Oregon State Treasury

The Oregon Investment Council (OIC) has, with advice from the 

Treasurer and Oregon State Treasury (OST) investment staff, adopted a 

policy and specific rules for investing the Oregon Intermediate Term

Pool (“OITP” or “Pool”). The policy and rules are included as sample 

form A.

 

The OITP is expected to provide a total return consistent with an 

investment grade quality short duration diversified fixed income 

portfolio.  Based upon historical market performance, it is anticipated 

that returns over extended periods will be greater in the OITP than in 

shorter maturity alternatives such as the OSTF portfolio.

This OITP is not structured to provide 100% net asset value on each 

participant’s initial investment at all times. Therefore an investor in 

OITP may lose money due to changes in market conditions.  For 

consistency with the portfolio’s total return objective, the value of each 

participant’s investment will be determined on a proportional basis to 

the net value of the entire portfolio.

 

The investment objective of the OITP is to maximize total return within

the desired risk parameters and fixed income investments prescribed in 

the portfolio guidelines.  Investment management emphasis is placed on 

maximizing investment value and coupon income.  

 

Subject to the terms and conditions of this policy and under the authority 

of ORS Chapter 293, the designated Oregon State Treasury (OST) Fixed 

Income Investment Officer(s) shall have the full discretionary power to 

direct the investment, exchange, liquidation, and reinvestment of assets 

in the OITP.  The OIC and Oregon State Treasury expects that OST 

investment staff will recommend changes to these guidelines at any time 

that they are viewed to be at variance with the investment objectives or 

market and economic conditions.

 

1) Compliance Oversight Committee: The Compliance oversight Committee is 

responsible for monitoring the OITP portfolio’s compliance with its Guidelines and 

working with Fixed Income Investment Staff to ensure that non-compliance is 

corrected.  The oversight committee for the OITP consists of the persons occupying the 

following positions:

     1. OST Chief Investment Officer

     2. Deputy State Treasurer

3. OST Assistant Controller

2) Guideline Compliance Oversight:  The OITP Oversight Committee and designated 

OST Fixed Income Investment Staff shall receive a Daily Compliance Report produced 

by the Investment Accounting Division.  This report should summarize OITP holdings 

in sufficient detail to monitor compliance with all guidelines. The Daily Compliance 

Report should also summarize each Portfolio Guideline as an "Objective," and compare 

the actual current portfolio to the objectives.

3) Correction of Non-Compliance.  If the OITP is found to be out of compliance with 

one or more adopted portfolio guidelines or is being managed inconsistently with the 

portfolio’s policy, Fixed Income Investment Staff shall bring the portfolio into

compliance as soon as is prudently feasible. Actions to bring the portfolio back into 

compliance; and justification for actions taken to bring the portfolio into compliance 

shall be documented by Fixed Income Investment Staff.

 

These rules apply to the investment of cash from all eligible and approved

participants of the Oregon Intermediate Term Pool (“OITP”).   These rules are 

established under the authority of, and shall not supersede the requirements 

established under, ORS Chapter 293.

A. The investment objective of the OITP is to maximize total return within risk 

parameters and fixed income investments prescribed in the portfolio guidelines.  

Investment management emphasis is placed on maximizing investment value and 

coupon income.

A. Prudence:  The standard of prudence to be used by investment staff shall be the 

“prudent investor” standard and shall be applied in the context of managing the 

OITP as a whole.  Pursuant to ORS Chapter 293.726: 

(1) The investment funds shall be invested and the investments of those funds 

managed as a prudent investor would do, under the circumstances then 

prevailing and in light of the purposes, terms, distribution requirements 

and laws governing the Pool.

(2) The standard stated in subsection (1) of this section requires the exercise 

of reasonable care, skill and caution, and is to be applied to investments 

not in isolation but in the context of the investment Pool’s investment 

portfolio and as a part of an overall investment strategy, which should 

incorporate risk and return objectives reasonably suitable to the 

investment Pool.

B. Ethics and Conflicts of Interest:  Staff involved in the investment process shall 

refrain from personal business activity that could conflict with the proper 

execution and management of the investment program, or that could impair their 

ability to make impartial decisions. Fixed Income Investment Staff shall, at all 

times, comply with the State of Oregon Government Standards and Practices code 

of ethics set forth in ORS 244, as well as all policies of the OST.

C. Delegation of Authority:  Fixed Income Investment Staff shall act in accordance 

with established written procedures and internal controls for the operation of the 

investment program consistent with these Portfolio Rules. No person may engage 

in an investment transaction except as provided under the terms of these Portfolio 

Rules and the procedures established by OST staff.  Senior Fixed Income 

Investment Officers are jointly responsible for all transactions undertaken, and 

shall establish a reasonable system of controls to regulate the activities of 

subordinate employees.

A. Authorized Financial Dealers and Institutions:  All financial institutions and 

broker/dealers who desire to become qualified for investment transactions must 

supply, as appropriate:

(1)   Audited financial statements 

(2) Licensing Representation form provided by OST 

(3) Understanding and acknowledgement of OITP Portfolio Rules located on 

the Oregon State Treasury’s website.

B. Internal Controls:  Fixed Income Investment Officer(s) and designated Fixed 

Income Investment staff should jointly collaborate to establish and maintain an 

adequate internal control structure designed to reasonably protect the assets of the 

OITP from loss, theft or misuse.

C. Delivery vs. Payment:  All trades where applicable will be executed by delivery 

vs. payment (DVP) to ensure that securities are deposited in an eligible financial 

institution prior to the release of funds.

D. Safekeeping:  Securities will be held by a third-party custodian as evidenced by 

safekeeping receipts.

1. Eligible Investments: Investments shall be limited to the following:

(1) Oregon Short Term Fund;

(2) Obligations issued or guaranteed by the United States (US) Treasury or by

US federal agencies and instrumentalities, including inflation-indexed 

obligations;

(3) Non-US Government Securities and their Instrumentalities;

i. Non-US government securities and Instrumentalities must have 

minimum long-term ratings of AA-, Aa3 or better at the time of 

purchase and must be rated by at least two Nationally Recognized 

Statistical Rating Organizations (NRSRO).

(4) Certificates of deposit;

(5) Bankers acceptances that are eligible for discount at a US Federal Reserve 

Bank;

(6) Corporate debt obligations (e.g., commercial paper, term debt, etc.);

(7) Taxable debt securities issued by US states or local governments and their 

agencies, authorities and other US state government-sponsored enterprises;

(8) Repurchase Agreements;

i. Maximum maturity will be 180 days.

ii. Counterparties must have a minimum Standard & Poor’s or Moody’s 

Investor Services credit rating of “AA” or “Aa2” for one year or 

longer maturities or “A-1” or “P-1” for less than one year maturities.

iii. Repurchase Agreements must equal no more than 5% of liabilities of 

the counterparty.

iv. No more than 10% of OITP assets shall be placed with the same 

counterparty for repurchases.

v. Counterparty must be either a Primary Dealer as recognized by the 

Federal Reserve Bank or the Oregon State Treasury’s custodial agent 

as non-primary dealer counterparty.

vi. The counterparty must have a signed repurchase agreement.

vii. Collateral must be delivered to the Oregon State Treasury 's account 

at its custodian or to an account established for the Oregon State 

Treasury pursuant to the terms of the specific Repurchase Agreement 

in the name of the Oregon State Treasury.

viii. Collateral for repurchase agreements may be U.S. Treasury or U.S. 

Agency Senior Unsubordinated securities only.

ix. The market value of the delivered collateral must be maintained at 

not less than 102% of the cash invested.

(9) Reverse Repurchase Agreements

i. Maximum maturity will be 180 days.

ii. Counterparties must have a minimum Standard & Poor’s or Moody’s 

Investor Services credit rating at least equivalent to “AA” or “Aa2”

for one year or longer maturities or “A-1” or “P-1” for less than one 

year maturities.

iii. Reverse Repurchase Agreements must equal no more than 5% of 

liabilities of the counterparty.

iv. No more than 10% of OITP assets shall be placed with the same 

counterparty for reverse repurchase agreements.

v. Counterparty must be a Primary Dealer as recognized by the Federal 

Reserve Bank.

vi. The counterparty must have a signed reverse repurchase agreement.

vii. Acceptable reinvestment vehicles include securities that may 

otherwise be purchased outright.

viii. Securities will be reversed on a fully collateralized basis.

ix. Reverse repurchase investments for interest rate arbitrage shall only 

be done on a matched book basis.

2. Denomination: All securities will be denominated in US$ only.

3. Form: All securities will be non-convertible to equity.

4. Benchmark: The benchmark for the portfolio is the The BofA Merrill Lynch 1-5 

Year AAA-A US Corporate & Government Index   

5. Risk Parameters: 

(1) Credit Risk:

i. Investment Rating:

1. Unless noted otherwise, securities must be rated investment 

grade or higher by a nationally recognized statistical rating 

organization (NRSRO), i.e., Moody's Investor Services; 

Standard and Poor's Inc. or Fitch, at the time of purchase.  If 

a security is rated by more than one NRSRO, the lowest 

rating is used to determine eligibility.

(2) Diversification:

i. Assets in the account shall be sufficiently diversified by type and 

maturity to allow for anticipated withdrawals;

ii. No more than 3% of the par value of portfolio shall be invested in 

one security. This restriction does not apply to obligations issued or 

guaranteed by the United States (US) Treasury or by US federal 

agencies and instrumentalities;

iii. No more than 5% of the par value of portfolio shall be invested in 

the securities of one issuer.  This restriction does not apply to 

obligations issued or guaranteed by the United States (US) Treasury 

or by US federal agencies and instrumentalities;

iv. No more than 25% of the portfolio shall be invested in the securities 

of one sector as defined by the Bloomberg Industry Sector 

Classification. This restriction does not apply to obligations issued or 

guaranteed by the United States (US) Treasury or by US federal 

agencies and instrumentalities.

(3) Interest-rate Risk:

i. The portfolio modified duration shall not exceed 3.0 years.

ii. The maximum maturity on any allowed investment is constrained as

follows:

1. The maximum stated maturity should not be greater than 

10.25 years from the date of settlement.

(4) Liquidity:

i. To insure the flexibility necessary to take defensive action when 

appropriate, positions should be in issues with sufficient float to 

facilitate, under most market conditions, prompt sale without severe 

market effect.

A. Acceptable reinvestment vehicles include securities that may otherwise be 

purchased outright in accordance with the  Portfolio Rules for the Oregon 

Intermediate Term Pool (OITP).  Within the securities lending program only, cash 

collateral may also be reinvested in:

(1) Maximum of 15% in asset backed securities rated AAA/Aaa, limited to 

auto loan and credit card issues with an average life of three years or less. 

(2) Maximum of 25% in A, or higher, rated corporate floating rate notes with 

a maximum final maturity of three years, and fixed rate corporate notes 

with a maximum final maturity of two years; up to 65% maximum in 

corporate indebtedness including commercial paper.

(3) Repurchase agreements collateralized by U.S. Treasury or U.S. 

Government Agency securities with a maximum original maturity of 30 

years.   No more than 25% of assets shall be placed with the same 

counterparty. 

(4) All Repurchase Agreements (under the Special Indemnification by State 

Street clause

1) must be fully collateralized by collateral, determined by 

State Street in its discretion, limited to the following: U.S. Treasuries, U.S. 

Treasury STRIPS, Federal Agency Obligations, Corporate securities rated 

A- or higher, Asset-Backed Securities rated A- or higher, Agency MBS 

pass throughs rated AAA, Commercial Paper rated A-1/P-1 or higher, or

any combination thereof.

1. For purposes of calculating average credit 

quality, current ratings of the indemnifier, State Street Corp, will be used.

(5) The target weighted average credit quality shall be < 3.8 by Standard & 

Poor’s or Moody’s Investors Services.

B. Net capital of lending counterparty must be over $100 million.

C. Securities will only be loaned on a fully collateralized basis.

D. Lending counterparty must be a Primary Dealer as recognized by the Federal 

Reserve Bank, and have a signed master securities lending agreement.  

E.  The market value of the delivered collateral must be maintained at not less than 

102% of the market value of the securities loaned.

F. Reverse Repurchase Agreements are prohibited within the securities lending 

program.

G. 25% of the reinvestment portfolio must mature within 93 days; up to 50% of the 

portfolio may mature in over one year.

1. Special Indemnification of Client By State Street:  Notwithstanding any provision herein to the contrary, if the value of the Liquidation Proceeds under Reverse Transactions (entered into between State Street (as agent for the Client) and a counter party in respect of whom an event of default has occurred under the agreement governing such Reverse Transactions) is less than the cash to be delivered by that counter party under such Reverse Transactions on the date of close-out of the same, State Street shall indemnify the Client for any such difference.  The term “Liquidation Proceeds” means the market value of the securities used to collateralize the Reverse Transaction(s) on the date that State Street takes action with respect to such securities under the applicable agreement.  The term “Reverse Transactions” means each transaction entered into between the Client and a counterparty (through the agency of State Street) under the terms of an agreement pursuant to which the counter party initially transfers securities to the Clien  and the Client transfers cash to the counter party.  All of such Reverse Transactions will be entered into in connection with the investment of cash Collateral received from Borrowers in connection with Loans hereunder ."

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