Notes to the Financial Statements
June 30, 2015
Note 3 Cash Deposits and Investments
According to GASB Statement No. 40, "Deposit and Investment Risk Disclosures", the State needs to make certain disclosures about deposit and investment risks that have the potential to result in losses. Thus, the following deposit and investment risks are discussed in this note:
Interest Rate Risk - the risk that changes in interest rates will adversely affect the fair value of an investment.
Credit Risk - the risk that an issuer or other counterparty to an investment will not fulfill its obligations.
Concentration of Credit Risk - the risk of loss attributed to the magnitude of an investment in a single issuer.
Custodial Credit Risk (deposits) - the risk that, in the event of a bank failure, the State's deposits may not be recovered.
Foreign Currency Risk - the risk that changes in exchange rates
will adversely affect the fair value of an investment or deposit.
Primary Government
The State Treasurer is the chief fiscal officer of State government and
is responsible for the prudent management and investment of monies of State
funds and agencies as well as monies of pension and other trust funds. The State
Treasurer with the advice of the Investment Advisory Council, whose members
include outside investment professionals and pension beneficiaries, establishes
investment policies and guidelines. Currently, the State Treasurer manages one
Short-Term Investment Fund and twelve Combined Investment Funds.
Short-Term Investment Fund (STIF)
STIF is a money market investment pool in which the State, municipal
entities, and political subdivisions of the State are eligible to invest. The
State Treasurer is authorized to invest monies of STIF in United States
government and agency obligations, certificates of deposit, commercial paper,
corporate bonds, savings accounts, bankers' acceptances, repurchase agreements,
and asset-backed securities. STIF's
investments are reported at amortized cost
(which approximates fair value) in the fund's
statement of net position.
For financial reporting purposes, STIF is considered to be a mixed investment pool - a pool having external and internal portions. The external portion of STIF (i.e. the portion that belongs to participants which are not part of the State's financial reporting entity) is reported as an investment trust fund (External Investment Pool fund) in the fiduciary fund financial statements. The internal portion of STIF (i.e., the portion that belongs to participants that are part of the State's financial reporting entity) is not reported in the accompanying financial statements. Instead, investments in the internal portion of STIF by participant funds are reported as cash equivalents in the government-wide and fund financial statements.
For disclosure purposes, certificates of deposit held by STIF are reported in this note as bank deposits, not as investments.
As of June 30, 2015, STIF had the following investments and maturities (amounts in thousands):
Short-Term Investment Fund | ||
---|---|---|
Investment | ||
Maturities | ||
(in years) | ||
Amortized | Less | |
Investment Type | Cost | Than 1 |
Federal Agency Securities | $1,476,285 | $1,476,285 |
Bank Commercial Paper | 350,000 | 350,000 |
US Government Guaranteed or Insured | 65,295 | 65,295 |
Government Money Market Funds | 501,170 | 501,170 |
Repurchase Agreements | 500,000 | 500,000 |
Total Investments | $2,892,750 | $2,892,750 |
Interest Rate Risk
The STIF's
policy for managing interest rate risk is to limit investment
to a very short weighted average maturity, not to exceed 90 days, and to comply
with Standard and Poor's
requirement that the weighted average maturity not to
exceed 60 days. As of June 30, 2015, the weighted average maturity of the STIF
was 37 days. Additionally, STIF is allowed by policy to invest in floating-rate
securities. However, investment in these securities having maturities greater
than two years is limited to no more than 20 percent of the overall portfolio.
For purposes of the fund's
weighted average maturity calculation, variable-rate
securities are calculated using their rate reset date. Because these securities
reprice frequently to prevailing market rates, interest rate risk is
substantially reduced. As of June 30, 2015, the amount of STIF's
investments in
variable-rate securities was $568 million.
Credit Risk
The STIF's
policy for managing credit risk is to invest in debt
securities that fall within the highest short-term or long-term rating
categories by nationally recognized rating organizations.
As of June 30, 2015, STIF's
investments were rated by Standard and Poor's as
follows (amounts in thousands):
Short-Term Investment Fund | ||||
---|---|---|---|---|
Quality Ratings | ||||
Amortized | ||||
Investment Type | Cost | AAA | AA | A |
Federal Agency Securities | $ 1,476,285 | $ - | $ 1,476,285 | $- |
Bank Commercial Paper | 350,000 | - | 350,000 | - |
U.S. Government Guaranteed & Insured Securities | 65,295 | - | 65,295 | - |
Government Money Market Funds | 501,170 | 501,170 | - | - |
Repurchase Agreements | 500,000 | - | 250,000 | 250,000 |
Total Investments | $ 2,892,750 | $ 501,170 | $ 2,141,580 | $ 250,000 |
Concentration of Credit Risk
STIF reduces its exposure to this risk by requiring that not more than 10
percent of its portfolio be invested in securities of any one issuer, except for
overnight or two-business day repurchase agreements and U.S. government and
agency securities. As of June 30, 2015, STIF's investments in any one issuer
that represents more than 5 percent of total investments were as follows
(amounts in thousands):
Amortized | |
---|---|
Investment Issuer | Cost |
Federal Home Loan Bank | $ 673,629 |
Federal Farm Credit Bank | $ 457,890 |
U.S. Bank | $ 350,000 |
Freddie Mac | $ 151,386 |
Merryl Lynch | $ 250,000 |
Fannie Mae | $ 193,379 |
Morgan Stanley | $ 250,001 |
Western Asset | $ 251,169 |
RBC Capital Markets | $ 250,000 |
Custodial Credit Risk-Bank Deposits-Nonnegotiable Certificate of Deposits
(amounts in thousands):
The STIF follows policy parameters that limit deposits in any one entity to a
maximum of ten percent of assets. Further, the certificate of deposits must be
issued from commercial banks whose short-term debt is rated at least A-1 by
Standard and Poor's
and F-1 by Fitch and whose long-term debt is rated at least
A- and its issuer rating is at least "C", or backed by a letter of credit issued
by a Federal Home Loan bank. As of June 30, 2015, $2,065,000 of the bank balance
of STIF's deposits of $2,140,000 was exposed to custodial credit risk as follows:
Uninsured and uncollateralized | $ 1,202,063 |
Uninsured and collateral held by trust department of either the pledging bank or another bank not in the name of the State | 862,475 |
Total | $ 2,064,538 |
Combined Investment Funds (CIFS)
The CIFS are open-ended, unitized portfolios in which the State pension trust
and permanent funds are eligible to invest. The State pension trust and
permanent funds own the units of the CIFS. The State Treasurer is also
authorized to invest monies of the CIFS in a broad range of fixed income and
equity securities, as well as real estate properties, mortgages and private
equity. CIFS' investments are reported at fair value in each fund's
statement of net position.
For financial reporting purposes, the CIFS are considered to be external
investment pools and are not reported in the accompanying financial statements.
Instead, investments in the CIFS by participant funds are reported as equity in
the CIFS in the government-wide and fund financial statements.
Primary Government | |||
---|---|---|---|
Governmental | Business-Type | Fiduciary | |
Activities | Activities | Funds | |
Equity in the CIFS | $ 110,069 | $ 652 | $ 29,541,256 |
Other Investments | 2,826 | 68,570 | 1,004,995 |
Total Investments-Current | $ 112,895 | $ 69,222 | $ 30,546,251 |
As of June 30, 2015, the CIFS had the following investments and maturities (amounts in thousands):
Combined Investment Funds | |||||
---|---|---|---|---|---|
Investment Maturities (in Years) | |||||
Investment Type | Fair Value | Less Than 1 | 1 - 5 | 6 - 10 | More Than 10 |
Cash Equivalents | $ 198,784 | $ 198,784 | $ - | $ - | $ - |
Asset Backed Securities | 191,411 | 3,902 | 161,552 | 15,533 | 10,424 |
Government Securities | 2,746,047 | 149,878 | 1,086,902 | 617,616 | 891,651 |
Government Agency Securities | 725,993 | 122,431 | 56,503 | 6,194 | 540,865 |
Mortgage Backed Securities | 377,930 | 10,098 | 61,452 | 73,195 | 233,185 |
Corporate Debt | 3,068,331 | 803,147 | 998,896 | 1,005,421 | 260,867 |
Convertible Debt | 34,542 | 1,644 | 13,963 | - | 18,935 |
Total Debt Investments | 7,343,038 | $ 1,289,884 | $ 2,379,268 | $ 1,717,959 | $ 1,955,927 |
Common Stock | 14,406,676 | ||||
Preferred Stock | 124,880 | ||||
Real Estate Investment Trust | 309,747 | ||||
Business Development Corporation | 80,600 | ||||
Mutual Fund | 820,291 | ||||
Limited Liability Corporation | 1,157 | ||||
Trusts | 583 | ||||
Limited Partnerships | 6,668,284 | ||||
Total Investments | $ 29,755,256 |
Interest Rate Risk
CIFS' investment managers are given full discretion to manage their portion of
CIFS' assets within their respective guidelines and constraints. The guidelines
and constraints require each manager to maintain a diversified portfolio at all
times. In addition, each core manager is required to maintain a target duration
that is similar to its respective benchmark which is typically the Barclays
Aggregate-an intermediate duration index.
Credit Risk
The CIFS minimizes exposure to this risk in accordance with a comprehensive
investment policy statement, as developed by the Office of the Treasurer and the
State's
Investment Advisory Council, which provides policy guidelines for the
CIFS and includes an asset allocation plan. The asset allocation plan's
main
objective is to maximize investment returns over the long term at an acceptable
level of risk. As of June 30, 2015, CIFS'
debt investments were rated by Moody's
as follows (amounts in thousands):
Combined Investment Funds | ||||||||
---|---|---|---|---|---|---|---|---|
Fair Value | Cash Equivalents | Asset Backed Securities | Government Securities | Government Agency Securities | Mortgage Backed Securities | Corporate Debt | Convertible Debt | |
Aaa | $ 2,235,451 | $ 100 | $138,598 | $ 1,269,100 | $ 534,650 | $ 233,191 | $ 59,812 | $ - |
Aa | 492,201 | 7,500 | 2,886 | 334,515 | - | 14,683 | 132,617 | - |
A | 641,373 | - | 1,486 | 327,413 | - | 11,067 | 301,407 | - |
Baa | 799,566 | - | 109 | 454,248 | - | 11,211 | 333,202 | 796 |
Ba | 520,267 | - | - | 82,170 | - | - | 428,750 | 9,347 |
B | 840,172 | - | - | 36,043 | - | - | 788,159 | 15,970 |
Caa | 261,361 | - | - | 40,775 | - | - | 220,586 | - |
Ca | 12,769 | - | - | 3,527 | - | - | 9,242 | - |
C | 940 | - | - | - | - | - | 940 | - |
Prime 1 | 493,856 | - | 2,672 | - | - | 4,798 | 486,386 | - |
Prime 2 | 30,391 | - | - | - | - | - | 30,391 | - |
Government fixed not rated | 202,429 | - | - | 191,343 | - | - | - | |
Non Government fixed not rated | 187,170 | - | 187,170 | - | - | - | - | |
Not Rated | 625,092 | 191,184 | 45,660 | - | - | 102,980 | 276,839 | 8,429 |
$ 7,343,038 | $ 198,784 | $191,411 | $ 2,746,047 | $ 725,993 | $ 377,930 | $ 3,068,331 | $ 34,542 |
Foreign Currency Risk
The CIFS manage exposure to this risk by utilizing a strategic hedge ratio of 50
percent for the developed market portion of the International Stock Fund (a
Combined Investment Fund). This strategic hedge ratio represents the neutral
stance or desired long-term exposure to currency for the ISF. To implement this
policy, currency specialists actively manage the currency portfolio as an
overlay strategy to the equity investment managers. These specialists may manage
the portfolio passively or actively depending on opportunities in the market
place. While managers within the fixed income portion of the portfolio are
allowed to invest in
non-U.S. denominated securities, managers are required to limit that investment
to a portion of their respective portfolios. As of June 30, 2015, CIFS' foreign
deposits and investments were as follows (amounts in thousands):
Combined Investment Funds | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Fixed Income Securities | Equities | |||||||||
Cash | Real Estate | |||||||||
Equivalent | Government | Corporate | Asset | Mortgage | Common | Preferred | Investement | |||
Foreign Currency | Total | Cash | Collateral | Securities | Debt | Backed | Backed | Stock | Stock | Trust Fund |
Argentine Peso | $ 81 | $ 81 | $ - | $ - | $ - | $ - | $ - | $ - | $ - | $ - |
Australian Dollar | 410,838 | 999 | 113 | 89,266 | 13,020 | - | - | 288,175 | - | 19,265 |
Brazilian Real | 279,997 | 2,492 | - | 111,328 | 1,437 | - | - | 128,965 | ||
Canadian Dollar | 84,910 | 145 | 43 | 15,550 | - | - | - | 66,765 | - | 2,407 |
Chilean Peso | 2,761 | - | - | 1,660 | - | - | - | 1,101 | - | - |
Colombian Peso | 31,645 | 42 | - | 26,266 | 4,684 | - | - | 653 | - | - |
Croatian Kuna | 86 | - | - | - | - | - | - | 86 | - | - |
Czech Koruna | 4,158 | 74 | - | - | - | - | - | 4,084 | - | - |
Danish Krone | 88,349 | 686 | - | 1,241 | - | - | - | 86,422 | - | - |
Egyptian Pound | 6,662 | 207 | - | - | - | - | - | 6,455 | - | - |
Euro Currecny | 1,964,783 | (1,610) | - | 189,222 | 6,257 | (535) | - | 1,727,992 | 29,649 | 13,808 |
Hong Kong Dollar | 633,515 | 1,576 | - | - | - | - | - | 627,957 | - | 3,982 |
Hungarian Forint | 24,324 | - | - | 6,341 | - | - | - | 17,983 | - | - |
Iceland Krona | 2 | 2 | - | - | - | - | - | - | - | - |
Indian Rupee | 3,300 | - | - | 1,612 | 1,688 | - | - | - | - | - |
Indonesian Rupiah | 96,094 | 20 | - | 42,289 | 6,442 | - | - | 47,343 | - | - |
Israeli Shekel | 17,565 | 404 | - | - | - | - | - | 17,161 | - | - |
Japanese Yen | 1,339,030 | 4,395 | - | 58,669 | - | - | - | 1,270,735 | - | 5,231 |
Malaysian Ringgit | 84,282 | 451 | - | 63,042 | - | - | - | 20,789 | - | - |
Mexican Peso | 198,235 | 1,980 | - | 159,361 | 4,268 | - | - | 29,454 | - | 3,172 |
Moroccan Dirham | 62 | - | - | - | - | - | - | 62 | - | - |
New Turkish Lira | 201,272 | 11 | - | 41,199 | - | - | - | 159,454 | - | 608 |
New Zealand Dollar | 110,084 | 929 | - | 96,223 | - | - | - | 12,932 | - | - |
Nigerian Naira | 2,698 | - | - | 2,698 | - | - | - | - | - | - |
Norwegian Krone | 60,802 | 1,325 | - | 14,124 | - | - | - | 45,353 | - | - |
Peruvian Nouveau Sol | 1,864 | - | - | 1,864 | - | - | - | - | - | - |
Philippine Peso | 65,375 | 17 | - | 3,444 | - | - | - | 61,914 | - | - |
Polish Zloty | 105,748 | 81 | - | 65,666 | - | - | - | 40,001 | - | - |
Pound Sterling | 1,387,031 | 1,764 | 223 | 200,831 | 11,298 | - | 5,805 | 1,151,938 | - | 15,172 |
Romanian Leu | 6,293 | - | - | 6,293 | - | - | - | - | - | - |
Russian Ruble | 26,939 | - | - | 26,610 | 329 | - | - | - | - | - |
Singapore Dollar | 91,253 | 1,344 | - | - | - | - | - | 83,945 | - | 5,964 |
South African Rand | 179,454 | 8 | - | 80,084 | - | - | - | 99,362 | - | - |
South Korean Won | 299,880 | 148 | - | - | - | - | - | 289,596 | 10,136 | - |
Sri Lanka Rupee | 78 | - | - | - | - | - | - | 78 | - | - |
Swedish Krona | 183,098 | 942 | - | 6,746 | - | - | - | 175,410 | - | - |
Swiss Franc | 452,525 | (554) | - | - | - | - | - | 453,079 | - | - |
Thailand Baht | 114,855 | 236 | - | 13,615 | - | - | - | 101,004 | - | - |
Uganda Shilling | 2,159 | - | - | 2,159 | - | - | - | - | - | - |
Uruguayan Peso | 3,357 | - | - | 3,357 | - | - | - | - | - | - |
$ 8,565,444 | $ 18,195 | $ 379 | $ 1,330,760 | $ 49,423 | $ (535) | $ 5,805 | $ 7,016,248 | $ 75,560 | $ 69,609 |
Derivatives
As of June 30, 2015, the CIFS held the following derivative
investments (amounts in thousands):
Derivative Investments | Fair Value |
---|---|
Adjustable Rate Securities | $ 505,870 |
Asset Backed Securities | 191,498 |
Mortgage Backed Securities | 277,288 |
Collateralized Mortgage Obligations | 100,623 |
TBA's | 190,181 |
Interest Only Securities | 740 |
Options | (306) |
Total | $ 1,265,894 |
The CIFS invest in derivative investments for trading purposes and to enhance investment returns. The credit exposure resulting from these investments is limited to their fair value at year end.
The CIFS also invest in foreign currency contracts. Contracts to buy are used
to acquire exposure to foreign currencies, while contracts to sell are used to
hedge the CIFS'
investments against currency fluctuations. Losses may arise from
changes in the value of the foreign currency or failure of the counterparties to
perform under the contracts'
terms. As of June 30, 2015, the fair value of
contracts to buy and contracts to sell was $8.4 billion and $8.3 billion,
respectively.
Custodial Credit Risk-Bank Deposits
The CIFS minimize this risk by maintaining certain restrictions set forth in the
Investment Policy Statement. The CIFS use a Liquidity Account which is a cash
management pool investing in highly liquid money market securities. As of June
30, 2015, the CIFS had deposits with a bank balance of $31.0 million which was
uninsured and uncollateralized.
Complete financial information about the STIF and the CIFS can be obtained from financial statements issued by the Office of the State Treasurer.
Other Investments
As of June 30, 2015, the State had other investments and maturities as follows
(amounts in thousands):
Other Investments | |||||
---|---|---|---|---|---|
Investment Maturities (in years) | |||||
Fair | Less | More | |||
Investment Type | Value | Than 1 | 1-5 | 6-10 | Than 10 |
State Bonds | $ 21,080 | $ - | $ 6,780 | $ 14,300 | $ - |
U.S. Government and Agency Securities | 350,209 | 101,380 | 10,929 | 236,776 | 1,124 |
Guaranteed Investment Contracts | 147,829 | 11,735 | 29,830 | 47,930 | 58,334 |
Money Market Funds | 8,301 | 8,301 | - | - | - |
Total Debt Investments | 527,419 | $ 121,416 | $ 47,539 | $ 299,006 | $ 59,458 |
Endowment Pool | 11,611 | ||||
Corporate Stock | 2,850 | ||||
Limited Partnership | 150 | ||||
Total Investments | $ 542,030 |
Credit Risk
As of June 30, 2015, other debt investments were rated by Standard and Poor's
as
follows (amounts in thousands):
Other Investments | ||||
---|---|---|---|---|
Fair | Quality Ratings | |||
Investment Type | Value | AA | A | Unrated |
State Bonds | $ 21,080 | $ 21,080 | $ - | $ - |
U.S. Government and Agency Securities | 261,116 | 261,116 | - | - |
Guaranteed Investment Contracts | 147,829 | 35,952 | 111,877 | - |
Money Market Funds | 8,301 | - | - | 8,301 |
Total | $ 438,326 | $ 318,148 | $ 111,877 | $ 8,301 |
Connecticut State Universities reported $89 million as U.S. Government Securities, these securities have no credit risk therefore, these securities are not included in the above table.
Custodial Credit Risk-Bank Deposits (amounts in thousands):
The State maintains its deposits at qualified financial institutions located in
the state to reduce its exposure to this risk. These institutions are required
to maintain, segregated from its other assets, eligible collateral in an amount
equal to 10 percent, 25 percent, 100 percent, or 120 percent of its public
deposits. The collateral is held in the custody of the trust department of
either the pledging bank or another bank in the name of the pledging bank. As of
June 30, 2015, $660,444 of the bank balance of the Primary Government of
$664,623 was exposed to custodial credit risk as follows:
Uninsured and uncollateralized | $ 55,181 |
Uninsured and collateral held by trust department of either the pledging bank or another bank not in the name of the State | 605,263 |
Total | $ 660,444 |
Component Units
The Connecticut Housing Finance Authority (CHFA) and the Connecticut Lottery
Corporation (CLC) reported the following investments and maturities as of
12-31-14 and
6-30-15, respectively (amounts in thousands):
Major Component Units | |||||
---|---|---|---|---|---|
Investment Maturities (in years) | |||||
Fair | Less | More | |||
Investment Type | Value | Than 1 | 1-5 | 6-10 | Than 10 |
Collateralized Mortgage Obligations | $ 863 | $ - | $ - | $ 863 | $ - |
Fidelity Funds | 6,114 | 6,114 | - | - | |
GNMA & FNMA Program Assets | 621,231 | - | - | - | 621,231 |
Mortgage Backed Securities | 878 | - | - | 150 | 728 |
Municipal Bonds | 42,164 | 201 | 1,191 | 1,567 | 39,205 |
U.S. Government Agency Securities | 928 | - | - | - | 928 |
Structured Securities | 690 | - | - | - | 690 |
Fidelity Tax Exempt Fund | 3,333 | 3,333 | - | - | 3,333 |
Total Debt Investments | 676,201 | $ 9,648 | $ 1,191 | $ 2,580 | $ 662,782 |
Annuity Contracts | 130,354 | ||||
Total Investments | $ 806,555 |
The CHFA and the CLC own 83.8 percent and 16.2 percent of the above investments, respectively. GNMA Program Assets represent securitized home mortgage loans of CHFA which are guaranteed by the Government National Mortgage Association. Annuity contracts are the only investment held by the CLC, which are not subject to investment risks discussed next.
Interest Rate Risk
CHFA
Exposure to declines in fair value is substantially limited to GNMA Program
Assets. The Authority's
investment policy requires diversification of its
investment portfolio to eliminate the risk of loss resulting from, among other
things, an over-concentration of assets in a specific maturity. This policy also
requires the Authority to attempt to match its investments with anticipated cash
flows requirements and to seek diversification by staggering maturities in such
a way that avoids undue concentration of assets in a specific maturity sector.
Credit Risk
CHFA
The Authority's
investments are limited by State statutes to United States
Government obligations, including its agencies or instrumentalities, investments
guaranteed by the state, investments in the state's
STIF, and other obligations
which are legal investments for savings banks in the state. The Fidelity Funds
are fully collateralized by obligations issued by the United States Government
or its agencies. Mortgage Backed Securities are fully collateralized by the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or the Government National Mortgage Association, and Collateralized
Mortgage Obligations are fully collateralized by the United States Department of
Housing and Urban Development mortgage pools.
CHFA's
investments were rated as of 12-31-14 as follows (amounts in
thousands):
Component Units | ||||
---|---|---|---|---|
Fair | Quality Ratings | |||
Investment Type | Value | CCC | D | Unrated |
Collateralized Mortgage Obligations | $ 863 | $ 863 | $ - | $ - |
Fidelity Tax Exempt Fund | 3,333 | - | - | 3,333 |
Municipal Bonds | 42,164 | - | - | 42,164 |
Structured Securities | 690 | - | 690 | - |
Total | $ 47,050 | $ 863 | $ 690 | $ 45,497 |
Concentration of Credit Risk
CHFA
The Authority's
investment policy requires diversification of its investment
portfolio to eliminate the risk of loss resulting from, among other things, an
over-concentration of assets with a specific issuer. As of December 31, 2014,
the Authority had no investments in any one issuer that represents 5 percent or
more of total investments, other than investments guaranteed by the U.S.
Government (GNMA and FNMA Program Assets), and investments in the State's
STIF.
Security Lending Transactions
Certain of the Combined Investment Funds are permitted by State statute to
engage in security lending transactions to provide incremental returns to the
funds. The funds' Agent is authorized to lend available securities to authorized
broker-dealers and banks subject to a formal loan agreement.
During the year, the Agent lent certain securities and received cash or other collateral as indicated on the Securities Lending Authorization Agreement. The Agent did not have the ability to pledge or sell collateral securities received absent a borrower default. Borrowers were required to deliver collateral for each loan equal to at least 102 percent of the market value of the domestic loaned securities or 105 percent of the market value of foreign loaned securities.
According to the Agreement, the Agent has an obligation to indemnify the funds in the event any borrower failed to return the loaned securities or pay distributions thereon. There were no such failures during the fiscal year that resulted in a declaration or notice of default of the borrower. During the fiscal year, the funds and the borrowers maintained the right to terminate all securities lending transactions upon notice. The cash collateral received on each loan was invested in an individual account known as the State of Connecticut Collateral Investment Trust. At year end, the funds had no credit exposure to borrowers because the value of the collateral held and the market value of securities on loan were $1,866.8 million and $1,826.0 million, respectively.
Under normal circumstances, the average duration of collateral investments is managed so that it will not exceed 60 days. At year end, the average duration of the collateral investments was 23.22 days and an average weighted maturity of 44.83 days.