Palo Alto finance committee advances revised investment policy, shifts to active management

The Palo Alto Finance Committee voted unanimously Jan. 6 to advance revisions to the city's investment policy that will allow more active management of the municipal portfolio, change reporting from par value to market value, and broaden the pool of allowable corporate investments while adding new safeguards and compliance checks.

Lauren Lai, the city's chief financial officer, opened the presentation and said staff worked with Chandler Asset Management on a comprehensive review to align the policy with state law and city priorities of safety, liquidity and return. "We're excited to bring this item back to you," Lai told committee members.

Chandler's presenters told the committee the policy removes a strict hold-to-maturity approach to permit tactical sales before maturity when doing so is projected to improve long-term portfolio return and better align duration. "We're allowing tactical sales before maturity so that we're able to flex with the changing market," a Chandler representative said, describing the firm's proposed approach to balancing realized gains and losses against reinvestment opportunities.

The revisions also shift internal reporting from…