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| Created in 2007, the Money Market Pool is FL SAFE's flagship investment vehicle, designed exclusively to maintain safety and liquidity while preserving the capital of Florida governmental entities. One of the biggest benefits of the Money Market Pool is the ability to combine the purchasing power of many public entities, generally attracting higher interest rates for Participants. |
| How it Works |
| FL SAFE provides a vehicle that pools funds for investment in U.S. government obligations, agencies, commercial paper and other high quality short term instruments, creating an efficient option for Participants with a short-term investment time horizon. |
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| Maintaining a Stable Net Asset Value |
| The primary goal of FL SAFE is to maintain $1.00 per share Net Asset Value (NAV). No investment pool or money market fund can "guarantee" a NAV of $1.00 per share. Investing in fixed income securities of any type introduces elements of risk. Among those risks are interest rate risk, liquidity risk and credit risk. In a local government investment pool like FL SAFE, the task of the investment manager is to mitigate those risks so that participants and taxpayer dollars are protected. |
| $1.00 per Share NAV Goal |
| To achieve the goal of maintaining $1.00 per share, an investment manager can implement a number of strategies, policies and an investment approach so that a stable NAV is maintained during volatile market environments. Many investment pools and money market funds are allowed to amortize the cost of any premium or discount in the purchase price using a straight line approach. The amortized cost approach ignores the effect of market and credit movements on the prices of the securities. In a stable interest rate environment with no credit events, risks to fixed income securities are minimized. Under these conditions, the amortized cost method seems to work appropriately. However, during a sharply fluctuating market environment, changes in interest rates can cause significant swings in the prices for fixed income securities that weaken the value of the amortized cost method. Many funds utilize the amortized cost method because it is easier to implement and less costly than pricing the portfolio frequently. FL SAFE does not take this approach. FL SAFE will price its portfolio on a weekly basis to determine if the pool's NAV deviates materially from $1.00 per share and take action if a material variation exists. FL SAFE has a NAV monitoring policy in place to guide our actions in the event that market prices change dramatically. |
| The APPROACH TO MAINTAINING A AAAm CREDIT RATING |
| By following S&P standards for an AAAm rated fund, FL SAFE will seek to maintain its NAV to retain its AAAm rating. If the market value remains in this range, transactions can be executed at $1.00 per share. Funds that fall below $0.995 are deemed to have "broken the buck", a cardinal sin for a money market fund or stable value investment pool like FL SAFE. As an AAAm rated investment pool, FL SAFE will adhere to the strict requirements of S&P and therefore seek to maintain a NAV of $0.9975 or higher. This includes following guidelines on weighted average maturity (WAM) of 60 days or less, limiting the amount of illiquid investments and diversifying the portfolio's investments. |
| For a complete analysis of S&P rating methodology and the strategies employed to maintain a $1.00 NAV, view the S&P Fund Ratings Criteria document (page 20-28 address the stability topic). |
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