4. What is a Supranational?
โ Supranationals are international institutions that provide development financing, advisory
services and/or other financial services to their member countries. Their goal is to achieve
improving living standards through sustainable economic growth.
โ A supranational entity is formed by two or more central governments with the purpose of
promoting economic development for the member countries. Supranational institutions
finance their activities by issuing debt, such as supranational bonds. Similar to the
government bonds, the bonds issued by these institutions are considered very safe and
have a high credit rating.
โ Example of Supranational organizations are:
โ International Bank of Reconstruction and Development Bank
โ International Finance Corporation
โ Inter-American Development Bank
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5. Supranationals for California Local Agencies
โ Signed into law as a permitted investment on January 1, 2015 (CGC 53601).
โ What the legislation allows:
โ A maximum portfolio allocation of 30% may be allocated to these securities.
โ The securities must be rated โAAโ or better by a nationally recognized statistical rating
organization.
โ Security purchases are limited to the three Washington, DC based issuers.
โ Inter-American Development Bank
โ International Bank for Reconstruction and Development
โ International Finance Corporation
โ The opportunities these securities provide to the Cityโs portfolio:
โ High quality AAA issuers to further diversify the portfolio.
โ A potential replacement for shrinking supply of US Agency securities.
โ Yield pickup of 5-10 basis points to similar US Treasury securities.
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