The primary goal of CSAFE Cash is to maintain a $1.00 per share Net Asset Value (NAV). No Local Government Investment Pool 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 stable $1.00 NAV fund like CSAFE Cash, preservation of principal is the primary investment objective. The task of the investment manager is to mitigate risks so that Participants and taxpayer dollars are protected.
To achieve the goal of maintaining a stable NAV of $1.00 per share, an investment manager can implement a number of strategies, policies and investment approaches. In a stable interest rate environment with no credit events, risks to fixed income securities are minimized. However, during a sharply fluctuating market environment, changes in interest rates can cause significant swings in the prices for fixed income securities.
CSAFE prices its portfolio on a weekly basis to determine if either the Cash or Core NAVs deviate materially from their respective transactional share prices. This best practice allows the investment manager to determine if it is necessary to take action if a material variation exists. In fact, CSAFE has a NAV Monitoring Policy in place to guide our actions in the event that market prices change dramatically.
CSAFE Cash and Core follow Fitch Ratings' standards and criteria for AAAmmf and AAAf/S1-rated funds, respectively.
As a Program, not only does CSAFE adhere to the strict requirements of Fitch Ratings for both Cash and Core, but the Cash fund also follows the conservative parameters set forth by GASB Statement No. 79. This includes abiding by guidelines on weighted average maturity (WAM) of 60 days or less, limiting the amount of illiquid investments, maintaining ample liquidity in the portfolio, and diversifying the portfolio's investments.
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