Senate Bill No. 998

At Chandler Asset Management, we believe it is imperative that every California Local Agency review their investment policy on an annual basis. This includes an analysis of liquidity needs, risk tolerance, return objectives and ensuring the policy conforms to current best practices. This year, the annual review process takes on a heightened importance as California Government Code (“CGC”) is expanding.

As of the publishing of this white paper, local agencies (except counties) are prohibited from investing more than 25% of their investable assets in commercial paper, and from purchasing more than 10% of the outstanding commercial paper of any single issuer. Senate Bill 998 increases the limitation to 40% of investable assets in commercial paper for those local agencies with more than $100 million of investable assets until January 1st, 2026. The Bill also closes a loophole capping the total investments in one issuer. The Bill combines the issuer limitation of a local agency’s investments in commercial paper and medium-term notes to 10% of any single issuer. In practice, the 10% change is likely to be immaterial for most investors subject to CGC due to the underlying focus on risk management creating a deterrent to concentrated risk in any single issuer. These stipulations are predicated at the time of purchase.

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