Page 5 - City of Moreno Valley Invstment and Cash Management Program

“

The politics of ensuring principal safety and liquidity ahead

of income shifts the focus from return to a focus on risk
above all. In a nutshell it all comes down to this: Wall Street

manages returns, Main Street manages risk.

— Ben Finkelstein,
The Politics of Public Funds Investing

Yield

Finally, after the aspects of Safety and Liquidity have been addressed, the portfolio can focus on
maximizing the overall yield of the portfolio, within the constraints of the investment policy. It is the City’s
policy to earn a reasonable rate of return on the investments within the primary objectives of preserving
the capital in the overall portfolio (low risk) and providing adequate liquidity to meet City’s cash
flow needs.

Main Street versus Wall Street

The investment goals are different between the municipal investor, Main Street, and the private money
managers, Wall Street. Municipal investors are guided primarily by the principals of Safety and Liquidity
with Yield, which in this context is defined as a reasonable rate of return, a lesser priority. The Wall
Street model of investing focuses on the primary goal of maximizing the return on investment with
earnings performance driving investment decisions and the risk of loss is a secondary consideration.

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