Investment Policy Statement
Purpose
This Investment Policy Statement (IPS) is adopted by the Board of Directors (the “Board”) of the La Crosse Area Community Foundation (the “Foundation”). The IPS outlines the general philosophy and policies that govern the prudent management and investment of the Foundation’s financial assets. The assets of which the Board expects to maintain into perpetuity in order to carry out the Foundation’s mission. The invested assets of the Foundation are intended to meet the funding requirements of the organization’s philanthropic activities as well as general operating requirements. This statement is also intended to give all parties with responsibilities related to this process a common framework and direction within which to manage, monitor and evaluate the Foundation’s investment portfolio.
This policy was written to be sufficiently specific to be meaningful, yet flexible enough to be practical. It is expected this policy will be reviewed annually by the Finance & Investment Committee of the Board of Directors of the Foundation to ensure the relevance of its contents to current capital market conditions and the needs of the Foundation.
Scope
This IPS applies to investment of all “funds” of the Foundation irrespective of designation for reporting or accounting purposes. It is inclusive of permanently restricted, temporarily restricted and pass-through funds, as well as administrative operating accounts of the Foundation.
The IPS is limited to and governs only investment of assets. Rules and guidelines of the Foundation regarding Gift Acceptance Policy and Distribution/Spending Policy or other financial management policies may be contained in separate documents and should be consulted in conjunction with the IPS as they are necessarily interdependent.
Procedure
DELEGATION OF AUTHORITY/RESPONSIBILITY
I. Duties of all Involved Parties
All individuals covered by this IPS are expected to act with the care, skill, prudence and diligence that an ordinary prudent person in like capacity and familiar with such business matters would exercise in the investment of assets of institutions of like character and with like aims.<
Individuals and parties appointed, hired or otherwise engaged by the Foundation for the purpose of management and investment of its assets occupy a position of special trust and confidence. They are presumed to be experts in their respective disciplines and are held to the standards of care of their profession.
Actions and decisions made in executing this policy must be based solely in the best long-term interests of the Foundation. Individuals and organizations must disclose all circumstances of material fact regarding any potential conflict of interest, including any compensation received.
II. Board of Directors
The Board bears the overall fiduciary responsibility for the Foundation. The specific duties and responsibilities of the Board in relation to the Foundation’s financial assets shall be to:
- Review and approve the IPS annually.
- Adhere to the guidelines as defined in the Wisconsin Uniform Prudent Management of Institutional Funds Act (WUPMIFA) and all other applicable regulations.
- Appoint and empower a Finance and Investment Committee that shall be responsible for the Foundation’s financial and investment guidance, monitoring and oversight.
- Retain additional specialists, as needed, such as attorneys, auditors and others to assist in meeting its responsibilities and obligations to administer Foundation assets prudently.
III. Finance and Investment Committee
The Finance and Investment Committee recommends the investment policy and shall be responsible for its periodic guidance, monitoring and oversight. The specific duties and responsibilities of the Finance and Investment Committee in relation to the IPS include:
- Design and approval of investment objectives and guidelines.
- Annual review, and amendment if necessary, of the IPS.
- Selection, retention, oversight and dismissal of service providers (such as advisors/consultants, investment managers, attorneys, etc.) as deemed necessary by the Committee to assist with discharge of its investment functions.
- Quarterly meeting and review with professionals retained by the Committee.
- Performance monitoring of assets invested under this policy.
- Ensure compliance with the IPS by all entities participating in investment of Foundation assets.
- Quarterly reporting to the Board regarding activities of the Committee and investment performance.
- Provide relevant information to the investment managers concerning the Foundation’s resources and any special considerations pertaining to any particular assets of the Foundation.
- Ensure that the investment management fees are appropriate and reasonable in relation to the assets, the purposes of the Foundation, and the skills available to the Foundation.
- Oversight of the executive director who is responsible for the day-to-day administrative details of the investment activities of the Foundation.
IV. Responsibility for Accounts
- By separate agreement, the Trustee of the Foundation’s Combined Trust Account shall maintain custody and be responsible for safe keeping of all investment accounts of the Trust. The Trustee shall discharge the regular duties required by law of a Trustee and duties as outlined in the separate Declaration of Trust agreement.
- Corporation Accounts are governed by the relevant Bylaws of the Foundation.
V. Investment Advisor/Consultant(s)
An investment consultant can be selected and retained by the Committee but is optional based upon the needs of the Committee. The consultant functions as an advisor to the Committee, giving guidance concerning investments that are consistent with objectives, policies and constraints as established in the IPS. A consultant may be hired on an ongoing long-term basis is to help manage all assets of the Foundation or retained for a smaller project or engagement. If the Committee chooses not to use the services of an independent consultant, the Committee itself will discharge the duties normally delegated to a consultant as required from time to time.
VI. Investment Manager(s)
The committee may engage the services of one or more investment managers. Duties of the investment manager(s) include:
- Exercise discretionary investment management including decisions to buy, sell, or hold individual securities, and to alter asset allocation within the guidelines established in this IPS.
- Reporting, on a timely basis and on a schedule agreed to with the Committee, investment performance results.
- Coordinating with the Foundation/Committee of liquidity needs and investment time horizon of funds under management and positioning the portfolio appropriately to meet these needs.
- Communicating any major changes to economic outlook, investment strategy, compliance with this document or any other factors which affect implementation of investment process, or the investment objectives progress of the Foundation’s investment management.
- Communicating with the Committee all significant changes pertaining to the Foundation assets it manages or the firm itself. Examples include changes in ownership, organizational structure, financial condition, professional staff or investigations by regulatory authorities.
VII. Individually Managed Corporation Accounts
At the Foundation’s discretion, and with its advance approval, the assets of a particular component fund of the Foundation’s Corporation may be managed by an Investment Manager recommended by the fund’s donor or advisor provided the value of the fund meets the following minimum criteria: An initial value of $500,000 and balance of $250,000 or more for the first 5 years. The fund can be established by the Foundation provided the Investment Manager satisfies the Foundation’s criteria. Any such Investment Manager must acknowledge and agree to comply with this IPS. Manager performance will be reviewed on a similar basis as the Foundation’s other Investment Managers.
Board approval of a donor’s recommended Investment Manager is contingent on the execution of a written agreement that meets the standards for Investment Managers. Upon the death of the fund’s original donor, the agreement between the Foundation and the Investment Manager may continue for a period of up to two years if the donor has so requested in writing. Additional extensions of the agreement must be approved by the Board.
Donors and fund advisors may not act as Investment Managers and the Investment Committee will not approve any Investment Manager who is a member of the donor’s family or any investment firm controlled by the donor or Investment Advisor either individually or together with members of the person’s family.
See separate ‘Individually Managed Account Policies and Guidelines’ for more detail.
DESCRIPTION OF INVESTMENT POOLS AND OBJECTIVES
Investment Pools
The Foundation maintains three separate investment pools: The Growth Pool, Impact Pool, and Money Market Pool. Each of these pools, and related investment objectives, are defined as follows:
Growth Pool
This pool is intended to hold perpetual funds. The Foundation believes the achievement of investment returns in this pool should be viewed in a long-term context. It recognizes that rates of return are volatile on a year-by-year basis and that achievement of the investment objectives for this pool will not progress uniformly over time. Historical performance results and future expectations suggest that equity securities will provide higher total investment returns than fixed-income securities over a long-term investment horizon. The primary objective of the Growth Pool is to provide a total return that after investment expenses should equal or exceed an average annual rate of return of the Foundation’s spending rate (historically 4—5%) + inflation (as measured by the CPI—U) plus a 1% premium.
IMPACT POOL
This pool is only available to non-endowed funds. For greater emphasis on capital preservation while maintaining some potential for appreciation, the Impact Pool provides donors with opportunities for growth with regular grantmaking. The objective of the Impact Pool is a rate of return in excess of the US core bond market with minimal equity exposure.
Money Market Pool
This pool is designed to preserve principal and provide current income and liquidity by investing in high-quality, short-term financial instruments. The Money Market Pool is available only to non-endowed funds. This pool is intended for temporary funds only, with a time horizon between 0-3 years. The objective of the Money Market Pool is the preservation of capital and high liquidity.
MONITORING AND EVALUATION PROCEDURES
The objective of the evaluation and review process is to monitor the progress of the Foundation’s investment portfolio in achieving the Foundation’s set investment objectives along with monitoring the performance of investment manager(s). The Committee will meet to review performance on a quarterly basis.
I. Investment Performance
The Committee will utilize at least two benchmarks that help evaluate performance for the long-term pool. Both are broad-based market benchmarks representing a mix between equities and fixed income. The Portfolio benchmark matches the target portfolio allocation and the Strategic benchmark will match the actual dynamic portfolio allocation utilized. Other mixed benchmarks or asset class specific benchmarks will also be considered, including the peer blended benchmark.
II. Benchmarks
The total return of each portfolio is expected to meet or exceed the performance of a Policy Benchmark for a similarly balanced composite index over the long run and should see similar returns on an annualized basis. The committee will regularly monitor performance on the 1, 5 and 10 year returns of the portfolios and benchmarks.
III. Investment Managers
The committee will review the investment manager(s) on an ongoing basis and evaluate the manager(s) based on the following criteria:
- Compliance to this IPS
- Satisfactory performance in relation to the objectives in this IPS
- Availability of reports that provide appropriate data to facilitate a meaningful performance review
- Offers a fee structure that is competitive and reasonable
- Whether any additional value regarding performance, service and support of the Foundation is being added
Related Resources
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