration management.
"Structured investment vehicles (SIVs)"means a special kind of conduit or a special purpose vehicle or entity that is bankruptcy remote, which means that it is a separate business entity and is not rolled up into the sponsoring company's balance sheet. It is a type of structured vehicle that issues ABCP. Many SIVs are administered by large commercial banks or other asset managers such as investment banks or hedge funds. They issue ABCP as a way to fund purchases of investment grade securities and also to earn the spread based on the term to maturity differential. They usually invest the majority of their portfolios in "AAA" and "AA" assets, which include an allocation to residential mortgage-backed securities. In contrast to a multi-seller or securities arbitrage conduit, a SIV does not employ credit enhancement, and the underlying SIV assets are marked to market at least weekly.
"Swap"means a derivative in which two counterparties agree to exchange one stream of cash flow against another stream. These streams are called the legs of the swap. The cash flows are calculated over a notional principal amount, which is usually not exchanged between counterparties. Consequently, swaps can be used to create unfunded exposures to an underlying asset, since counterparties can earn the profit or loss from movements in price without having to post the notional amount in cash or collateral. Swaps can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the expected direction of underlying prices.
"TBA"means a term used to describe a forward mortgage-backed securities trade. Pass-through securities issued by Freddie Mac, Fannie Mae and Ginnie Mae trade in the TBA market. The term TBA is derived from the fact that the actual mortgage-backed security that will be delivered to fulfill a TBA trade is not designated at the time the trade is made. The securities are "to be announced" 48 hours prior to the established trade settlement date. The settlement procedures of mortgage-backed securities TBA trades are established by the Bond Market Association.
"Variable rate demand obligation (VRDO)"means a debt security which bears interest at a floating (variable) rate adjusted at specified intervals (such as daily, weekly, or monthly) and can be redeemed at its holder's option when the rate changes. Also known as a low floater, variable rate demand note, or variable rate demand bond.
"Working Capital Portfolio"means that portion of the Portfolio managed for very short-term liquidity, typically with a duration band of zero to 270 days. The Working Capital Portfolio is intended to provide for same-day liquidity for working capital management. In addition to providing liquidity, the objective of the Working Capital Portfolio is to preserve principal and generate current income by investing in a portfolio of high-quality, short-term instruments.