N.M. Admin. Code § 2.60.25.15

Current through Register Vol. 35, No. 23, December 10, 2024

Section 2.60.25.15 - FIXED INCOME INVESTMENT

A. Constitutional and statutory restrictions: The New Mexico Constitution and statutes contain numerous provisions to insure the safety of the two funds' assets. These provisions include limits on quality, types of securities, and total corporate securities. Bonds must be rated at least A in the PF (Section 6-8-9 NMSA 1978), and at least BBB in the STPF (Section 7-27-5.1 NMSA 1978). No more than 50 percent of the funds may be invested in corporate securities (both stocks and bonds). The majority of the fixed income portfolios consist of government and corporate bonds with very high quality ratings. Both Funds currently have an average quality rating of AA+ or better. If any questions arise concerning the eligibility of a particular security type for investment, an opinion is obtained from the state attorney general's office.

B. Council goals and policies:

(1) The council has adopted the following goals for the management of the fixed income portfolios:

(a) preservation of capital through the maintenance of a well-diversified portfolios of fixed income investments with high credit quality; and

(b) maximization of the portfolios' current income.

(2) Achievement of these goals by the state investment office will be pursued under the following policies:

(a) all corporate bonds purchased by the council will be rated A or better;

(b) asset backed or other collateralized securities rated AA or better are authorized;

(c) extending duration to maximize yield to maturity when feasible; current income is essential to the funds' beneficiaries, and current income may be increased by lengthening duration when the yield curve is positively sloped. It is therefore reasonable to expect that the funds' durations, average maturities, and price risk or variation will normally be greater than the fixed income benchmark portfolio; and

(d) all possible fixed income trades will be done on a competitive basis to obtain the best possible pricing and execution.

N.M. Admin. Code § 2.60.25.15

Recompiled 10/1/01