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What is CalTRUST and how is it structured?
CalTRUST is a Joint Powers Authority created by public agencies in 2003 to provide a convenient method for public agencies to pool their assets for investment purposes. CalTRUST is governed by a Board of Trustees made up of experienced local agency treasurers and investment officers. The Board sets overall policies for the program and selects and supervises the activities of the investment manager and other agents.
What entities are permitted to participate in CalTRUST?
As a practical matter, any California public agency that is authorized to join a Joint Powers Authority can participate in CalTRUST. The specific sections of the California Government Code that govern participation in CalTRUST (Sections 6500 and 6509.7), provide that the following types of agencies may participate:
“the federal government or any federal department or agency, this state, another state or any state department or agency, a county, county board of education, county superintendent of schools, city, public corporation, public district, or regional transportation commission of the State of California or another state, a federally recognized Indian tribe, or any joint powers authority formed pursuant to this article [Article 1 of the Joint Exercise of Powers Act] by any of these agencies,” (Section 6500), and “a nonprofit corporation whose membership is confined to public agencies or public officials” (Section 6509.7).
How does an agency initiate participation in CalTRUST?
Legislation enacted in 2004 (AB 969 – Chapter 470, Statutes of 2004) simplified participation in CalTRUST. AB 969 authorizes local agencies to directly invest in shares issued by JPA pooled investment programs. As a result, agencies interested in investing through the CalTRUST Program no longer need to adopt a resolution to formally become a member of the CalTRUST Joint Powers Authority.
Opening an account in the CalTRUST program is quite simple; just carefully read the Information Statement, the Joint Powers Agreement, the CalTRUST Investment Policy, and complete the Participant Registration Form & Agreement.
What fund/account options does CalTRUST offer?
CalTRUST offers three fund options – Liquidity Fund, Short-Term Fund, and Medium-Term Fund. Participants can select account options that match their investment time horizon and cash flow needs; and easily reallocate among accounts as circumstances warrant.
All CalTRUST accounts comply with the limits and restrictions placed on agency investments by the California Government Code; no leverage is permitted in any of the CalTRUST accounts.
What is the minimum amount that an agency can invest in the CalTRUST program?
What is the maximum amount that an agency can invest in the CalTRUST program?
Is there a limit on the number of accounts that an agency can maintain?
What are the principal risks of investing in CalTRUST?
Investments in CalTRUST, like investments in other types of bond funds, are subject primarily to interest rate risk and credit risk. The CalTRUST Short-Term and Medium-Term Funds both have floating net asset values, whereas the Liquidity Fund has a fixed/stable net asset value.
Interest rate risk is the potential for a decline in bond prices — and hence the market value of bonds in the portfolio — due to rising market interest rates. In general, bond prices vary inversely with interest rates. The change in a bond’s price depends on several factors, including its maturity date. In general, bonds with longer maturities are more sensitive to changes in interest rates than bonds with shorter maturities. Similarly, bond funds with longer average portfolio maturities, such as the CalTRUST Medium-Term Fund, will be more sensitive to interest rate changes than those with shorter average portfolio maturities, such as the CalTRUST Short-Term Fund.
Credit risk is the possibility that a deterioration in the underlying creditworthiness of an issuer will adversely affect the value of its outstanding bonds or that a bond issuer will fail to make timely payments of interest or principal on its outstanding bonds (default). A decline in a bond issuer’s credit rating, or creditworthiness, may cause prices for its outstanding bonds to decline.
Similar to shares in a bond mutual fund, the value of CalTRUST shares will change with market conditions, as will the value of an agency’s investment account. An agency could lose money on an investment in a CalTRUST account or an investment in a CalTRUST account could underperform other investments.
What is the cost of transferring assets between CalTRUST funds?
How does an agency monitor its investments in CalTRUST?
All participating agencies have 24-hour, password-protected online access to their individual account information at www.caltrust.org. The CalTRUST website shows the current value of CalTRUST shares, as well as additional relevant information regarding the underlying pools of securities in the CalTRUST funds. Month-end statements can be downloaded directly from the CalTRUST website.
What are the costs of participating in CalTRUST?
There are no out-of-pocket costs for an agency to invest funds in CalTRUST. As with other programs, such as the Local Agency Investment Fund, managed by the State Treasurer’s Office, all expenses associated with participation in CalTRUST are deducted from the yield. Expenses for each of the CalTRUST Funds are deducted from the net assets of the Funds on a monthly basis. A breakdown of the fees associated with each fund can be found in the CalTRUST Information Statement.
How does past legislation affect the CalTRUST Program?
Legislation signed by Governor Schwarzenegger in September 2004 clarified the authority for local agencies to participate in Joint Powers Authority investment pools, and makes it easier to participate in CalTRUST.
Chapter 470, Statutes of 2004 (Assembly Bill 969 – Correa) revised the provisions of California Government Code Section 53601 to provide an explicit grant of authority for local agencies to invest in shares of beneficial interest issued by a Joint Powers Authority, provided the JPA:
1. Invests only in securities and obligations eligible for local agency investment directly.
2. Retains an investment adviser that:
- Is registered with the Securities and Exchange Commission or is exempt from registration
- Has not less than five years experience investing in securities and obligations eligible for local agency investment
- Has at least $500 million in assets under management.