Page 558 - Bedford-FY24-25 Budget

a. Credit Risk. Bedford will minimize credit risk, the risk of loss due to the failure of the
investment issuer or backer, by:

1) Limiting investments to the safest types.

2) Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors
with whom Bedford will do business.

3) Diversifying the investment portfolio so that potential losses on individual
investments will be minimized.

4) Establishment of procedures to monitor rating changes of investments and the
liquidation of such investments as required by the PFIA.

b. Interest Rate Risk. Bedford will minimize the risk that the market value of securities in the
portfolio will fall due to changes in general interest rates by:

1) Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell securities on
the open market prior to maturity.

2) Investing operating funds primarily in shorter-term securities, financial institution
deposits, money market mutual funds, or local government investment pools.

2. Liquidity. The 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 investments mature concurrent with cash needs to meet anticipated demands (static liquidity).
Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist
largely of investments with active secondary or resale markets (dynamic liquidity). All or a portion
of the portfolio also may be placed in financial institution deposits, money market mutual funds, or
local government investment pools which offer same-day liquidity for short-term funds.

3. Yield. The investment portfolio shall be designed with the objective of attaining a market rate of
return throughout budgetary and economic cycles, taking into account the investment risk constraints
and liquidity needs. Return on investment is of secondary importance compared to safety and
liquidity. Investments shall not be liquidated prior to maturity with the following exceptions:

a. An investment with declining credit may be sold early to minimize loss of principal.

b. An investment swap would improve the quality, yield, or target duration in the portfolio.

c. Liquidity needs of the portfolio require that the investment be sold or redeemed.

III. Standards of Care.

1. Prudence. The standard to be used by Investment Officers shall be the “prudent person” rule,
which states, “investments shall be made with judgment and care, under prevailing circumstances,
that a person of prudence, discretion, and intelligence would exercise in the management of the

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