The Mission of the Virginia Highlands Community College Educational Foundation’s Endowment Fund (VHCCEF) is to provide income for the support of current operations while growing the asset base. Assets contained within the endowment consist of accumulated contributions and resulting earnings on those contributions.
The investment objective for the Endowment Fund is to invest for the long term and to accept that level of portfolio risk that is consistent with achieving long term growth and the preservation of capital.
The Statement of Investment Policy shall provide the Board of VHCCEF and the Investment Manager with the guidelines for the prudent investment management of the Endowment Fund. Recognizing that changing economic and market conditions may make it impossible for the endowment to reflect all aspects of the investment policy at any given time, the Board understands and agrees that this policy is to serve as a general framework within which the endowment is to be managed.
Delegation of Authority and Responsibility
The ultimate responsibility for managing the Endowment Fund shall rest with the VHCCEF Board of Directors with the advice and assistance of the Investment Committee. The Investment Committee shall consist of persons who are familiar with the investments currently used by institutional investors, in order to assure sophisticated understanding of investment opportunities and strategies, risk and reward factors, and measurement techniques. The authorized duties of the Investment Committee include:
Regular maintenance of the Endowment Fund’s Objectives and Guidelines;
Review of the asset allocation policy of the Endowment Fund and the implementation of necessary changes;
The hiring and removal of outside investment manager(s) charged with the management of the Endowment Fund;
Authorization of the selection and retention of an investment advisor(s) who will consult with the Investment Committee as requested in order to help the Board achieve its “prudent man” fiduciary responsibility; and monitor the performance of the Endowment Fund and report this analysis to the Board of Directors;
Setting relative performance goals for the Endowment Fund as well as setting the risk level deemed suitable for the Endowment Fund;
Determine or approve asset allocation percentages;
Review all expenses incurred by the Endowment Fund including trustees, custodial relationships, investment advisor(s), and investment manager(s); and
Provide written communications of the Investment Committee instructions to the investment manager(s), as necessary.
Investment Manager(s) Responsibilities
Manage the assets of the Endowment Fund within these Objectives and Guidelines.
Provide quarterly performance reports that are within the industry standards.
Be available for meetings as deemed necessary by the Investment Committee, with meetings no less frequently than once a year, for the purpose of discussing the portfolio performance, strategic changes, and market and economic conditions.
Request changes in the Objectives and Guidelines in written form to the Investment Committee.
Other than indicated in this statement, the Investment Manager is to have complete investment discretion with the expectation that funds will be invested with care, skill, prudence and diligence.
General Investment Objectives and Guidelines
Assets are to be managed with a goal of achieving the investment objectives, taking into consideration the following:
The fixed income and equity portions of the investment portfolio are to be diversified in order to provide reasonable assurance that no single investment or group of investments will have an excessive impact on the total portfolio.
The returns on the portfolio should be compared to the standard market indices including, but not limited to, the S&P 500 Index, 90-Day Treasury Bills, and the Lehman Brothers Intermediate Government Bond Index. Other indices may be added from time to time.
Investment of New Moneys
Any new gifts that are designated for the Endowment Fund shall be invested in the strategy described within this document. All gifts of liquid securities will be liquidated upon receipt and deployed according to the asset allocation in place at that time. Subject to the terms of the gift, gifts may be immediately used for cash flow needs as the situation may dictate.
The assets shall be managed according to a Balanced Investment Objective. The percentage range of the total portfolio that is to be invested in each category is as follows:
|Equities||40%||50%||60%||S&P 500 Index|
|Fixed Income||30%||45%||55%||Lehman Intermediate Gov’t Bd|
|Cash Equivalent||5%||5%||30%||90-Day Treasury Bills|
The purpose of equity investments is to provide current income, growth of income, and appreciation of principal. Equities shall mean common stocks, convertible bonds, and convertible preferred issues.
Common stock investing is permitted in both domestic and foreign companies traded on a domestic ($U.S. based) exchange. Investing in high quality mutual funds and electronically traded funds (ETF) will be acceptable for the purpose of enhancing diversification. The equity investments are expected to outperform the S&P 500 Index net of fees, over a market cycle.
It is expected that the equity portion of the portfolio will be broadly diversified so as to reduce the inherent risk of any one investment. No equity weighting should exceed 6% of the market value and broad sector diversification is encouraged.
The use of options futures and other hedging strategies is prohibited. In addition, there will be no margin purchases, or other uses of borrowed funds. Short sales are not allowed, nor are the uses of puts, calls, straddles, and commodities, as well as other types of derivatives investments.
Fixed Income Investment
Fixed Income securities are to be selected and managed in order to provide income and stability. Fixed Income securities with a maturity beyond 15 years are not permitted. Average duration should range between 7-10 years.
The use of fixed income investments may include U.S. Government and Agency obligations, marketable corporate bonds, debentures, preferred stocks, mortgage backed securities, commercial paper, bonds, CDs and other such instruments as deemed prudent by the Investment Manager. Returns on these investments shall be compared to the Lehman Brothers Intermediate Government Bond Index.
All bonds selected herein shall be investment grade or higher, as granted by Standard & Poor’s or Moody’s (classified BBB or better). Bonds, which subsequent to purchase fall below the minimum standards, may be held as long as the investment managers deem appropriate.
Cash and Cash Equivalents Investment
This portion of the portfolio is designed to meet the short term obligations of VHCCEF. A minimum account balance of the greater of $25,000 or 5% of the Endowment Fund portfolio should be maintained. Suitable instruments for investment include money market funds, stable value funds and short-term fixed income instruments. While income will be a desired characteristic, it is secondary to principal preservation. The appropriate benchmark for this asset class will be 90-Day Treasury Bills.
Based on the above stated objectives, the current spending policy shall be expressed as a maximum of 6% of a three-year moving average of the market value of the Endowment Fund. Such a policy will allow for greater predictability of spendable income for budgeting purposes and for gradual, steady growth for the support of operations by investable assets. Any income received in excess of 6% of the three-year average shall be reinvested in that year. Should the yield (interest and dividends) be less than 6%, realized gains may be used to make up the deficiency.