University Guidelines


Issued:     May 2020

Replaces:  April 2019

Objectives and Purpose

The goal is to construct a portfolio that emphasizes safety of principal, maintaining liquidity, and will outperform the BofA Merrill Lynch US 3-Month Treasury Bill Index (the “Benchmark”).  Active management is expected to provide increased income and total return to Southern Illinois University.  These guidelines should be reviewed periodically by Southern Illinois University, its investment consultant and PFM Asset Management LLC to assure that the University's objectives are being achieved.

In addition to the guidelines outlined below, the investment manager will adhere to the Southern Illinois University Statement of Investment Policy, the Illinois Public Funds Investment Act, other applicable state laws and applicable federal laws.  The guidelines below are intended to provide additional direction specific to the short term portfolio.


Eligible Securities

Investments may be made in any of the following fixed income securities, subject to credit, diversification and marketability guidelines below.  All securities must be authorized investments under the Illinois Public Funds Investment Act including the following:

  1. Obligations issued or guaranteed by the United States of America, its agencies, and its instrumentalities.
  2. Certificates of deposit, time deposits or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act.
  3. Obligations of U.S. corporations with assets exceeding $500 million. Such obligations shall have a maturity of 3 years or less, be rated the highest short term or three highest long term rating classifications by at least two standard rating services, and not exceed 10% of the corporation’s outstanding obligations.
  4. U.S. Agency mortgage-backed securities (MBS); provided weighted average life is equal to or less than 3 years.  No “derivative” MBS such as Interest Only (IO), Principal Only (PO), and inverse floaters will be allowed.  Mortgage “to be announced” (TBAs) securities, and passthrough Planned Amortization Class Securities (PACS) are allowed.  At no time shall the portfolio to be subjected to leverage.

Duration Exposure

The average weighted duration of portfolio security holdings will be managed to meet the University cash flow expectations.


Credit Quality

In all categories of investments, emphasis will be on high-quality securities and the weighted average of portfolio holdings will not fall below AA-/Aa2 long term or A-1/P-1 short term.  Portfolio holdings are subject to the following limitations:

  1. Rated Securities:  At the time of purchase, all securities must be rated in accordance with the minimum rating requirements as noted in Table A.       
  2. Downgrade Securities:  Securities which fall below the stated minimum credit requirements subsequent to initial purchase may be held at PFM Asset Management LLC but must be approved by the University.  The University will be notified of all such downgrades in writing.


  1. Maturity: Securities must be equal to or less than 3 years to maturity.  In the case of MBS, average life will be used as a proxy for maturity. See Table A for additional maturity limitations.

      2.   Sector: The portfolios managed by PFM Asset Management LLC will at all times be diversified among the major market sectors,subject to the limitations outlined in Table A.

       3.  Issuer:  Holdings are subject to the following limitations outlined in Table A.


All holdings will be of sufficient size and held in issues that are traded actively enough to facilitate transactions at minimum cost and accurate market valuation.

Performance Measurement and Objectives

Total portfolio return will be calculated each calendar month and reported at the end of each calendar quarter.  The manager will be evaluated on an after-fees basis against the ICE BofA Merrill Lynch US 3-Month Treasury Bill Index (the “Benchmark”).

The manager shall aim to meet or exceed the ICE BofA Merrill Lynch US 3-Month Treasury Bill Index (the “Benchmark”) over a complete economic cycle.


Formal management reporting will include:

  1. A monthly accounting statement showing portfolio income, holdings and transactions;
  2. A monthly total return computation; and
  3. A quarterly market outlook and investment strategy.


______________________________________________                    ____________________________                                                                                                                                                        

Daniel F. Mahony                                                                                                                 Date















Table A


SIU – Short Term Portfolio Guidelines: Investment Limits and Specifications


Sector Maximum (%)

Per Issuer Maximum


Minimum Ratings Requirement1

Maximum Maturity

U.S. Treasury




3 Years

(3 year avg. life6

for GNMA)



Other U.S. Government Guaranteed (e.g. AID, GTC)


Federal Agency/GSE:




Highest ST or Three Highest LT Rating Categories

 (A-1/P-1, A-/A3, or equivalent)

3 Years

Federal Agency/GSE

other than those above



where U.S. is a shareholder and voting member



Highest ST or Two Highest LT Rating Categories by one NRSRO

(A-1/P-1, AA-/Aa3, or equivalent)

3 Years

Agency Mortgage-Backed Securities (MBS)



Highest ST or Three Highest LT Rating Categories

 (A-1/P-1, A-/A3, or equivalent)

3 Year

Avg. Life6

Commercial Paper (CP)



Highest ST Rating Category

(A-1/P-1, A-A3, or equivalent)

3 Years

Time Deposits/Certificates of Deposit




2 Years


1 Rating by at least two SEC-registered   Nationally Recognized Statistical Rating Organizations (“NRSROs”), unless only one is available or unless otherwise noted.  ST=Short-term; LT=Long-term.

2 Maximum allocation applies across all funds managed by PFM Asset Management LLC.

3 Maximum across all non-government permitted investment sectors (excluding Treasuries, U.S. Federal Agencies and   Agency MBS) is 5% combined per issuer.

4Maximum allocation to federal agency securities, including Agency debentures and Agency MBS, is 75%.

5Maximum issuer allocation to federal agencies, included Agency debentures and Agency MBS, is 50%.

6 The maturity limit for MBS is based on the expected average life at time of purchase, measured using Bloomberg or other industry standard methods.

7 None, deposits must follow collateralization requirements which are detailed in the University’s Statement of Investment Policy.

8 All Sector, issuer, and rating limits apply at the time of purchase.