102 KAR 1:178. Investment policies for insurance trust fund

      Section 1. (1)(a) The board of trustees shall appoint an investment committee in accordance with the provisions of KRS 161.430(1). The trustees shall be named at the beginning of each fiscal year.

      (b) The executive secretary shall act on behalf of the investment committee in administering the investment policies and procedures established in this administrative regulation.

      (c) To ensure a timely market transaction, the executive secretary and the chief investment officer may make a purchase or sale of an investment instrument without prior board approval if the action conforms to the provisions established in this administrative regulation.

      (2) The staff investment personnel employed by the board under KRS 161.430(1) may be delegated transaction responsibilities under the supervision of the chief investment officer and the executive secretary.

      (3)(a) Contracts with contracted investment counselors employed under KRS 161.430(1) shall be on a fiscal year basis for twelve (12) month periods, except that contracts entered into on or after the start of the fiscal year shall not extend beyond the end of the fiscal year in which the contract is entered.

      (b) The system may invest in either separately managed accounts or commingled funds.

      (c) The investment committee shall make recommendations to the board regarding employment of investment counselors and the renewal or nonrenewal of contracts.

      (d)1. The system may utilize the services of a consultant to advise the investment committee, as well as to assist in evaluating the effectiveness of investment counselors.

      2. A consultant may advise the investment committee with regard to asset class allocation and the combined effect of the various portfolios on the system's overall risk and expected long-term return.

      (e) Investment counselors shall provide reports documenting their results at least quarterly and meet with the investment committee if requested.

      (f) An annual report on the performance and service of each investment counselor shall be provided to the board with recommendations from the investment committee.

      (4) The following procedures shall be followed with regard to all investment transactions, whether internally or externally managed:

      (a) The board shall be provided a quarterly report reflecting complete record of each investment transaction that occurred during that quarter;

      (b) The investment committee shall be provided a complete record of each investment transaction or holding;

      (c) The staff shall maintain a file of investment directives that indicates the committee's separate review of each specific long-term investment; and

      (d) An "authorization for investment" shall be approved by the executive secretary or the chief investment officer.

 

      Section 2. Asset Allocation. (1) In order to preserve the assets of the system and produce the required rate of return while minimizing risk, assets shall be prudently diversified among various classes of investments.

      (2) In determining asset allocation policy, the investment committee and the board shall be mindful of the system's liquidity and its capability of meeting both short and long-term obligations. (37 Ky.R. 2303; eff. 6-3-11.)

Notation

      RELATES TO: KRS 161.430

      STATUTORY AUTHORITY: KRS 161.310(1), 161.430(1), 161.677

      NECESSITY, FUNCTION AND CONFORMITY: KRS 161.310 requires the Teachers' Retirement System Board of Trustees to promulgate administrative regulations for the administration of the funds of the retirement system and for the transaction of business. KRS 161.430(1) requires the board of trustees to promulgate administrative regulations to establish investment policies and procedures to carry out its responsibilities and provides that the board of trustees shall have full power and responsibility for the purchase, sale, exchange, transfer, or other disposition of the investments and money of the Teachers' Retirement System. KRS 161.677(3) provides that the board of trustees shall manage the Kentucky Teachers’ Retirement System insurance trust fund in the same general manner in which it administers retirement funds. The administrative regulation establishes investment policies and procedures to carry out these responsibilities for the Kentucky Teachers’ Retirement System insurance trust fund.