Summary of Investment Policy changes

The proposed changes to the policy are both minor and also more significant in nature.

The more significant changes include:-

1.  Additional guidance under credit rating tables such as investment preference- preference not to invest in BBB- products.

2.  Inclusion of a limit for investments with T Corp in Portfolio Credit limits.  Investments with T Corp are allowed under the current policy however no set limit is prescribed.  It is recommended that a limit should be specified for purposes of clarity.

3.  Change in credit exposure to include a combined minimum of a 60% investments in the AAA, AA and A rated institutions within the Overall Portfolio Credit Framework. 

4.  Inclusion of guidance that generally Council will avoid investment in unrated entities in the absence of significant benefits or the investment is with a local community financial institution.

5.  Removal of the reference to short term ratings. PMHC has not used short term ratings, and this was seen as confusing given the lack of complete alignment between short and long term ratings. 

6.  Expansion of individual credit rating limits to note that where the investment is with a 100% Commonwealth Government or 100% Government Guaranteed deposit then no upper limit shall apply to the counterparty.

7.  Specification that in the event of a downgrade/ upgrade event which results in movement outside policy limits  that an assessment and recommended approach will be made to Council as soon as practicable.

8.  Allowance of grandfathering in the event of policy review changes or ratings review or other changes such as ownership. Grandfathering allows investments to continue to natural maturity.

9.  Specify that use of Fitch or Moody’s equivalent ratings only be used in the event that there is no S&P rating, with Moody’s to be used first before Fitch.

10.  Reduce the maximum allowable portfolio percentage for A category from 60% to 55%.

11.  Reduce the maximum individual limit for A category from 20% to 15%.