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FARM CREDIT SYSTEM INSURANCE CORPORATION

POLICY STATEMENT CONCERNING

INVESTMENTS

DATED: JANUARY 30, 2020

Purpose:

The purpose of this policy is to:

1. Define the uses of the Farm Credit System Insurance Corporation (Corporation) Insurance Fund (Fund);

2. State the Corporation’s objective in the management of the Fund;

3. Provide management with the flexibility needed to effectively and efficiently manage the Fund; and

4. Provide a basis for evaluating Fund performance, and a basis for modification of this policy.

Background:

The Corporation was created by the Agricultural Credit Act of 1987 (Act) to insure the timely payment of 

interest and principal on insured obligations and the retirement of eligible borrower stock at par value. 

Corporation funds may also be used to provide financial assistance to certain Farm Credit System (System) 

institutions and to pay operating expenses of the Corporation. Section 5.62 of the Act states that the money

of the Corporation not otherwise employed shall be invested in obligations of the United States or in 

obligations guaranteed as to principal and interest by the United States.

The Fund represents the assets of the Corporation less its liabilities.

Investment Objective:

The Corporation will implement a short duration strategy to minimize loss exposure in the event 

disbursements must be made to meet its statutory obligations. Secondarily, the Corporation will seek to 

optimize the rate of return within the investment parameters set forth below. The Corporation will not trade 

for capital gains purposes. 

Investment Parameters:

All available funds not needed for operations will be invested in U.S. Treasury instruments, including 

market-based one-day repurchase certificates, bills, notes, bonds or inflation-protected securities purchased 

through the U.S. Treasury’s Financial Management Service. Investments will be held by the Treasury in 

book-entry form. The Corporation’s Investment Committee shall consider the risk environment for System 

banks and associations, the U.S. Treasury market environment, and the potential need for Fund 

disbursements in determining the appropriate duration of the Fund. However, at least 40 percent of the Fund 

shall consist of securities with remaining maturities of two years or less at all times to ensure that loss 

exposure is minimized in the event disbursements must be made to meet the Corporation’s statutory 

obligations. 

Investments in securities with remaining maturities beyond two years may be made to enhance the total 

return on the portfolio, to facilitate match funding of long-term Corporation liabilities, or for other purposes 

as approved by the Investment Committee. To further reduce market risk, the maximum maturity limit of 
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securities purchased will be limited to a remaining maturity of ten years, and investments purchased with 

remaining maturities between five and ten years shall be limited to 20 percent of the Fund.

If an authorized use of the Fund results in a deviation from the limits set forth in this policy, the portfolio 

shall be restructured to conform to this policy as soon as practicable. However, the Corporation is not 

required to dispose of any existing investment to achieve restructuring.

Control Environment, Authorities and Reporting:

Investments within the parameters of this policy will be administered by the Chief Operating Officer of the 

Corporation. The Chief Operating Officer shall chair an Investment Committee consisting of the Chief 

Operating Officer, Chief Financial Officer, Chief Investment Officer and Chief Risk Officer. If one or more 

members of the Investment Committee are unavailable, the Chief Operating Officer may designate other 

senior Corporation staff members to serve on the Investment Committee. The Investment Committee shall 

meet at least once each quarter to review the performance, composition and appropriate accounting 

treatment of current investments as well as future investment opportunities. Investment decisions will be 

documented through the preparation of decision memoranda and minutes will be maintained for all 

Investment Committee meetings. 

The Chief Operating Officer will report to the Board of Directors quarterly on the status of the Corporation’s 

investments, including adjustments contemplated in the ensuing calendar quarter. The Corporation has 

adopted Accounting Standards Codification Topic 320 (ASC 320), Investments – Debt and Equity 

Securities. Corporation accounting and reporting of investment transactions shall be in compliance with 

ASC 320. To benchmark performance, the Corporation will compare the rate of return achieved to similarly 

invested funds, or other appropriate benchmarks, and report the results annually to the Board and the public.

The policy shall be subject to annual review by the Investment Committee at which time decisions regarding 

any needed modification shall be recommended to the Board of Directors. The Investment Committee shall 

meet at least quarterly to review the performance of the investment portfolio, current investment 

opportunities and to determine whether changes to the classification categories of investments based on the 

criteria of ASC 320 should be made. In the event of a tie vote on any issue before the Investment Committee, 

the Chief Operating Officer of the Corporation shall decide the issue’s outcome. 

Any deviations from this policy must be approved by the Board of Directors.