The Endowment
Investment Policies, Objectives, and Procedures
Policies and Objectives
The University has as its long-term investment objectives:
- To generate investment returns which provide for both the present and future needs of the University.
- To achieve the maximum total return over the long term that is commensurate with a reasonable degree of risk and to earn a rate of return over a 3 to 5-year period of at least 5.5 percentage points annually in excess of the inflation rate. The extremes of investing primarily for preservation of principal and current income on the one hand, and maximum reward without regard to risk on the other hand, are to be avoided. It is expected that diversification (among investment advisors, security holdings and strategies) will be utilized to reduce portfolio risk.
- The Committee will employ investment advisory firms to invest the assets of the endowment. While the Committee is responsible for asset allocation, it may allow certain investment advisors to allocate among asset classes.
- The Committee recognizes the importance of monitoring portfolios of peer institutions and will review peer performance and allocation annually.
In pursuit of these long-term objectives, the Investment Committee shall:
- Select investment managers demonstrating consistent, superior historical performance and organizational stability. Each manager's goal shall be to outperform over a market cycle an appropriate pre-specified market index rate of return, and to achieve favorable investment results relative to investors with similar objectives and policies.
- Set benchmarks by which the performance of the aggregate portfolio is to be measured.
- Monitor the diversification of the portfolio across asset classes and managers so as to reduce the volatility of returns and to provide a reasonable assurance that no single security investment or class of investments will have an unintended impact on total return.
- Review investment guidelines and asset allocation annually and revise as needed.
Procedures
The Board of Trustees has delegated responsibility for investing the University endowment (and similar funds) to the Investment Committee. The Committee may recommend to the Board and to the University President the establishment of an Investment Office and/or the retention of a Vice President for Investments to assist it in carrying out these responsibilities. The Committee will report to the Board at least semi-annually.
The Investment Office is authorized by the Committee to take certain actions, subject to approval of the Chairman of the Investment Committee, as follows:
- rebalance asset allocations towards the policy targets when circumstances make it appropriate to do so and, as part of this rebalancing, to re-allocate assets among investment advisory firms, and;
- terminate an investment advisory firm when the Investment Office determines that immediate termination is required, and;
- add to or reduce an allocation to an investment advisory firm, up to $5 million for accounts over $25 million and up to $10 million for accounts over $50 million, when, in the opinion of the Investment Office, specific opportunities exist to justify an increase or decrease in the allocation.
Revised: August 2005
