§88-119  Investments.  Investments maybe made in:

(1)  Real estate loans and mortgages.  Obligations (asdefined in section 431:6-101) of any of the following classes:

(A)  Obligations secured by mortgages ofnonprofit corporations desiring to build multirental units (ten units or more)subject to control of the government for occupancy by families displaced as aresult of government action;

(B)  Obligations secured by mortgages insuredby the Federal Housing Administration;

(C)  Obligations for the repayment of homeloans made under the Servicemen's Readjustment Act of 1944 or under Title II ofthe National Housing Act;

(D)  Other obligations secured by firstmortgages on unencumbered improved real estate owned in fee simple; providedthat the amount of the obligation at the time investment is made therein shallnot exceed eighty per cent of the value of the real estate and improvementsmortgaged to secure it, and except that the amount of the obligation at thetime investment is made therein may exceed eighty per cent but no more thanninety per cent of the value of the real estate and improvements mortgaged tosecure it; provided further that the obligation is insured or guaranteedagainst default or loss under a mortgage insurance policy issued by a casualtyinsurance company licensed to do business in the State.  The coverage providedby the insurer shall be sufficient to reduce the system's exposure to not morethan eighty per cent of the value of the real estate and improvements mortgagedto secure it.  The insurance coverage shall remain in force until the principalamount of the obligation is reduced to eighty per cent of the market value ofthe real estate and improvements mortgaged to secure it, at which time thecoverage shall be subject to cancellation solely at the option of the board. Real estate shall not be deemed to be encumbered within the meaning of thissubparagraph by reason of the existence of any of the restrictions, charges, orclaims described in section 431:6-308;

(E)  Other obligations secured by firstmortgages of leasehold interests in improved real estate; provided that:

(i)  Each leasehold interest at the time shallhave a current term extending at least two years beyond the stated maturity ofthe obligation it secures; and

(ii)  The amount of the obligation at the timeinvestment is made therein shall not exceed eighty per cent of the value of therespective leasehold interest and improvements, and except that the amount ofthe obligation at the time investment is made therein may exceed eighty percent but no more than ninety per cent of the value of the leasehold interestand improvements mortgaged to secure it;

provided further that the obligation isinsured or guaranteed against default or loss under a mortgage insurance policyissued by a casualty insurance company licensed to do business in the State. The coverage provided by the insurer shall be sufficient to reduce the system'sexposure to not more than eighty per cent of the value of the leaseholdinterest and improvements mortgaged to secure it.  The insurance coverage shallremain in force until the principal amount of the obligation is reduced toeighty per cent of the market value of the leasehold interest and improvementsmortgaged to secure it, at which time the coverage shall be subject tocancellation solely at the option of the board;

(F)  Obligations for the repayment of homeloans guaranteed by the department of Hawaiian home lands pursuant to section214(b) of the Hawaiian Homes Commission Act, 1920; and

(G)  Obligations secured by second mortgages onimproved real estate for which the mortgagor procures a second mortgage on theimproved real estate for the purpose of acquiring the leaseholder's fee simpleinterest in the improved real estate; provided that any prior mortgage shallnot contain provisions that might jeopardize the security position of theretirement system or the borrower's ability to repay the mortgage loan.

The board may retain the real estate, includingleasehold interests therein, as it may acquire by foreclosure of mortgages orin enforcement of security, or as may be conveyed to it in satisfaction ofdebts previously contracted; provided that all the real estate, other thanleasehold interests, shall be sold within five years after acquiring the same,subject to extension by the governor for additional periods not exceeding fiveyears each, and that all the leasehold interests shall be sold within one yearafter acquiring the same, subject to extension by the governor for additionalperiods not exceeding one year each;

(2)  Government obligations, etc.  Obligations of anyof the following classes:

(A)  Obligations issued or guaranteed as toprincipal and interest by the United States or by any state thereof or by anymunicipal or political subdivision or school district of any of the foregoing;provided that principal of and interest on the obligations are payable incurrency of the United States; or sovereign debt instruments issued by agenciesof, or guaranteed by foreign governments;

(B)  Revenue bonds, whether or not permitted byany other provision hereof, of the State or any municipal or politicalsubdivision thereof, including the board of water supply of the city and countyof Honolulu, and street or improvement district bonds of any district orproject in the State; and

(C)  Obligations issued or guaranteed by anyfederal home loan bank, including consolidated federal home loan bankobligations, the Home Owner's Loan Corporation, the Federal National MortgageAssociation, or the Small Business Administration;

(3)  Corporate obligations.  Below investment grade ornonrated debt instruments, foreign or domestic, in accordance with investmentguidelines adopted by the board;

(4)  Preferred and common stocks.  Shares of preferredor common stock of any corporation created or existing under the laws of the United States or of any state or district thereof or of any country;

(5)  Obligations eligible by law for purchase in theopen market by federal reserve banks;

(6)  Obligations issued or guaranteed by theInternational Bank for Reconstruction and Development, the Inter-AmericanDevelopment Bank, the Asian Development Bank, or the African Development Bank;

(7)  Obligations secured by collateral consisting ofany of the securities or stock listed above and worth at the time theinvestment is made at least fifteen per cent more than the amount of therespective obligations;

(8)  Insurance company obligations.  Contracts andagreements supplemental thereto providing for participation in one or moreaccounts of a life insurance company authorized to do business in Hawaii,including its separate accounts, and whether the investments allocated theretoare comprised of stocks or other securities or of real or personal property orinterests therein;

(9)  Interests in real property.  Interests inimproved or productive real property in which, in the informed opinion of theboard, it is prudent to invest funds of the system.  For purposes of thisparagraph, "real property" includes any property treated as realproperty either by local law or for federal income tax purposes.  Investmentsin improved or productive real property may be made directly or through pooledfunds, including common or collective trust funds of banks and trust companies,group or unit trusts, limited partnerships, limited liability companies,investment trusts, title-holding corporations recognized under section 501(c)of the Internal Revenue Code of 1986, as amended, similar entities that wouldprotect the system's interest, and other pooled funds invested on behalf of thesystem by investment managers retained by the system;

(10)  Other securities and futures contracts. Securities and futures contracts in which in the informed opinion of the board,it is prudent to invest funds of the system, including currency, interest rate,bond, and stock index futures contracts and options on the contracts to hedgeagainst anticipated changes in currencies, interest rates, and bond and stockprices that might otherwise have an adverse effect upon the value of thesystem's securities portfolios; covered put and call options on securities; andstock; whether or not the securities, stock, futures contracts, or options onfutures are expressly authorized by or qualify under the foregoing paragraphs,and notwithstanding any limitation of any of the foregoing paragraphs(including paragraph (4)); and

(11)  Private placements.  Investments in institutionalblind pool limited partnerships, limited liability companies, or directinvestments that make private debt and equity investments in privately heldcompanies, including but not limited to investments in Hawaii high technologybusinesses or venture capital investments that, in the informed opinion of theboard, are appropriate to invest funds of the system.  In evaluating venturecapital investments, the board shall consider, among other things, the impactan investment may have on job creation in Hawaii and on the state economy.  Theboard shall report annually to the legislature on any Hawaii venture capitalinvestments it has made; provided that if the board determines it is notprudent to invest in any Hawaii venture capital investments the board shallreport the rationale for the decision.  The board, by January 1, 2008, shalldevelop criteria to determine the amount of funds that may be prudentlyinvested in Hawaii private placement investments. [L 1925, c 55, pt of §7; RL1935, pt of §7926; am L 1935, c 156, §1; am L 1939, c 5, pt of §1; am L 1941, c50, §1 and c 61, §1; RL 1945, §710, subs 2; am L 1947, c 233, §1; am L 1949, c297, §1; am L Sp 1949, c 27, §1; am L 1951, c 56, §1; am L 1955, c 270, §§1, 2;RL 1955, §6-75; am L 1959, c 81, §1, c 144, §1, and c 175, §1; am L 1961, c111, §1; am L 1965, c 222, §11; am L 1967, c 166, §§1, 2; HRS §88-110; am L1969, c 107, §1, c 110, pt of §1, and c 159, §1; am L 1970, c 89, §§1 to 3; amL 1974, c 177, §1; am L 1977, c 83, §1; am L 1978, c 11, §2; am L 1981, c 129,§1; am L 1983, c 105, §1; am L 1986, c 71, §1 and c 77, §2; am L 1987, c 114, §1;am L 1990, c 34, §8; am L 1991, c 17, §1; am L 1998, c 151, §21; am L 1999, c168, §1; am L 2000, c 297, §12; am L 2006, c 169, §21; am L 2007, c 260, §2]