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August 2011<br />
CSOONLINE<br />
<strong>The</strong> <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong><br />
By John S. Griswold, Executive Director, Commonfund Institute<br />
and William F. Jarvis, Managing Director, Commonfund Institute<br />
Csoonline.com<br />
Executice CEO and Founder - Sean Stengle<br />
Number of Copies: As indicated in the Invoice Submission Clause in the contract.<br />
“Chance favors only the prepared mind.” - Pasteur<br />
Introduction.<br />
Successful investing for long-term funds requires a strategic plan. This is true despite –<br />
indeed, because of – the fact that the future is unknowable. <strong>The</strong> plan must be specific,<br />
embodying in concrete terms the best thinking of the board of trustees about the investment<br />
pool, its goals and purposes; but it also needs to be sufficiently flexible to<br />
guide the board through environments that may be very different from those prevailing<br />
at the time of its adoption.<br />
This paper reviews the key features of such a plan – the investment policy statement.<br />
Since investment policy statements are as varied as the organizations they serve,<br />
there is no one-size-fits-all solution. We do, however, include an appendix with two<br />
templates that may serve as examples for those who find it helpful to work from<br />
an existing model.<br />
For institutions with endowed perpetual funds, one of the gravest risks is that, in<br />
periods of economic turmoil, crucial investment decisions may be made in haste,<br />
under pressure, and without adequate consideration of the long-term consequences.<br />
During the working lifetimes of many of today’s trustees, market crises have occurred<br />
at a rate of around two per decade. In such cases, the temptation to listen to urgent<br />
voices claiming that ‘this time is different’ has been very difficult to resist. For trustees,<br />
the risk to the fund of a permanent loss of purchasing power as a result of poor<br />
investment decisions is compounded by the potential for after-the-fact secondguessing<br />
and possible legal challenge by attorneys general, donors and beneficiaries.<br />
<strong>The</strong> investment policy statement sets forth in writing the operating plan of the board<br />
of trustees for the management, investment and spending of the investment pool.<br />
While strategic in approach and long-term in scope, the investment policy statement<br />
also sets forth parameters or ranges within which more tactical actions may be taken.<br />
Composed in calm to be used in crisis, it is both a shield, guarding trustees from the<br />
pressure to make unwise decisions in an atmosphere of panic, and a sword, by which<br />
the board establishes the territory it intends to occupy and cultivate, through its<br />
investment practice, as fiduciaries for the institution.
Components of the investment policy statement.<br />
Endowed institutions differ in their missions, capabilities and resources, and<br />
investment policy statements naturally mirror these differences. In that sense, there<br />
is no single ‘right’ investment policy statement; each institution’s board must craft<br />
a statement that responds to the needs of the institution and the preferences and risk<br />
tolerances of the trustees. Annual review of the statement by the board can help to<br />
ensure that it remains an appropriate distillation of the institution’s investment<br />
philosophy and practice.<br />
It can be said, however, that a properly-drafted investment policy statement should<br />
address, at a minimum, the following issues:<br />
• What is the purpose of the investment pool? What is its role in supporting<br />
the mission of the institution?<br />
• Is the fund intended to be perpetual in duration, or will it have a finite life?<br />
To what extent is maintenance of purchasing power an explicit goal?<br />
• Who will have responsibility for investment decisions? What are the required<br />
qualifications of these individuals, and how are they to be recruited?<br />
• If the board of trustees intends to delegate its authority to an investment<br />
committee or some other body or entity, how should that delegation be<br />
evidenced and documented? Which investment decisions, if any, should<br />
be delegated to outside advisors or investment managers? How should these<br />
and other service providers be selected and monitored?<br />
• What is the investment pool’s target return, both in nominal and real<br />
(i.e., after inflation) terms? What is its expected annual contribution as<br />
a proportion of the institution’s operating budget or other relevant criterion?<br />
• What should be the overall investment strategy of the fund, including asset<br />
allocation targets and ranges, permitted and prohibited investment strategies<br />
and instruments?<br />
• What kind and degree of risk is the board prepared to take in pursuit of its<br />
investment goals? How are risks to be defined and measured?<br />
• How much liquidity should be maintained by the fund, either for investment<br />
needs within the fund or for wider institutional purposes?<br />
2 ©2011 COMMONFUND
• How much of the endowment should be spent and how much reinvested?<br />
What rules determine how this amount is calculated?<br />
• To what extent is the fund expected to assist in maintaining the balance sheet<br />
of the institution (for example, by supporting its credit rating)?<br />
In the following sections, we review and discuss each of these issues.<br />
Discussion.<br />
Purpose of the investment pool. Endowments are typically composed of individual<br />
funds given by donors over time, usually to support particular activities or missions<br />
of the organization. Apart from these restricted funds, donors sometimes give with<br />
no restriction as to purpose. In addition, institutions themselves may elect to treat<br />
operating surpluses, unrestricted bequests and other similar amounts as ‘quasiendowment’,<br />
to be invested and spent alongside other endowed funds.<br />
<strong>The</strong>se differing purposes influence the investment strategy for the funds. For example,<br />
a fund dedicated to providing scholarships at a college requires a steady flow of cash,<br />
year in and year out; ideally, the amount should not only remain steady but should<br />
rise with inflation. A fund, on the other hand, that is intended to cover the cost of<br />
awarding an occasional prize every five years does not have the same need for ready<br />
cash. <strong>The</strong>se two funds have different tolerances for year-to-year fluctuation in their<br />
value and for liquidity, among other characteristics; and their asset allocation may,<br />
as a result, be different.<br />
Duration of the pool: perpetual or not? Historically, most donors to endowments<br />
have contemplated a perpetual life for their funds. In recent years, however, some<br />
endowments – including some very large ones such as the Bill and Melinda Gates<br />
Foundation – have been established with a finite life. <strong>The</strong> expected lifespan, or term,<br />
of a fund is an important factor to consider when crafting an investment policy.<br />
In this context, the maintenance of purchasing power, also called intergenerational<br />
equity, becomes an issue of key importance for a perpetual fund. While donors may<br />
occasionally state that intergenerational equity is not a goal for their fund, under the<br />
Uniform Prudent Management of Institutional Funds Act (UPMIFA), which is the<br />
law in virtually all the states, maintenance of purchasing power is assumed to be<br />
the intention of donors in the absence of a specific provision to the contrary. 1 ©2011 COMMONFUND 3<br />
1<br />
For a summary discussion of UPMIFA and its requirements, see Sedlacek and Jarvis, “Endowment Spending: Building a<br />
Stronger <strong>Policy</strong> Framework” (2010), pp. 2-4. For other information about the law, see http://www.upmifa.org.
For example, a series of funds to endow the conductor’s and section chairs’ positions<br />
at a symphony orchestra will need to be invested with a perpetual horizon in mind,<br />
including considerations of intergenerational equity. On the other hand, a fund<br />
dedicated to constructing a new concert hall for the symphony ten years from now<br />
does not need to generate any cash during its life and should, accordingly, be<br />
invested using a different strategy (although a fund for ongoing maintenance of<br />
the hall would be perpetual).<br />
Who has responsibility for investment decisions? Authority over institutional investment<br />
pools such as endowments, foundations and pension funds resides with the<br />
governing board, the members of which are fiduciaries. Under common-law concepts<br />
of fiduciary duty, and also under UPMIFA, whoever has responsibility for investment<br />
decisions must exercise prudence. 2 UPMIFA sets forth a list of factors that those<br />
responsible for endowed funds must observe in managing and investing, and states<br />
that “a person that has special skills or expertise, or is selected in reliance upon the<br />
person’s representation that the person has special skills or expertise, has a duty to<br />
use those skills or that expertise in managing and investing institutional funds.” 3<br />
Thus, while the law is flexible in not demanding that board or investment committee<br />
members exercise expertise that they do not possess, it also implicitly disapproves of<br />
arrangements whereby an illustrious individual lends his or her name without actually<br />
participating in debate and decision-making.<br />
Apart from purely legal considerations, the task of recruiting a competent and<br />
committed group of individuals to oversee the investment pool requires a nominating<br />
process that acknowledges the seriousness of this portion of the organization’s mission.<br />
If the board as a whole is to retain this responsibility, then trustee nominations should<br />
include an assessment of candidates’ financial literacy and investment-related<br />
experience.<br />
2<br />
UPMIFA § 3(b). http://www.law.upenn.edu/bll/archives/ulc/umoifa/2006final_act.pdf, p. 11.<br />
3<br />
Ibid. § 3(e)(6), p. 13.<br />
4 ©2011 COMMONFUND
Delegation to a committee, a consultant, or a manager. Delegation of the trustees’<br />
responsibilities with respect to a particular fund is permitted under UPMIFA, unless<br />
prohibited by the donor. 4 Under this standard, the board can delegate its fiduciary<br />
responsibility for investment matters to a committee or to outside advisors, but<br />
must exercise prudence in doing so. 5 Upon accepting the delegation, the new<br />
fiduciaries are bound by the same standard as the trustees in carrying out their<br />
new responsibilities. And if an investment committee or similar body is to be<br />
created, the committee chair (who should be a trustee) should seek out members –<br />
whether trustees or not – who have sufficient skill, experience and commitment<br />
to be good fiduciaries for the pool. All of these actions should be evidenced by<br />
appropriate board discussion and action, and recorded in the minutes.<br />
What is the right size for an investment committee, and what kind of individuals<br />
should be asked to serve? Data taken from the most recent NACUBO-Commonfund<br />
Study of Endowments and Commonfund Benchmarks Studies 6 show that the investment<br />
committees of educational institutions, operating charities and nonprofit healthcare<br />
organizations number about 8 voting members on average. Foundations have smaller<br />
committees of around 6 voting members, since for many foundations the committee<br />
is composed of the founder’s family and a few outside advisors. Within the investment<br />
committee, around 4 or 5 members are investment professionals (for foundations,<br />
the number of investment professionals is around 3). Between 2 and 3 members<br />
across all types of institution have alternative strategies experience, a key requirement<br />
for fiduciaries of highly diversified portfolios.<br />
It is thus apparent that in recruiting trustees, investment committee members, and<br />
others who will have responsibility for managing endowment funds, care must be<br />
taken to select individuals who will understand and be able to fulfill their duties as<br />
fiduciaries and will bring their particular skills to bear in overseeing or managing the<br />
funds. It is important to note that, while UPMIFA does not set a minimum standard<br />
for those to whom the responsibility is delegated, it does require that the board, in<br />
choosing those individuals, act prudently. 7 Thus, sound investment policy would<br />
indicate that those to whom the responsibility for managing institutional funds is<br />
assigned (whether trustees or others) should, at a minimum, have some familiarity<br />
with and experience in investment management.<br />
4<br />
Ibid. § 5(a), p. 29.<br />
5<br />
Ibid.<br />
6<br />
Citations are to data for FY2010 drawn from the NACUBO-Commonfund Study of Endowments (NCSE) and the<br />
Commonfund Benchmarks Study volumes on foundations, operating charities and healthcare organizations.<br />
7<br />
Ibid.<br />
©2011 COMMONFUND 5
What about outside investment managers, consultants and other advisors?<br />
Most smaller and mid-sized nonprofit organizations lack the financial and staff<br />
resources to manage their own portfolios, and so must rely on such outside entities,<br />
overseen by volunteer boards of trustees or investment committees that meet several<br />
times a year. Many commentators have criticized this model as lacking in rigor, but it<br />
remains the standard for most nonprofits.<br />
Across the nonprofit sector, internal staff resources are minimal. <strong>The</strong> NCSE and<br />
Benchmarks Study research shows that the average number of full-time equivalent<br />
(FTE) staff overseeing investments is between 1 and 2 FTEs. Only at institutions<br />
with endowments above $300 million do the data show higher staffing levels.<br />
Yet manager use, even by smaller nonprofits, is high: institutions with assets below<br />
$100 million use a total of 9 to 10 managers on average across all asset classes, while<br />
for endowments above $100 million it is not unusual to see 6 to 11 separate<br />
managers hired directly for various alternative strategies, in addition to between<br />
3 and 5 managers for each of the traditional asset classes such as domestic equities,<br />
fixed income, international equities and cash.<br />
Nevertheless, the fiduciary standards outlined above require that the same prudence<br />
be exercised in retaining, monitoring, evaluating and dismissing these advisors as in<br />
all other matters undertaken by the board. And, given the highly diversified portfolios<br />
that underpin the endowment model of investing, it is not surprising that the<br />
NCSE and Benchmarks research shows that between one-quarter and one-third<br />
of institutions have decided to delegate their investment responsibilities, in full or<br />
in part, to outsourced investment providers. Even here, however, the same standards<br />
of prudence and diligence in choosing and monitoring the provider apply.<br />
Target return and endowment dependence. If the board aspires to maintain the<br />
purchasing power of the investment pool over time, then assumptions must be made<br />
about the long-term spending rate from the endowment, the anticipated rate of<br />
inflation and any other costs the fund may incur. As to the spending rate, both<br />
practical experience and economic modeling tools have demonstrated that it is not<br />
possible to spend in excess of five percent of the portfolio each year without suffering<br />
erosion in purchasing power over time. A proxy rate of no more than five percent,<br />
therefore, is frequently used. Inflation has fluctuated considerably over the past<br />
half-century, but in recent years has been negligible; an assumed long-term rate of<br />
three percent is common. And administrative and other costs are typically considered<br />
to add one percent to the expense base. Thus, five plus three plus one, or nine percent,<br />
is often the target return cited as necessary to maintain purchasing power.<br />
6 ©2011 COMMONFUND
It is important to try to reduce this number, because a nominal nine percent return,<br />
year after year, is probably unachievable without incurring a level of risk that most<br />
trustees would deem unacceptably high. Academic research has shown that, in the<br />
United States, the long-term equity premium over the risk-free rate of return has<br />
averaged approximately six percent, of which two percent has been dividends rather<br />
than capital appreciation. 8 To the extent that a portfolio is diversified away from U.S.<br />
equity securities – for example, into fixed income – this long-term return is even lower.<br />
<strong>The</strong>refore, the assumptions for spending, inflation and expenses need to be examined<br />
carefully.<br />
Spending, in particular, is the largest item of these three and is most directly within<br />
the control of the board. <strong>The</strong> NCSE and Benchmarks research shows that policy<br />
spending rates for educational institutions and operating charities average between<br />
4.5 percent and 4.9 percent. Among foundations, the federally-required minimum<br />
annual spending rate of 5 percent for private foundations means that policy<br />
spending rates range between 5.1 percent and 5.5 percent, highlighting the<br />
challenges that face these institutions in maintaining intergenerational equity.<br />
Equally important, when considering long-term return targets, is the degree to<br />
which the institution’s operating budget is dependent upon support from the longterm<br />
investment pool. This ratio of endowment dependence ranges from zero,<br />
at institutions for which the pool is truly a ‘rainy-day fund’, to much higher figures –<br />
for example, the 30-50 percent endowment dependence ratios that are observed<br />
at well-endowed U.S. private colleges and universities. <strong>The</strong> NCSE and Benchmarks<br />
research shows that endowment dependence ratios at institutions of higher education<br />
average 10.5 percent, from a low of just 5.3 percent at institutions with endowments<br />
under $25 million to a high of 17.1 percent at those with institutions with assets<br />
over $1 billion. For operating charities, the average endowment dependence is even<br />
higher, at 38.3 percent.<br />
An endowed institution ideally would like to receive a steady, and steadily increasing,<br />
amount of dollar support each year from its endowment. Where endowment<br />
dependence is high, the institution’s tolerance for volatility in this amount becomes<br />
lower, and the imperative for realism in setting expected returns and acceptable risk<br />
levels becomes correspondingly more urgent.<br />
8<br />
Dimson, Marsh and Staunton, Triumph of the Optimists (2002), pp. 163-175.<br />
©2011 COMMONFUND 7
<strong>Investment</strong> strategy of the fund, asset allocation, and permitted and prohibited<br />
investment strategies and instruments. <strong>The</strong> investment strategy section forms the<br />
conceptual core of the investment policy statement (for operational ease, it may be<br />
contained in an appendix to the main body of the document). Its chief component<br />
is a table in which target allocations for each permitted asset class and strategy are<br />
specified. <strong>The</strong> table also prescribes ranges or bands around the target allocations,<br />
within which they will be permitted to fluctuate. It is important that the ranges not<br />
be so broad that they lack discipline or fail to reflect the actual portfolio construction<br />
preferences and risk tolerances of the institution. For this reason, where possible,<br />
financial modeling using long-term simulation tools should be used to help the<br />
board or investment committee to understand the range of probable outcomes and<br />
risk parameters of various alternative portfolio choices.<br />
Rebalancing is another key component of the asset allocation policy. Different asset<br />
classes and investment strategies will of necessity produce different returns over the<br />
same investment period, with the result that the portfolio’s actual allocations to<br />
each asset class or strategy will become higher or lower than the targets. To the<br />
extent that the allocations move outside the permitted bands as a result of such<br />
market fluctuations, rebalancing is required. Across all the different types of<br />
endowed nonprofits surveyed in the NCSE and Benchmarks research, this practice<br />
is nearly universal: around 80 percent of institutions report having rebalanced their<br />
portfolios during the past fiscal year.<br />
<strong>The</strong> process is somewhat counterintuitive, since it involves selling investments that<br />
have appreciated in value and using the proceeds to purchase investments that have<br />
declined; but the result, from an investment policy point of view, is highly beneficial<br />
as the institution is able to reap gains on successful investments and buy other<br />
investments that are desired components of the portfolio cheaply.<br />
8 ©2011 COMMONFUND
<strong>The</strong> two most frequently used approaches to rebalancing are those in which the<br />
process is conducted a certain number of times a year (calendar-based) and those in<br />
which rebalancing takes place whenever the targets or ranges in the asset allocation<br />
table have been exceeded (target/range-based). In the former the portfolio may be<br />
rebalanced monthly, quarterly, annually or at some other time interval; in the NCSE<br />
and Benchmarks research, around one-fourth of institutions report rebalancing<br />
quarterly. In the latter, as noted above, the rebalancing is triggered when the ranges<br />
or bands are exceeded; around three-fourths to four-fifths of survey participants<br />
report using this method, probably in coordination with one of the calendar-based<br />
alternatives. Rebalancing may also be triggered in response to major gifts or other<br />
changes in cash flow, in order to ensure that the portfolio remains within its permitted<br />
asset allocation ranges. Whichever method is used, it is important that the rebalancing<br />
process itself not become the subject of subsequent debate (apart, that is, from the<br />
annual review of the investment policy). If it is regarded as optional, the board<br />
or committee may be tempted to engage in market timing and the policy will lose<br />
its effectiveness.<br />
<strong>The</strong> investment policy statement should also contain descriptions of permitted and<br />
prohibited asset classes, investment strategies and instruments. <strong>The</strong> purpose of this list<br />
is to enable the board or committee to focus on the role of the various strategies in the<br />
context of the portfolio and its goals. To this end, it should include not only strategies<br />
that the institution intends to use immediately, but those that it may use in the future.<br />
For example, the statement might permit certain classes of alternative investments<br />
while assigning them a weighting of zero in the current portfolio. Going through the<br />
work of considering and describing their potential role and advantages enables the<br />
board or committee to be prepared for the time when a place will be made for them<br />
in the portfolio.<br />
©2011 COMMONFUND 9
<strong>The</strong> question of permitted and prohibited investment strategies and instruments has<br />
gained in importance today because the complex nature of many investment products<br />
can make it difficult for a client to understand clearly what investment practices are<br />
being employed by a manager. Many disclosure documents and offering memoranda<br />
are lengthy and densely written, and can as a result be hard to understand, even if the<br />
information in them is accurate. <strong>The</strong> board should not find itself in a situation where,<br />
as a result of this complexity, the language in the investment policy conflicts with<br />
decisions actually taken. If, for example, an investment policy statement prohibits<br />
instruments such as derivatives or strategies such as short selling, the committee<br />
should be careful not to invest with a hedge fund that uses derivatives and routinely<br />
goes short unless it has first inserted language in the investment policy statement<br />
to allow for the use of derivatives and short-selling as part of a hedging strategy.<br />
<strong>The</strong> institution should know what it is investing in and be sure that permissions and<br />
prohibitions in the investment policy statement reflect the reality of the decisions<br />
being made for the portfolio.<br />
Risks the board is prepared to take in pursuit of its investment goals. Historically,<br />
most investment policy statements treated investment risk as an undesirable by-product<br />
of investing rather than as an essential precondition to earning investment returns.<br />
References to risk typically spoke of it as something to be ‘managed’ in a general sense,<br />
while avoiding specific metrics or parameters. Where risk was defined in investment<br />
policy statements, it was usually as volatility of returns, measured in terms of standard<br />
deviation – a definition first used by Markowitz in his Modern Portfolio <strong>The</strong>ory dating<br />
from the 1950s.<br />
<strong>The</strong> 2007-2009 market collapse, and the subsequent (and as yet incomplete) recovery,<br />
have brought home to fiduciaries the inadequate nature of this definition and the<br />
multiple nature of the risks that are undertaken in investing. <strong>Investment</strong> risk is now<br />
understood to comprise a wide variety of potential threats, chief among which is the<br />
risk of loss that would be permanent or require an unacceptably long time to recoup.<br />
Financial models are available to enable fiduciaries to estimate the probability and<br />
range of possible losses associated with given investment strategies over time, but<br />
it is important to emphasize that while risk can be modeled and to some degree<br />
understood, it cannot be eliminated if the portfolio’s goal is to achieve a long-term<br />
return after spending and costs that is in excess of inflation. <strong>The</strong> question for<br />
fiduciaries, then, becomes whether the risks described are acceptable. How many<br />
years in twenty, for example, will the board be faced with a decline in dollar spending<br />
from year to year? What is the projected worst loss, and how many years would be<br />
required for the portfolio to recover its purchasing power? <strong>The</strong>se important questions<br />
should be asked and resolved as part of the investment policy formation process.<br />
10 ©2011 COMMONFUND
Liquidity: How much and for what purposes? During the financial crisis, many<br />
nonprofits found themselves with insufficient liquidity. For these institutions, the<br />
normal process of selling investments to raise cash for payroll and ongoing operations<br />
became a harrowing race to the bottom as sellers greatly outnumbered buyers and even<br />
high-quality securities could not be sold except at steep discounts from their previous<br />
prices. This situation called into question the validity of the ‘Endowment Model’,<br />
which uses a highly diversified portfolio with a higher-than-usual tolerance for<br />
illiquidity. Under the Endowment Model, endowment cash was held in small<br />
amounts, primarily to satisfy capital calls for partnership investments and to provide<br />
‘dry powder’ to take advantage of attractive investment opportunities. Cash and<br />
near-cash allocations in excess of these requirements were viewed as a drag on<br />
performance and kept to a minimum. <strong>The</strong> crisis greatly increased the need for<br />
liquidity at the time when it was least available, and led to a reassessment of the place<br />
of cash in the endowment. Data from the NCSE and Benchmarks Studies show that<br />
most institutions now include a larger allocation to endowment cash in their policy<br />
portfolios – between 5 percent and 9 percent – than at any time in the past ten years.<br />
Spending versus reinvestment and the rules guiding it. Endowments have different<br />
purposes and uses for different organizations. At one end of this broad spectrum are<br />
institutions whose philosophy is to spend nothing and simply let the investment pool<br />
grow. <strong>The</strong>se endowments are typically not composed of restricted funds (or at least<br />
not of those that require regular spending) and their institutions are, by definition,<br />
not heavily dependent on the endowment for support of the operating budget.<br />
It may be that trustees want to build up a rainy-day fund or have some other long-term<br />
goal in mind, such as a major capital project. At the other extreme are those funds<br />
that are not intended to be perpetual in duration, where spending during a set period<br />
is part of the donor’s purpose. As noted above, some very large private foundations<br />
are currently operating on this basis.<br />
Occupying the middle ground, and defining the vast majority of institutions and assets,<br />
are those institutions whose goal is that the endowment provide a source of perpetual<br />
support for the mission of the institution. <strong>The</strong> touchstones for this goal are prudent<br />
investing and spending, concepts that inform UPMIFA. Under UPMIFA, trustees may<br />
spend or accumulate as much of an endowment fund—including principal or income,<br />
realized or unrealized appreciation—as they deem prudent, taking into account the<br />
intended duration of the fund, the fund’s purposes, economic conditions, expected<br />
inflation or deflation, investment returns, other institutional resources and the<br />
institution’s investment policy. 9 This direct reference to investment policy highlights the<br />
central role of the statement in forcing an explicit consideration and articulation, in the<br />
statement itself, of the respective roles of investment and spending in the endowment.<br />
9<br />
UPMIFA § 4(a). http://www.law.upenn.edu/bll/archives/ulc/umoifa/2006final_act.pdf, p. 19.<br />
©2011 COMMONFUND 11
Role of the fund in supporting the institution’s balance sheet. Most endowments have<br />
as their primary goal the support of the institution’s operating budget. In some cases,<br />
however, an endowment may have different, or even multiple, roles. For example,<br />
unrestricted or quasi-endowment may be pledged to secure a credit line, or it may<br />
support a bond rating. In the case of nonprofit healthcare organizations, bond rating<br />
agencies have requirements for liquidity and underlying assets; these considerations<br />
affect asset allocation, and must be worked into the organization’s risk and return<br />
expectations. In this sense, the question of the purpose of the investment pool, which<br />
we considered at the outset, continues to inform the endowment management<br />
process even in areas that are not directly related to investment decision-making.<br />
Indeed, there is a strong case to be made for linking the investment policy not only<br />
with the institution’s balance sheet but also with its long-term strategic plan. A growing<br />
number of institutions are doing this, and many are also addressing gifts and debt<br />
either in their investment policy or in separate but coordinated policy documents.<br />
12 ©2011 COMMONFUND
Conclusion.<br />
In the past, many investment policy statements gave relatively cursory treatment to<br />
risk, its quantification and its potential impact on the asset pool. <strong>The</strong> market collapse<br />
and credit crisis of 2007-2009 demonstrated that many institutions’ portfolios carried<br />
unacknowledged risks, that their risk profiles in general were higher than they thought,<br />
and that the risk tolerance of their fiduciaries was lower than acknowledged. Today,<br />
then, it is entirely appropriate to put risk at the top of the process of investment policy<br />
development.<br />
Financial models, as the crisis demonstrated, are anything but infallible and, when<br />
consulted, must be used with care and a healthy degree of skepticism. It is nonetheless<br />
true that the results of an appropriate simulation or modeling study can assist<br />
fiduciaries in going beyond traditional risk definitions such as volatility to examine<br />
such critical parameters as the risk of permanent loss, year-to-year declines in spending,<br />
and recovery periods. <strong>The</strong>se metrics both enable and force a discussion about tolerable<br />
levels of risk, the conclusions from which can be used to guide the construction of<br />
a range of potential portfolios that embody those risks that are deemed acceptable.<br />
Projected returns from these portfolios are an outcome which, if considered<br />
insufficient, indicate either acceptance of lower contributions for the acceptable<br />
level of risk or mandate a more robust discussion about the relationship between risk<br />
assumption and needed long-term returns.<br />
Thus, in this proposed structure, instead of starting with return, committees work<br />
toward it. If, ultimately, the projected range of returns is seen as ‘too low’ compared<br />
to anticipated institutional needs, then the fiduciaries must either reconcile themselves<br />
to the fact that the target return is beyond their reach given their risk limits, or accept<br />
the necessity of embracing additional risks and explicitly acknowledge them in the<br />
investment policy statement.<br />
©2011 COMMONFUND 13
Appendix<br />
Sample <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong> Templates<br />
This section contains two templates for the Board of Trustees or <strong>Investment</strong><br />
Committee of an endowed nonprofit organization to use in crafting an investment<br />
policy statement.<br />
<strong>The</strong> Risk-based <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong> is designed for organizations with access<br />
to financial simulation and modeling tools (sometimes called Monte Carlo models)<br />
that can be used to estimate ranges of future returns for given portfolio choices and create<br />
“stress-testing” scenarios to examine the performance of portfolios in illiquid or<br />
non-normal market environments. This approach requires more intensive quantitative<br />
work on the part of the Board or Committee, usually in partnership with the organization’s<br />
investment advisor; the result is a more dynamic investment policy process that<br />
places risk and liquidity considerations on an equal footing with portfolio returns in<br />
making asset allocation and spending decisions.<br />
<strong>The</strong> Traditional <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong> is designed for organizations that do not<br />
have access to, or choose not to use, the financial simulation and modeling tools employed<br />
in the Risk-based <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong>. It places asset allocation at the<br />
center of the investment policy, does not focus on multiple levels or types of risk parameters<br />
to the same degree as the Risk-based <strong>Statement</strong>, and does not require the same<br />
degree of dynamic involvement by the Board or Committee in the investment process.<br />
Both templates comprise a main body, which forms the permanent text of the <strong>Statement</strong>;<br />
this is followed by an appendix containing the Operating Guidelines that set<br />
forth the working parameters to be used by the Board or Committee in managing the<br />
portfolio. This structure is intended to facilitate the Committee’s annual review of the<br />
<strong>Statement</strong>, and to make the process of revision relatively simple and clear.<br />
Both statements also incorporate references to the investment, fiduciary and spending<br />
standards of the Uniform Prudent Management of Institutional Funds Act (UPMIFA),<br />
which is the law in virtually all states of the United States. It is recommended that an<br />
institution consult its counsel to confirm that the <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong> conforms<br />
to the version of UPMIFA adopted in its state.
Template I:<br />
Risk-based <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong><br />
[NAME OF INSTITUTION]<br />
Csoonline <strong>Investment</strong>s Fund Fund on on Confidential Confidential Credit<br />
<strong>Statement</strong><br />
Credit<br />
of <strong>Investment</strong> <strong>Policy</strong><br />
Csoonline <strong>Investment</strong>s Fund on Confidential Credit<br />
<strong>Statement</strong> of of <strong>Investment</strong> <strong>Investment</strong> <strong>Policy</strong> <strong>Policy</strong><br />
General: <strong>The</strong> contractor shall submit claims for reimbursement in the manner and format described herein and as illustrated in the<br />
sample General: invoice/financing <strong>The</strong> contractor request. shall submit claims for reimbursement in the manner and<br />
Format: herein format<br />
Standard described as Form illustrated 1034,<br />
herein<br />
"Public the Voucher<br />
and sample as<br />
for<br />
illustrated<br />
Purchases invoice/financing and Services<br />
the sample<br />
Other request. Than<br />
invoice/financing<br />
Personal," and Standard<br />
request.<br />
Form 1035, "Public<br />
Voucher for Purchases and Services Other Than Personal-- Continuation Sheet," or reproduced copies of such forms marked<br />
ORIGINAL should be used to submit claims for reimbursement. In lieu of SF-1034 and SF-1035, claims may be submitted on the<br />
payee's letter-head or self-designed form provided that it contains the information shown on the sample invoice/financing request.<br />
General: <strong>The</strong> contractor shall submit claims for reimbursement in the manner and format described<br />
Format: Standard Form 1034, "Public Voucher for Purchases and Services Other Than Personal," and<br />
Standard Form 1035, "Public Voucher for Purchases and Services Other Than Personal-- Continuation<br />
Sheet," or reproduced copies of such forms marked ORIGINAL should be used to submit claims for<br />
reimbursement. Format: Standard In lieu Form of SF-1034 1034, "Public and SF-1035, Voucher claims for Purchases may be submitted and Services on the payee's Other Than letter-head or<br />
self-designed Personal," and form Standard provided that Form it contains 1035, the "Public information Voucher shown for on Purchases the sample and invoice/financing<br />
Services<br />
request. Other Than Personal-- Continuation Sheet," or reproduced copies of such forms<br />
marked ORIGINAL should be used to submit claims for reimbursement. In lieu of<br />
SF-1034 and SF-1035, claims may be submitted on the payee's letter-head or selfdesigned<br />
Legal Fees. Should<br />
form provided<br />
a dispute between<br />
that it<br />
the<br />
contains<br />
named Parties<br />
the information<br />
arise lead to<br />
shown<br />
legal action,<br />
on the<br />
the prevailing<br />
sample<br />
Party<br />
shall be entitled to any reasonable legal fees, including, but not limited to attorneys’ fees.<br />
invoice/financing request.<br />
Legal Fees. Should a dispute between the named Parties arise lead to legal action, the prevailing Party shall be entitled to any<br />
reasonable legal fees, including, but not limited to attorneys’ fees.<br />
Legal Fees. Should a dispute between the named Parties arise lead to legal action,<br />
the prevailing Party shall be entitled to any reasonable legal fees, including, but not<br />
limited to attorneys’ fees.<br />
Adopted: [Date]<br />
Aug. 30th, 2023<br />
<strong>The</strong> Financial Advisor shall perform the services in compliance with the terms and conditions of the Agreement.
Table of Contents<br />
<strong>Statement</strong> of Purpose............................................................................................4<br />
General Principles ................................................................................................4<br />
Roles and Responsibilities.....................................................................................4<br />
<strong>Policy</strong> Review .......................................................................................................5<br />
Goals and Objectives............................................................................................5<br />
Objectives of the Fund .............................................................................5<br />
<strong>Investment</strong> Philosophy .............................................................................6<br />
Modeling Assumptions and Process..........................................................6<br />
<strong>Investment</strong> Policies and Procedures ......................................................................6<br />
Operating Guidelines ...............................................................................6<br />
Risk and Liquidity....................................................................................7<br />
<strong>Investment</strong> <strong>Policy</strong> .....................................................................................8<br />
Asset Allocation, <strong>Investment</strong> Strategies,Guidelines and Restrictions........10<br />
Spending ................................................................................................11<br />
Appendix A: Operating Guidelines....................................................................12<br />
<strong>Investment</strong> <strong>Policy</strong> Metrics ..........................................................12<br />
Hypothetical Target Asset Allocation ..........................................13<br />
<strong>Investment</strong> Strategies, Guidelines and Restrictions .....................14<br />
Page<br />
©2011 COMMONFUND 3
<strong>Statement</strong> of Purpose<br />
<strong>The</strong> purpose of this <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong> (together with its Appendix, the<br />
“<strong>Statement</strong>”) is to set forth the policies and procedures that shall guide the Board of<br />
Trustees (the “Board of Trustees” or the “Board”) of [name of institution] (“XYZ”) in<br />
supervising and monitoring the management of XYZ’s investable assets (the “Fund”).<br />
General Principles<br />
<strong>The</strong> risk parameters and related return objectives set forth in this <strong>Statement</strong> shall<br />
form the basis for the Fund’s investment strategy, as more fully described herein.<br />
XYZ shall diversify the investments of the Fund unless the Board and, if applicable,<br />
the <strong>Investment</strong> Committee (the “<strong>Investment</strong> Committee” or the “Committee”), after<br />
appropriate deliberation, reasonably determine that because of special circumstances<br />
the purposes of the Fund are better served without diversification.<br />
<strong>The</strong> Fund shall be managed in accordance with high standards of fiduciary duty and<br />
in compliance with applicable laws and regulations. 10<br />
Standards for risk, return, asset allocation, diversification and liquidity shall be<br />
determined from a strategic perspective and measured over successive market cycles.<br />
Roles and Responsibilities<br />
If the Board of Trustees elects to oversee investment matters directly, it shall<br />
undertake the roles and responsibilities prescribed for the <strong>Investment</strong> Committee<br />
herein. Otherwise, the <strong>Investment</strong> Committee shall implement the management<br />
process and monitor the Fund in accordance with this <strong>Statement</strong>. <strong>The</strong> Chair of the<br />
Committee shall be a current member of XYZ’s Board of Trustees; other Committee<br />
members need not be Trustees.<br />
<strong>The</strong> <strong>Investment</strong> Committee, acting pursuant to this <strong>Statement</strong> and to instructions<br />
from the Board of Trustees, shall have direct responsibility for the oversight and<br />
management of the Fund and for the establishment of investment policies and<br />
procedures.<br />
10<br />
Including but not limited to the version of the Uniform Prudent Management of Institutional Funds Act<br />
enacted in this state, if applicable.<br />
4 ©2011 COMMONFUND
<strong>The</strong> <strong>Investment</strong> Committee shall, as more fully described herein, manage the Fund<br />
via a set of risk and return parameters at the asset class level, combined with policy<br />
liquidity and asset allocation mixes for the portfolio.<br />
In fulfilling its responsibilities under this <strong>Statement</strong>, the <strong>Investment</strong> Committee shall,<br />
among other activities, recommend to the Board of Trustees the hiring and dismissal<br />
of investment managers, fiscal agents and other advisors.<br />
Reports on the Fund shall be provided quarterly to the <strong>Investment</strong> Committee.<br />
<strong>The</strong> [insert title of appropriate staff person] shall be responsible to the <strong>Investment</strong><br />
Committee for maintaining detailed records of all invested funds and for carrying<br />
out the investment policies and procedures established by the Board of Trustees and<br />
the <strong>Investment</strong> Committee.<br />
<strong>Policy</strong> Review<br />
This <strong>Statement</strong> shall be reviewed annually by the <strong>Investment</strong> Committee and any<br />
recommendations for changes presented to the Board of Trustees.<br />
Goals and Objectives<br />
Objectives of the Fund<br />
<strong>The</strong> Fund has a long-term investment horizon. <strong>The</strong> primary investment objectives of<br />
the Fund are to:<br />
• Maintain the real purchasing power of the Fund after inflation, costs and<br />
spending (i.e., achieve “intergenerational equity”);<br />
• Maximize the Fund’s risk-adjusted returns; and<br />
• Provide a stable source of liquidity and financial support for the mission<br />
of XYZ.<br />
©2011 COMMONFUND 5
<strong>Investment</strong> Philosophy<br />
While acknowledging the importance of preserving capital, the Board of Trustees also<br />
recognizes the necessity of accepting risk if the Fund is to be able to meet its long-term<br />
investment goals. It is the view of the Board of Trustees that choices made with respect<br />
to asset allocation and liquidity risk will be the major determinants of investment<br />
performance. <strong>The</strong> Committee shall seek to ensure that the risks taken are appropriate<br />
and commensurate with the Fund’s goals.<br />
Modeling Assumptions and Process<br />
In setting risk and liquidity parameters for the management of the Fund, the<br />
Committee shall use appropriate financial simulation models to determine the Fund’s<br />
portfolio structure and calculate risk levels. In so doing, the Committee shall not<br />
assume that normal market environments will prevail, but shall instead engage in<br />
“stress testing” scenarios for the portfolio. <strong>The</strong>se stress scenarios, including “left tail”<br />
or loss scenarios, shall form the basis for the risk and liquidity parameters that shall<br />
guide the management of the Fund.<br />
<strong>Investment</strong> Policies and Procedures<br />
Operating Guidelines<br />
<strong>The</strong> Fund shall be managed in accordance with the Operating Guidelines for risk<br />
and liquidity described in this section, a template for which is set forth in Appendix A.<br />
Once the Operating Guidelines have been approved by the Board, the <strong>Investment</strong><br />
Committee shall have the authority to manage the Fund within the Operating<br />
Guidelines without further authorization from the Board. <strong>The</strong> following policy<br />
descriptions refer to items in the corresponding sections in Appendix A.<br />
6 ©2011 COMMONFUND
Risk and Liquidity<br />
Definition of Risk: Using appropriate financial simulation models, the Committee<br />
shall begin by specifying its goals for the following parameters over a 20-year period:<br />
– Probability of achieving intergenerational equity (expressed as a percentage)<br />
– Maximum cumulative drawdown for the Fund, from absolute market cycle peak<br />
to trough (expressed as a percentage of asset value)<br />
– Conditional Value at Risk (CVaR) for the aggregate portfolio (expressed in basis<br />
points)<br />
– Risk of not meeting payout requirements (expressed as the percentage of occasions<br />
when the amount spent declines from one period to the next)<br />
Liquidity <strong>Policy</strong>: From the above inputs, the model will produce a target asset<br />
allocation for the Fund, which shall be designed to achieve the above objectives and<br />
entered in Appendix A.<br />
– <strong>The</strong> Committee shall determine the liquidity mix of this target portfolio as of the<br />
present time, in normal market conditions, and in conditions representing market<br />
stress, giving due regard to the operating needs of the institution. <strong>The</strong>se three<br />
liquidity mixes shall be depicted in, respectively, the “Current Portfolio”, “Normal<br />
Market” and “Stress Testing” subsections of the “Liquidity <strong>Policy</strong>” section in<br />
Appendix A.<br />
– <strong>The</strong> overall liquidity constraints of the Fund for the target portfolio shall be closely<br />
derived from the “Stress Testing” subsection, and shall be entered in the “Liquidity<br />
Mix” section of Appendix A.<br />
Current Risk Metrics: <strong>The</strong> Fund shall be managed on a risk-adjusted basis to maintain<br />
purchasing power after inflation, costs and spending, within the “Stress Testing” liquidity<br />
environment.<br />
– On an ongoing basis, the aggregate portfolio shall be managed to the 12-month<br />
average CVaR for the Fund. <strong>The</strong> Committee shall also monitor trends and changes<br />
in this metric.<br />
©2011 COMMONFUND 7
– When possible, the Committee shall monitor and compare the Fund’s performance<br />
relative to:<br />
• Absolute return objectives for the Fund<br />
• <strong>The</strong> respective benchmarks for each asset class or strategy in which the Fund<br />
is invested, as set forth in the asset allocation table in Appendix A<br />
• A representative group of peer institutions identified by the Committee<br />
• A representative group of peer investment managers<br />
<strong>Investment</strong> <strong>Policy</strong><br />
– Asset allocation. <strong>The</strong> Committee shall, consistent with the above sections, invest the<br />
Fund using an asset allocation that is designed to meet the Fund’s long-term goals.<br />
<strong>The</strong> allocation will be based on the objectives of the Fund as set forth above.<br />
– Illiquid investments. Because of their long-term nature, investments in and<br />
commitments to illiquid investment strategies, including but not limited to private<br />
capital, private equity real estate, natural resources, distressed debt and other similar<br />
private investments, shall be analyzed and discussed by the Committee separately.<br />
– Targets and ranges. <strong>The</strong> asset allocation shall be implemented using a policy portfolio,<br />
with target allocations and ranges for each investment strategy. Due to the need<br />
for diversification and the longer funding periods for certain investment strategies,<br />
the Committee recognizes that an extended period of time may be required to fully<br />
implement the asset allocation plan. It is expected that market value fluctuations<br />
will cause deviations from the target allocations to occur.<br />
– Rebalancing. <strong>The</strong> purpose of rebalancing is to maintain the Fund’s policy asset<br />
allocation within the targeted ranges, thereby ensuring that the Fund does not incur<br />
additional risks as a result of having deviated from the policy portfolio. Rebalancing<br />
will take place on a portfolio basis to reduce expenses as far as practicable. More<br />
frequent tactical rebalancing of asset classes within their ranges will also be permitted<br />
in order to take advantage of shorter-term market conditions, as long as such changes<br />
or reallocations do not, in the opinion of the Committee, cause undue risk or<br />
expense to the Fund.<br />
8 ©2011 COMMONFUND
– Standard of conduct. In managing and investing the Fund, the Committee shall:<br />
• act in good faith and with the care an ordinarily prudent person in a like<br />
position would exercise under similar circumstances;<br />
• incur only costs that are appropriate and reasonable in relation to the assets,<br />
the purposes of XYZ and the skills available to XYZ;<br />
• make a reasonable effort to verify facts relevant to the management and<br />
investment of the Fund;<br />
• consider the following factors, if relevant:<br />
(a) general economic conditions;<br />
(b) the possible effect of inflation or deflation;<br />
(c) the expected tax consequences, if any, of investment decisions or strategies;<br />
(d) the role that each investment or course of action plays within the overall<br />
investment portfolio of the Fund;<br />
(e) the expected total return from income and the appreciation of investments;<br />
(f ) other resources of XYZ;<br />
(g ) the needs of XYZ and the Fund to make distributions and to preserve<br />
capital; and<br />
(h) an asset’s special relationship or special value, if any, to the charitable<br />
purposes of XYZ;<br />
• make management and investment decisions about an individual asset not in<br />
isolation, but rather in the context of the Fund’s portfolio of investments as a<br />
whole and as a part of XYZ’s overall investment strategy, including the risk<br />
and return parameters set forth in this <strong>Statement</strong>.<br />
– Delegation. Subject to any specific limitation set forth in a gift instrument, the<br />
Committee may delegate to an external agent the management and investment<br />
of all or part of the Fund to the extent that XYZ could prudently delegate under<br />
the circumstances. <strong>The</strong> Committee shall act in good faith, with the care that<br />
an ordinarily prudent person in a like position would exercise under similar<br />
circumstances in: (1) selecting an agent; (2) establishing the scope and terms of the<br />
delegation, consistent with the purposes of XYZ and the Fund; and (3) periodically<br />
reviewing the agent’s actions in order to monitor the agent’s performance and<br />
compliance with the scope and terms of the delegation.<br />
©2011 COMMONFUND 9
In this regard, the Committee shall engage qualified external professional investment<br />
managers that have demonstrated competence in their respective investment<br />
strategies. <strong>The</strong>se managers shall have full discretion and authority for determining<br />
investment strategy, security selection and timing of purchases and sales of assets<br />
subject to the guidelines specific to their allocation.<br />
– <strong>Investment</strong> manager reporting and evaluation. <strong>The</strong> investment managers responsible<br />
for the investment of the Fund’s assets shall report quarterly on their performance.<br />
Reports shall include, at a minimum, the following information:<br />
• Comparative returns for the Fund assets under management against their respective<br />
benchmarks.<br />
• A complete accounting of all transactions involving the Fund during the quarter.<br />
Each investment manager shall review the portfolio with the <strong>Investment</strong> Committee<br />
at least annually; these review meetings may be supplemented by such other meetings<br />
as the Committee may think necessary.<br />
Asset Allocation, <strong>Investment</strong> Strategies, Guidelines and Restrictions<br />
<strong>The</strong> Fund shall be diversified both by asset class and within asset classes. Within each<br />
asset class, investments shall be diversified further among economic sector, industry,<br />
quality and size. <strong>The</strong> purpose of this diversification is to provide a reasonable assurance<br />
that no single security or class of securities will have a disproportionate impact –<br />
positive or negative – on the overall performance of the Fund.<br />
<strong>The</strong> Operating Guidelines, a template for which is set forth in Appendix A, contain<br />
the Fund’s target asset allocation and range for each asset class or investment strategy,<br />
together with the applicable guidelines and restrictions. Taken together, these<br />
constitute a framework to assist XYZ and its investment managers in achieving the<br />
Fund’s investment objectives at a level of risk consistent with the parameters set forth<br />
in this <strong>Statement</strong>.<br />
10 ©2011 COMMONFUND
Spending 11<br />
– <strong>Policy</strong> spending rate. <strong>The</strong> policy spending rate for the Fund shall be [ ] percent. 12<br />
– Spending formula. <strong>The</strong> amount available for appropriation during each fiscal year<br />
shall be calculated by applying the policy spending rate to the average of the previous<br />
three fiscal years’ beginning-period endowment values.<br />
– Special appropriations and decisions not to spend. Any special appropriation or decision<br />
not to spend the amount indicated by the spending formula must be approved<br />
in<br />
advance by the Board of Trustees.<br />
– Standard of conduct. Subject to the intent of a donor expressed in a gift instrument,<br />
XYZ may appropriate for expenditure or accumulate so much of the Fund as the<br />
Board of Trustees determines to be prudent for the uses, benefits, purposes and<br />
duration for which each of the separate endowments in the Fund is established.<br />
In making a determination to appropriate or accumulate, XYZ shall act in good faith,<br />
with the care of an ordinarily prudent person in a like position would exercise under<br />
similar circumstances and shall consider, if relevant, the following factors:<br />
(1) the duration and preservation of the Fund;<br />
(2) the purposes of XYZ and the Fund;<br />
(3) general economic conditions;<br />
(4) the possible effect of inflation or deflation;<br />
(5) the expected total return from income and the appreciation of investments;<br />
(6) other resources of XYZ; and<br />
(7) XYZ’s investment policy.<br />
11<br />
A spending policy must be based on an institution’s own specific spending requirements. Examples of the main spending<br />
formulas currently in use include spending a percentage of a moving average of market value; a fixed percentage; increasing<br />
spending dollars each year by an inflation measure; and using a hybrid or weighted average approach.<br />
12<br />
Where the version of UPMIFA passed in the state contains the provision creating a rebuttable presumption that spending<br />
above a specified amount is imprudent, the spending rate set forth in this section must fall within the permissible range.<br />
New York state institutions are reminded that the version of UPMIFA passed in that state (New York Prudent Management<br />
of Institutional Funds Act, New York Not-for-Profit <strong>Corp</strong>oration Law (N-PCL) §§ 550-558) establishes requirements for<br />
record-keeping on spending decisions.<br />
©2011 COMMONFUND 11
Appendix A: Operating Guidelines<br />
<strong>Investment</strong> <strong>Policy</strong> Metrics<br />
Modeling Results<br />
NB: <strong>The</strong>se Allocations Are Samples and are Provided for Illustrative Purposes Only<br />
Definition of Risk<br />
Probability of Achieving Intergenerational Equity Conditional VaR for Aggregate Portfolio<br />
(Percent Probability) (60%) (Basis Points) (3-4)<br />
Maximum Drawdown (Absolute)<br />
(Percent of Asset Value) (35%)<br />
Risk of not meeting payout<br />
(Percent Negative Spend)<br />
Liquidity <strong>Policy</strong><br />
• Daily >20%<br />
• Monthly >25%<br />
• Quarterly
Hypothetical Target Asset Allocation<br />
NB: <strong>The</strong>se Allocations Are Samples and are Provided for Illustrative Purposes Only<br />
Minimum Target Maximum Benchmark<br />
Equity Strategies 30% 40% 60% MSCI All Country<br />
Domestic Equity 10% 15% 30% Russell 3000<br />
International Equity 5% 15% 30% MSCI All Country ex U.S.<br />
Private Capital 0% 5% 10% Russell 3000 + 4%<br />
Distressed Debt 0% 5% 10% Merrill Lynch High Yield + 4%<br />
Fixed Income (Deflation Hedging) 10% 20% 40% Barclays U.S. Aggregate<br />
Cash & Equivalents 0% 3% 10% 3 Month T-Bill<br />
U.S. Treasuries 0% 5% 20% Barclays U.S. Treasury Index<br />
Core Bonds 5% 7% 25% Barclays U.S. Aggregate<br />
Global Bonds 0% 5% 15% World Govt Bond Index<br />
Real Assets (Inflation Hedging) 5% 20% 40% CPI + 4%<br />
TIPS 0% 0% 10% Barclays TIPS<br />
Commodities 0% 5% 10% Dow Jones-UBS Commodities<br />
Natural Resources 0% 8% 10% Goldman Sachs Commodities + 4%<br />
Private Real Estate 0% 7% 15% NCREIF 50% Leveraged<br />
Directional & Relative Strategies 10% 20% 35% LIBOR + 5%<br />
Long/Short Directional 0% 10% 20% S&P 500<br />
Relative Value 0% 10% 20% 3 Month T-Bill + 4%<br />
©2011 COMMONFUND 13
<strong>Investment</strong> Strategies, Guidelines and Restrictions<br />
– Equity Securities. <strong>The</strong> purpose of equity investments, both domestic and<br />
international, in the Fund is to provide capital appreciation, growth of income,<br />
and current income. This asset class carries the assumption of greater market<br />
volatility and increased risk of loss, but also provides a traditional approach to<br />
meeting portfolio total return goals. This component includes domestic and<br />
international common stocks, American Depository Receipts (ADRs), preferred<br />
stocks, and convertible stocks traded on the world’s stock exchanges or overthe-counter<br />
markets.<br />
Public equity securities shall be restricted to high quality, readily marketable<br />
securities of corporations that are traded on the major stock exchanges, including<br />
NASDAQ, and have the potential for meeting return targets. Equity holdings must<br />
generally represent companies meeting a minimum market capitalization requirement<br />
of respective asset class profiles with reasonable market liquidity where customary.<br />
Decisions as to individual security selection, number of industries and holdings,<br />
current income levels and turnover are left to manager discretion, subject to the<br />
standards of fiduciary prudence. However, investments in securities of issuers<br />
representing a single major industry (as determined by the Committee) shall not<br />
at time of investment exceed 10 percent of the Fund’s total market value, and<br />
investments in securities of any one issuer shall not at time of investment exceed<br />
5 percent of the Fund’s total market value, unless approved by the Committee.<br />
Within the above guidelines and restrictions, the Fund’s investment managers shall<br />
have complete discretion over the selection, purchase and sale of equity securities.<br />
– Fixed Income Securities. Domestic and international fixed income investments are<br />
intended to provide diversification and a dependable source of current income.<br />
Fixed income investments should reduce the overall volatility of the Fund’s assets<br />
and provide a deflation or inflation hedge, where appropriate.<br />
14 ©2011 COMMONFUND
<strong>The</strong> fixed income asset class includes the fixed income markets of the U.S. and the<br />
world’s other developed economies. It includes, but is not limited to, U.S. Treasury<br />
and government agency bonds, non-U.S. dollar denominated securities, public and<br />
private corporate debt, mortgages and asset-backed securities, and non-investment<br />
grade debt. Also included are money market instruments such as commercial paper,<br />
certificates of deposit, time deposits, bankers’ acceptances, repurchase agreements,<br />
and U.S. Treasury and agency obligations. <strong>The</strong> investment managers shall take into<br />
account credit quality, sector, duration and issuer concentrations in selecting an<br />
appropriate mix of fixed income securities. <strong>Investment</strong>s in fixed income securities<br />
should be managed actively to pursue opportunities presented by changes in interest<br />
rates, credit ratings, and maturity premiums.<br />
Within the above guidelines and restrictions, the Fund’s investment managers<br />
shall have complete discretion over the selection, purchase and sale of fixed income<br />
securities.<br />
– Cash and Equivalents. <strong>The</strong> Fund’s investment managers may invest in the highest<br />
quality commercial paper, repurchase agreements, U.S. Treasury Bills, certificates of<br />
deposit, and money market funds to provide income, liquidity for expense payments,<br />
and preservation of the Fund’s principal value. <strong>Investment</strong>s in the obligations of a<br />
single issuer shall not at time of investment exceed 5 percent of the Fund’s total<br />
market value, with the exception of the U.S. Government and its agencies.<br />
Since the <strong>Investment</strong> Committee does not consider short-term cash equivalent<br />
securities to be appropriate investment vehicles for long-term portfolios, uninvested<br />
cash reserves shall be kept to a minimum except where needed to comply with the<br />
Fund’s liquidity parameters. However, such vehicles are considered appropriate<br />
(i) as a depository for income distributions from longer-term investments,<br />
(ii) as needed for temporary placement of funds directed for future investment<br />
to longer-term investment strategies and (iii) for contributions to the current fund<br />
or for current operating cash.<br />
Within the above guidelines and restrictions, the investment managers shall have<br />
complete discretion over the selection, purchase and sale of cash equivalent securities.<br />
–Alternatives. <strong>The</strong> following alternative strategies shall be permitted investments for<br />
the Fund, subject to the respective guidelines set forth in each section. <strong>Investment</strong>s<br />
in alternative strategies shall not at time of investment exceed 25 percent of the<br />
Fund’s total market value, unless approved by the Committee.<br />
©2011 COMMONFUND 15
Marketable Alternative Strategies - <strong>Investment</strong>s may include (among other<br />
strategies) equity-oriented or market-neutral hedge funds (i.e. long/short,<br />
macro event driven, convertible arbitrage, and fixed income strategies), which<br />
can be both domestic and international market oriented. <strong>The</strong>se components<br />
may be viewed as equity-like or fixed income-like strategies as defined by their<br />
structures and exposures.<br />
Private Capital - <strong>Investment</strong> allocations may include venture capital, private<br />
equity and international private capital investments, typically held in the form<br />
of professionally managed pooled limited partnerships. Such investments must<br />
be made through funds offered by professional investment managers.<br />
Energy & Natural Resources - <strong>Investment</strong>s may include oil, gas, and timber<br />
investments, typically held in the form of professionally managed pooled<br />
limited partnerships, as well as commodity-based investments. All such<br />
investments must be made through funds offered by professional investment<br />
managers.<br />
Private Equity Real Estate - <strong>Investment</strong>s may include equity real estate,<br />
held in the form of professionally managed, income producing commercial<br />
and residential property. Such investments may be made only through<br />
professionally managed pooled real estate investment funds.<br />
Distressed Debt - <strong>Investment</strong>s may include the debt securities of companies<br />
undergoing bankruptcy or reorganization. Such investments may be made<br />
only through professionally managed funds.<br />
– Derivatives and Derivative Securities. Certain of the Fund’s managers may be<br />
permitted under the terms of their specific investment guidelines to use derivative<br />
instruments. Derivatives are contracts or securities whose market value is related<br />
to the value of another security, index, or financial instrument. <strong>Investment</strong>s in<br />
derivatives include (but are not limited to) futures, forwards, options, options on<br />
futures, warrants, and interest-only and principal-only strips. No derivative positions<br />
can be established that have the effect of creating portfolio characteristics outside of<br />
portfolio guidelines.<br />
Examples of appropriate applications of derivative strategies include hedging market,<br />
interest rate, or currency risk, maintaining exposure to a desired asset class while<br />
making asset allocation changes, gaining exposure to an asset class when it is more<br />
cost-effective than the cash markets, and adjusting duration within a fixed income<br />
portfolio. <strong>Investment</strong> managers must ascertain and carefully monitor the<br />
creditworthiness of any third parties involved in derivative transactions.<br />
16 ©2011 COMMONFUND
Each manager using derivatives shall (1) exhibit expertise and experience in utilizing<br />
such products; (2) demonstrate that such usage is strategically integral to their<br />
security selection, risk management, or investment processes; and (3) demonstrate<br />
acceptable internal controls regarding these investments.<br />
– <strong>Investment</strong> Restrictions. <strong>The</strong> <strong>Investment</strong> Committee may waive or modify any of<br />
the restrictions in these guidelines in appropriate circumstances. Any such waiver<br />
or modification shall be made only after a thorough review of the investment<br />
manager and investment strategy involved. An addendum supporting such waiver<br />
or modification shall be maintained as a permanent record of the <strong>Investment</strong><br />
Committee. All such waivers and modifications shall be reported to the Board<br />
of Trustees at the meeting immediately following the granting of the waiver or<br />
modification.<br />
Adherence to the restrictions in these guidelines shall be measured as of the time<br />
of initial investment. It is recognized that subsequent market action may result in<br />
the investment or strategy ceasing to adhere to these restrictions, through no fault<br />
of the XYZ staff or the respective outside manager. In such a situation, XYZ and<br />
the manager shall make reasonable attempts to bring the investment or strategy back<br />
within adherence to these restrictions, bearing in mind the long-term interests of<br />
XYZ and the Fund and the desirability of avoiding harmful forced sales of assets.<br />
<strong>Investment</strong>s in mutual funds or commingled funds shall be reviewed and approved<br />
by the <strong>Investment</strong> Committee on a case-by-case basis and, if approved, may vary<br />
from this <strong>Statement</strong>. For each such mutual or commingled fund, the prospectus,<br />
offering memorandum or Declaration of Trust documents of the respective fund<br />
will govern the investment policies of the fund investments. While the <strong>Investment</strong><br />
Committee understands that such funds have their own stated guidelines which<br />
cannot be changed for individual investors, those guidelines should be similar in<br />
principle and spirit to the guidelines stated herein. To the extent that a mutual or<br />
commingled fund departs from any or all of such guidelines, the <strong>Investment</strong><br />
Committee shall make itself aware of the possible consequences and be confident<br />
that the investment manager thoroughly understands the risks being taken, has<br />
demonstrated expertise in such investment strategies and has guidelines in place<br />
for monitoring their risk-adjusted performance.<br />
©2011 COMMONFUND 17
CSOONLINE<br />
Template II:<br />
Traditional <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong><br />
[NAME OF INSTITUTION]<br />
<strong>Statement</strong> of <strong>Investment</strong> <strong>Policy</strong><br />
Number of Copies: As indicated in the Invoice Submission Clause in the contract.<br />
Number of Copies: As indicated in the Invoice Submission Clause in the contract.<br />
Format: Standard Form 1034, "Public Voucher for Purchases and Services Other Than Personal,"<br />
and Standard Form 1035, "Public Voucher for Purchases and Services Other Than Personal--<br />
Continuation Sheet," or reproduced copies of such forms marked ORIGINAL should be used to<br />
submit claims for reimbursement. In lieu of SF-1034 and SF-1035, claims may be submitted on the<br />
payee's letter-head or self-designed form provided that it contains the information shown on the<br />
sample invoice/financing request.<br />
Format: Standard Form 1034, "Public Voucher for Purchases and Services Other Than Personal," and Standard Form 1035, "Public Voucher<br />
for Purchases and Services Other Than Personal-- Continuation Sheet," or reproduced copies of such forms marked ORIGINAL should be<br />
used to submit claims for reimbursement. In lieu of SF-1034 and SF-1035, claims may be submitted on the payee's letter-head or self-designed<br />
form provided that it contains the information shown on the sample invoice/financing request.<br />
Adopted: [Date]<br />
Aug. 30th, 2023
Table of Contents<br />
Page<br />
<strong>Statement</strong> of Purpose .......................................................................................................3<br />
General Principles............................................................................................................3<br />
Roles and Responsibilities ................................................................................................3<br />
<strong>Policy</strong> Review...................................................................................................................4<br />
Goals and Objectives .......................................................................................................4<br />
Objectives of the Fund........................................................................................4<br />
<strong>Investment</strong> Philosophy........................................................................................4<br />
<strong>Investment</strong> Policies and Procedures ..................................................................................5<br />
Operating Guidelines..........................................................................................5<br />
<strong>Investment</strong> <strong>Policy</strong>................................................................................................5<br />
Asset Allocation, <strong>Investment</strong> Strategies, Guidelines and Restrictions ...................7<br />
Spending.............................................................................................................8<br />
Appendix A: Operating Guidelines ................................................................................9<br />
Hypothetical Target Asset Allocation .....................................................9<br />
<strong>Investment</strong> Strategies, Guidelines and Restrictions...............................10<br />
2 ©2011 COMMONFUND
<strong>Statement</strong> of Purpose<br />
<strong>The</strong> purpose of this <strong>Investment</strong> <strong>Policy</strong> <strong>Statement</strong> (together with its Appendix, the<br />
“<strong>Statement</strong>”) is to set forth the policies and procedures that shall guide the Board of<br />
Trustees (the “Board of Trustees” or the “Board”) of [name of institution] (“XYZ”) in<br />
supervising and monitoring the management of XYZ’s investable assets (the “Fund”).<br />
General Principles<br />
1. XYZ shall diversify the investments of the Fund unless the Board and, if<br />
applicable, the <strong>Investment</strong> Committee (the “<strong>Investment</strong> Committee” or the<br />
“Committee”), after appropriate deliberation, reasonably determine that<br />
because of special circumstances the purposes of the Fund are better served<br />
without diversification.<br />
2. <strong>The</strong> Fund shall be managed in accordance with high standards of fiduciary<br />
duty and in compliance with applicable laws and regulations. 13<br />
3. Standards for return, asset allocation and diversification shall be determined<br />
from a strategic perspective and measured over successive market cycles.<br />
Roles and Responsibilities<br />
If the Board of Trustees elects to oversee investment matters directly, it shall<br />
undertake the roles and responsibilities prescribed for the <strong>Investment</strong> Committee<br />
herein. Otherwise, the <strong>Investment</strong> Committee shall implement the management<br />
process and monitor the Fund in accordance with this <strong>Statement</strong>. <strong>The</strong> Chair of the<br />
Committee shall be a current member of XYZ’s Board of Trustees; other Committee<br />
members need not be Trustees.<br />
<strong>The</strong> <strong>Investment</strong> Committee, acting pursuant to this <strong>Statement</strong> and to instructions<br />
from the Board of Trustees, shall have direct responsibility for the oversight and<br />
management of the Fund and for the establishment of investment policies and<br />
procedures.<br />
<strong>The</strong> <strong>Investment</strong> Committee shall, as more fully described herein, manage the Fund<br />
via a set of asset allocation targets and ranges for the portfolio.<br />
13<br />
Including but not limited to the version of the Uniform Prudent Management of Institutional Funds Act enacted<br />
in this state, if applicable.<br />
©2011 COMMONFUND 3
In fulfilling its responsibilities under this <strong>Statement</strong>, the <strong>Investment</strong> Committee shall,<br />
among other activities, recommend to the Board of Trustees the hiring and dismissal of<br />
investment managers, fiscal agents and other advisors.<br />
Reports on the Fund shall be provided quarterly to the <strong>Investment</strong> Committee.<br />
<strong>The</strong> [insert title of appropriate staff person] shall be responsible to the <strong>Investment</strong><br />
Committee for maintaining detailed records of all invested funds and for carrying out<br />
the investment policies and procedures established by the Board of Trustees and the<br />
<strong>Investment</strong> Committee.<br />
<strong>Policy</strong> Review<br />
This <strong>Statement</strong> shall be reviewed annually by the <strong>Investment</strong> Committee and any<br />
recommendations for changes presented to the Board of Trustees.<br />
Goals and Objectives<br />
Objectives of the Fund<br />
<strong>The</strong> Fund has a long-term investment horizon. <strong>The</strong> primary investment objectives of<br />
the Fund are to:<br />
• Maintain the real purchasing power of the Fund after inflation, costs and<br />
spending (i.e., achieve “intergenerational equity”);<br />
• Provide a stable source of liquidity and financial support for the mission<br />
of XYZ.<br />
<strong>Investment</strong> Philosophy<br />
While acknowledging the importance of preserving capital, the Board of Trustees also<br />
recognizes the necessity of accepting risk if the Fund is to be able to meet its long-term<br />
investment goals. It is the view of the Board of Trustees that choices made with respect<br />
to asset allocation will be the major determinants of investment performance. <strong>The</strong><br />
Committee shall seek to ensure that the risks taken are appropriate and commensurate<br />
with the Fund’s goals.<br />
4 ©2011 COMMONFUND
<strong>Investment</strong> Policies and Procedures<br />
Operating Guidelines<br />
<strong>The</strong> Fund shall be managed in accordance with the Operating Guidelines described in<br />
this section, a template for which is set forth in Appendix A. Once the Operating<br />
Guidelines have been approved by the Board, the <strong>Investment</strong> Committee shall have<br />
the authority to manage the Fund within the Operating Guidelines without further<br />
authorization from the Board.<br />
<strong>Investment</strong> <strong>Policy</strong><br />
– Asset allocation. <strong>The</strong> Committee shall, consistent with the above sections, invest the<br />
Fund using an asset allocation that is designed to meet the Fund’s long-term goals.<br />
<strong>The</strong> allocation will be based on the objectives of the Fund as set forth above.<br />
– Illiquid investments. Because of their long-term nature, investments in and commitments<br />
to illiquid investment strategies, including but not limited to private capital,<br />
private equity real estate, natural resources, distressed debt and other similar private<br />
investments, shall be analyzed and discussed by the Committee separately.<br />
– Targets and ranges. <strong>The</strong> asset allocation shall be implemented using a policy portfolio<br />
as set forth in Appendix A, with target allocations and ranges for each investment<br />
strategy. Due to the need for diversification and the longer funding periods for<br />
certain investment strategies, the Committee recognizes that an extended period of<br />
time may be required to fully implement the asset allocation plan. It is expected that<br />
market value fluctuations will cause deviations from the target allocations to occur.<br />
– Rebalancing. <strong>The</strong> purpose of rebalancing is to maintain the Fund’s policy asset<br />
allocation within the targeted ranges, thereby ensuring that the Fund does not incur<br />
additional risks as a result of having deviated from the policy portfolio. Rebalancing<br />
will take place on a portfolio basis to reduce expenses as far as practicable. More<br />
frequent tactical rebalancing of asset classes within their ranges will also be permitted<br />
in order to take advantage of shorter-term market conditions, as long as such changes<br />
or reallocations do not, in the opinion of the Committee, cause undue risk or<br />
expense to the Fund.<br />
©2011 COMMONFUND 5
– Standard of conduct. In managing and investing the Fund, the Committee shall:<br />
• act in good faith and with the care an ordinarily prudent person in a like<br />
position would exercise under similar circumstances;<br />
• incur only costs that are appropriate and reasonable in relation to the assets,<br />
the purposes of XYZ and the skills available to XYZ;<br />
• make a reasonable effort to verify facts relevant to the management and<br />
investment of the Fund;<br />
• consider the following factors, if relevant:<br />
(a) general economic conditions;<br />
(b) the possible effect of inflation or deflation;<br />
(c) the expected tax consequences, if any, of investment decisions or strategies;<br />
(d) the role that each investment or course of action plays within the overall<br />
investment portfolio of the Fund;<br />
(e) the expected total return from income and the appreciation of investments;<br />
(f) other resources of XYZ;<br />
(g) the needs of XYZ and the Fund to make distributions and to preserve<br />
capital; and<br />
(h) an asset’s special relationship or special value, if any, to the charitable<br />
purposes of XYZ;<br />
• make management and investment decisions about an individual asset not in<br />
isolation, but rather in the context of the Fund’s portfolio of investments as a<br />
whole and as a part of XYZ’s overall investment strategy, including the risk<br />
and return parameters set forth in this <strong>Statement</strong>.<br />
– Delegation. Subject to any specific limitation set forth in a gift instrument, the Committee<br />
may delegate to an external agent the management and investment of<br />
all or part of the Fund to the extent that XYZ could prudently delegate under the<br />
circumstances. <strong>The</strong> Committee shall act in good faith, with the care that an<br />
ordinarily prudent person in a like position would exercise under similar<br />
circumstances in: (1) selecting an agent; (2) establishing the scope and terms of the<br />
delegation, consistent with the purposes of XYZ and the Fund; and (3) periodically<br />
reviewing the agent’s actions in order to monitor the agent’s performance and<br />
compliance with the scope and terms of the delegation.<br />
6 ©2011 COMMONFUND
In this regard, the Committee shall engage qualified external professional investment<br />
managers that have demonstrated competence in their respective investment<br />
strategies. <strong>The</strong>se managers shall have full discretion and authority for determining<br />
investment strategy, security selection and timing of purchases and sales of assets<br />
subject to the guidelines specific to their allocation.<br />
– <strong>Investment</strong> manager reporting and evaluation. <strong>The</strong> investment managers responsible<br />
for the investment of the Fund’s assets shall report quarterly on their performance.<br />
Reports shall include, at a minimum, the following information:<br />
• Comparative returns for the Fund assets under management against their<br />
respective benchmarks.<br />
• A complete accounting of all transactions involving the Fund during the<br />
quarter.<br />
– Each investment manager shall review the portfolio with the <strong>Investment</strong> Committee<br />
at least annually; these review meetings may be supplemented by such other meetings<br />
as the Committee may think necessary.<br />
When possible, the Committee shall monitor and compare the Fund’s performance<br />
relative to:<br />
• Absolute return objectives for the Fund<br />
• <strong>The</strong> respective benchmarks for each asset class or strategy in which the Fund<br />
is invested, as set forth in the asset allocation table in Appendix A<br />
• A representative group of peer institutions identified by the Committee<br />
• A representative group of peer investment managers<br />
Asset Allocation, <strong>Investment</strong> Strategies, Guidelines and Restrictions<br />
<strong>The</strong> Fund shall be diversified both by asset class and within asset classes. Within each<br />
asset class, investments shall be diversified further among economic sector, industry,<br />
quality and size. <strong>The</strong> purpose of this diversification is to provide a reasonable assurance<br />
that no single security or class of securities will have a disproportionate impact –<br />
positive or negative – on the overall performance of the Fund.<br />
©2011 COMMONFUND 7
<strong>The</strong> Operating Guidelines, a template for which is set forth in Appendix A, contain<br />
the Fund’s target asset allocation and range for each asset class or investment strategy,<br />
together with the applicable guidelines and restrictions. Taken together, these<br />
constitute a framework to assist XYZ and its investment managers in achieving the<br />
Fund’s investment objectives at a level of risk consistent with the parameters set forth<br />
in this <strong>Statement</strong>.<br />
Spending 14<br />
– <strong>Policy</strong> spending rate. <strong>The</strong> policy spending rate for the Fund shall be [ ] percent. 15<br />
– Spending formula. <strong>The</strong> amount available for appropriation during each fiscal year<br />
shall be calculated by applying the policy spending rate to the average of the<br />
previous three fiscal years’ beginning-period endowment values.<br />
–Special appropriations and decisions not to spend. Any special appropriation or<br />
decision not to spend the amount indicated by the spending formula must be<br />
approved in advance by the Board of Trustees.<br />
– Standard of conduct. Subject to the intent of a donor expressed in a gift instrument,<br />
XYZ may appropriate for expenditure or accumulate so much of the Fund as the<br />
Board of Trustees determines to be prudent for the uses, benefits, purposes and<br />
duration for which each of the separate endowments in the Fund is established.<br />
In making a determination to appropriate or accumulate, XYZ shall act in good<br />
faith, with the care of an ordinarily prudent person in a like position would exercise<br />
under similar circumstances and shall consider, if relevant, the following factors:<br />
(1) the duration and preservation of the Fund;<br />
(2) the purposes of XYZ and the Fund;<br />
(3) general economic conditions;<br />
(4) the possible effect of inflation or deflation;<br />
(5) the expected total return from income and the appreciation of investments;<br />
(6) other resources of XYZ; and<br />
(7) XYZ’s investment policy.<br />
14<br />
A spending policy must be based on an institution’s own specific spending requirements. Examples of the main spending formulas<br />
currently in use include spending a percentage of a moving average of market value; a fixed percentage; increasing<br />
spending dollars each year by an inflation measure; and using a hybrid or weighted average approach.<br />
15<br />
Where the version of UPMIFA passed in the state contains the provision creating a rebuttable presumption that spending<br />
above a specified amount is imprudent, the spending rate set forth in this section must fall within the permissible range.<br />
New York state institutions are reminded that the version of UPMIFA passed in that state (New York Prudent Management of<br />
Institutional Funds Act, New York Not-for-Profit <strong>Corp</strong>oration Law (N-PCL) §§ 550-558) establishes requirements for recordkeeping<br />
on spending decisions.<br />
8 ©2011 COMMONFUND
Appendix A: Operating Guidelines<br />
Hypothetical Target Asset Allocation<br />
NB: <strong>The</strong>se Allocations Are Samples and are Provided for Illustrative Purposes Only<br />
Minimum Target Maximum Benchmark<br />
Equity Strategies 30% 40% 60% MSCI All Country<br />
Domestic Equity 10% 15% 30% Russell 3000<br />
International Equity 5% 15% 30% MSCI All Country ex U.S.<br />
Private Capital 0% 5% 10% Russell 3000 + 4%<br />
Distressed Debt 0% 5% 10% Merrill Lynch High Yield + 4%<br />
Fixed Income (Deflation Hedging) 10% 20% 40% Barclays U.S. Aggregate<br />
Cash & Equivalents 0% 3% 10% 3 Month T-Bill<br />
U.S. Treasuries 0% 5% 20% Barclays U.S. Treasury Index<br />
Core Bonds 5% 7% 25% Barclays U.S. Aggregate<br />
Global Bonds 0% 5% 15% World Govt Bond Index<br />
Real Assets (Inflation Hedging) 5% 20% 40% CPI + 4%<br />
TIPS 0% 0% 10% Barclays TIPS<br />
Commodities 0% 5% 10% Dow Jones-UBS Commodities<br />
Natural Resources 0% 8% 10% Goldman Sachs Commodities + 4%<br />
Private Real Estate 0% 7% 15% NCREIF 50% Leveraged<br />
Directional & Relative Strategies 10% 20% 35% LIBOR + 5%<br />
Long/Short Directional 0% 10% 20% S&P 500<br />
Relative Value 0% 10% 20% 3 Month T-Bill + 4%<br />
©2011 COMMONFUND 9
<strong>Investment</strong> Strategies, Guidelines and Restrictions<br />
– Equity Securities. <strong>The</strong> purpose of equity investments, both domestic and<br />
international, in the Fund is to provide capital appreciation, growth of income,<br />
and current income. This asset class carries the assumption of greater market<br />
volatility and increased risk of loss, but also provides a traditional approach to<br />
meeting portfolio total return goals. This component includes domestic and<br />
international common stocks, American Depository Receipts (ADRs), preferred<br />
stocks, and convertible stocks traded on the world’s stock exchanges or over-thecounter<br />
markets.<br />
Public equity securities shall be restricted to high quality, readily marketable securities<br />
of corporations that are traded on the major stock exchanges, including NASDAQ,<br />
and have the potential for meeting return targets. Equity holdings must generally<br />
represent companies meeting a minimum market capitalization requirement of<br />
respective asset class profiles with reasonable market liquidity where customary.<br />
Decisions as to individual security selection, number of industries and holdings,<br />
current income levels and turnover are left to manager discretion, subject to the<br />
standards of fiduciary prudence. However, investments in securities of issuers<br />
representing a single major industry (as determined by the Committee) shall not<br />
at time of investment exceed 10 percent of the Fund’s total market value, and<br />
investments in securities of any one issuer shall not at time of investment exceed<br />
5 percent of the Fund’s total market value, unless approved by the Committee.<br />
Within the above guidelines and restrictions, the Fund’s investment managers shall<br />
have complete discretion over the selection, purchase and sale of equity securities.<br />
– Fixed Income Securities. Domestic and international fixed income investments are<br />
intended to provide diversification and a dependable source of current income.<br />
Fixed income investments should reduce the overall volatility of the Fund’s assets<br />
and provide a deflation or inflation hedge, where appropriate.<br />
10 ©2011 COMMONFUND
<strong>The</strong> fixed income asset class includes the fixed income markets of the U.S. and the<br />
world’s other developed economies. It includes, but is not limited to, U.S. Treasury<br />
and government agency bonds, non-U.S. dollar denominated securities, public and<br />
private corporate debt, mortgages and asset-backed securities, and non-investment<br />
grade debt. Also included are money market instruments such as commercial paper,<br />
certificates of deposit, time deposits, bankers’ acceptances, repurchase agreements,<br />
and U.S. Treasury and agency obligations. <strong>The</strong> investment managers shall take into<br />
account credit quality, sector, duration and issuer concentrations in selecting an<br />
appropriate mix of fixed income securities. <strong>Investment</strong>s in fixed income securities<br />
should be managed actively to pursue opportunities presented by changes in interest<br />
rates, credit ratings, and maturity premiums.<br />
Within the above guidelines and restrictions, the Fund’s investment managers<br />
shall have complete discretion over the selection, purchase and sale of fixed income<br />
securities.<br />
– Cash and Equivalents. <strong>The</strong> Fund’s investment managers may invest in the highest<br />
quality commercial paper, repurchase agreements, U.S. Treasury Bills, certificates of<br />
deposit, and money market funds to provide income, liquidity for expense payments,<br />
and preservation of the Fund’s principal value. <strong>Investment</strong>s in the obligations of a<br />
single issuer shall not at time of investment exceed 5 percent of the Fund’s total<br />
market value, with the exception of the U.S. Government and its agencies.<br />
Since the <strong>Investment</strong> Committee does not consider short-term cash equivalent<br />
securities to be appropriate investment vehicles for long-term portfolios, uninvested<br />
cash reserves shall be kept to a minimum except where needed to comply with the<br />
Fund’s liquidity parameters. However, such vehicles are considered appropriate<br />
(i) as a depository for income distributions from longer-term investments,<br />
(ii) as needed for temporary placement of funds directed for future investment<br />
to longer-term investment strategies and (iii) for contributions to the current<br />
fund or for current operating cash.<br />
Within the above guidelines and restrictions, the investment managers shall have<br />
complete discretion over the selection, purchase and sale of cash equivalent securities.<br />
©2011 COMMONFUND 11
–Alternatives. <strong>The</strong> following alternative strategies shall be permitted investments for<br />
the Fund, subject to the respective guidelines set forth in each section. <strong>Investment</strong>s<br />
in alternative strategies shall not at time of investment exceed 25 percent of the<br />
Fund’s total market value, unless approved by the Committee.<br />
Marketable Alternative Strategies - <strong>Investment</strong>s may include (among other<br />
strategies) equity-oriented or market-neutral hedge funds (i.e. long/short,<br />
macro event driven, convertible arbitrage, and fixed income strategies), which<br />
can be both domestic and international market oriented. <strong>The</strong>se components<br />
may be viewed as equity-like or fixed income-like strategies as defined by their<br />
structures and exposures.<br />
Private Capital - <strong>Investment</strong> allocations may include venture capital, private<br />
equity and international private capital investments, typically held in the form<br />
of professionally managed pooled limited partnerships. Such investments must<br />
be made through funds offered by professional investment managers.<br />
Energy & Natural Resources - <strong>Investment</strong>s may include oil, gas, and timber<br />
investments, typically held in the form of professionally managed pooled<br />
limited partnerships, as well as commodity-based investments. All such<br />
investments must be made through funds offered by professional investment<br />
managers.<br />
Private Equity Real Estate - <strong>Investment</strong>s may include equity real estate,<br />
held in the form of professionally managed, income producing commercial<br />
and residential property. Such investments may be made only through<br />
professionally managed pooled real estate investment funds.<br />
Distressed Debt - <strong>Investment</strong>s may include the debt securities of companies<br />
undergoing bankruptcy or reorganization. Such investments may be made only<br />
through professionally managed funds.<br />
– Derivatives and Derivative Securities. Certain of the Fund’s managers may be<br />
permitted under the terms of their specific investment guidelines to use derivative<br />
instruments. Derivatives are contracts or securities whose market value is related<br />
to the value of another security, index, or financial instrument. <strong>Investment</strong>s in<br />
derivatives include (but are not limited to) futures, forwards, options, options on<br />
futures, warrants, and interest-only and principal-only strips. No derivative positions<br />
can be established that have the effect of creating portfolio characteristics outside<br />
of portfolio guidelines.<br />
12 ©2011 COMMONFUND
Examples of appropriate applications of derivative strategies include hedging market,<br />
interest rate, or currency risk, maintaining exposure to a desired asset class while<br />
making asset allocation changes, gaining exposure to an asset class when it is more<br />
cost-effective than the cash markets, and adjusting duration within a fixed income<br />
portfolio. <strong>Investment</strong> managers must ascertain and carefully monitor the<br />
creditworthiness of any third parties involved in derivative transactions.<br />
Each manager using derivatives shall (1) exhibit expertise and experience in utilizing<br />
such products; (2) demonstrate that such usage is strategically integral to their<br />
security selection, risk management, or investment processes; and (3) demonstrate<br />
acceptable internal controls regarding these investments.<br />
– <strong>Investment</strong> Restrictions. <strong>The</strong> <strong>Investment</strong> Committee may waive or modify any of the<br />
restrictions in these guidelines in appropriate circumstances. Any such waiver or<br />
modification shall be made only after a thorough review of the investment manager<br />
and investment strategy involved. An addendum supporting such waiver or<br />
modification shall be maintained as a permanent record of the <strong>Investment</strong><br />
Committee. All such waivers and modifications shall be reported to the Board<br />
of Trustees at the meeting immediately following the granting of the waiver<br />
or modification.<br />
Adherence to the restrictions in these guidelines shall be measured as of the time of<br />
initial investment. It is recognized that subsequent market action may result in the<br />
investment or strategy ceasing to adhere to these restrictions, through no fault of<br />
the XYZ staff or the respective outside manager. In such a situation, XYZ and the<br />
manager shall make reasonable attempts to bring the investment or strategy back<br />
within adherence to these restrictions, bearing in mind the long-term interests of<br />
XYZ and the Fund and the desirability of avoiding harmful forced sales of assets.<br />
<strong>Investment</strong>s in mutual funds or commingled funds shall be reviewed and approved<br />
by the <strong>Investment</strong> Committee on a case-by-case basis and, if approved, may vary<br />
from this <strong>Statement</strong>. For each such mutual or commingled fund, the prospectus,<br />
offering memorandum or Declaration of Trust documents of the respective fund<br />
will govern the investment policies of the fund investments. While the <strong>Investment</strong><br />
Committee understands that such funds have their own stated guidelines which<br />
cannot be changed for individual investors, those guidelines should be similar in<br />
principle and spirit to the guidelines stated herein. To the extent that a mutual or<br />
commingled fund departs from any or all of such guidelines, the <strong>Investment</strong><br />
Committee shall make itself aware of the possible consequences and be confident<br />
that the investment manager thoroughly understands the risks being taken, has<br />
demonstrated expertise in such investment strategies and has guidelines in place<br />
for monitoring their risk-adjusted performance.<br />
©2011 COMMONFUND 13
Four Primary Areas of<br />
Quantitative Research<br />
Scales of Measurement<br />
Measurement – Construct Validity<br />
Sampling – External Validity<br />
Design – Internal Validity<br />
Statistics – Statistical Conclusion Validity<br />
Nominal: categorical measurement. We use this when we group observations<br />
of the same attribute together, for example, putting people into religious<br />
categories (p. 138)<br />
Ordinal: goes one step beyond nominal level in that we not only group like<br />
observations together but also rank them. For example, the question “ Would<br />
you rate your social support as very good, satisfactory, or very poor?” asks for<br />
an ordinal judgment. Ordinal measures may use numbers for convenience in<br />
coding answers, for example, very good (3), satisfactory (2), and very poor (1).<br />
However, such numbers for ordinal categories may serve only as handy,<br />
abbreviations or labels, and you could not conclude that someone answering<br />
with a “3” had three times as much social support as someone answering<br />
with a “3” (p318)<br />
Interval: not only group equivalent observations together in ordered<br />
categories, but also consider the interval between adjacent categories as<br />
equal, but no natural zero. Such as temperature, differences make sense, but<br />
ratios do not. You can think of the meaning of interval level measurement if<br />
you think of it as “equal-internal” measurement (p.329)<br />
Ratio: includes all of the characteristics of the interval level plus the<br />
additional one of having a true zero point that allows dividing one measure by<br />
another (p.329)<br />
Measurement –<br />
Primary Concepts<br />
Reliability: refers to the degree to which observed scores are “free from<br />
errors of measurement” (APA, 1985, p. 19). We can gauge reliability by the<br />
consistency of scores (p. 76) – CONSISTENCY<br />
Construct Validity: refers to the appropriateness, meaningfulness and<br />
usefulness of the specific inferences made from the measures (APA, 1985,<br />
p.9) (p. 76) - we use the score and how will it reflects the construct<br />
Sampling –<br />
Primary Concepts<br />
Population: Collection of all elements (3 rd grade teachers) to whom survey<br />
results are to be generalized (US). (p. 348).<br />
Sample: Subset of individuals selected from a larger population (p. 350)
Sampling Methods<br />
Probability sampling: <strong>The</strong> actual selection of elements from the frame must<br />
give the elements in the frame an equal probability of selection. Random<br />
sampling provides the best way of achieving equal-probability sampling (p.<br />
128). BETTER FOR GENERALIZATIONS; MORE RIGOROUS<br />
Non-probability sampling: includes any method in which the elements have<br />
unequal chances of being selected. One such method, called convenience<br />
sampling, depends on the availability of respondents. In this procedure,<br />
subjects select themselves (p. 129)<br />
External Validity<br />
Design<br />
Generalizability of the study’s findings to other populations, places or times<br />
(p. 345)<br />
True Experimental Designs<br />
(Random Assignment to Control/Comparison Group). More desirable.<br />
Control group is randomly assigned. Random selection from population into<br />
sample; random assignment of control/treatments groups.<br />
Quasi-Experimental Designs<br />
(Control/Comparison Group without Random Assignment)<br />
Pre-Experimental Designs (No Control/Comparison Group)<br />
Internal Validity<br />
Descriptive Statistics<br />
Inferential Statistics<br />
Statistical Conclusion<br />
Validity<br />
FERPA<br />
National Research Act and<br />
Institutional Review Board<br />
(IRB):<br />
Truthfulness of the assertion that the observed effect is due to the<br />
independent variables in the study (p. 346). Judge the relationship between<br />
the independent and dependent variables. RELATED TO DESIGN<br />
Describes the sample. A set of methods to describe data that we have<br />
collected (mean, standard deviation)<br />
Make inferences about population. Tests probability of sample data being<br />
drawn from the population defined by hypotheses, this is a set of methods<br />
use to make a generalization, estimate, predication or decision.<br />
Refers to inferences about whether it is reasonable to presume that a<br />
relationship exists between variables (introduction presentation)<br />
Family Educational rights and privacy act (1974) is a federal law that<br />
protects the privacy of student education records (ethics presentation)<br />
Committees established by us federal regulations at each research<br />
institution to protect human subjects from abuses through prior review of<br />
research proposals
Risk<br />
Coercion Anonymous<br />
Confidential<br />
Reliability<br />
Reliability Coefficient<br />
Exposure to the possibility of physical, psychological or social injury as a<br />
result of the study<br />
Coercing people to participate require the participants cannot be identified<br />
Require the confidentiality of the participants<br />
Refers to the degree to which observed scores are “free from errors of<br />
measurement” (APA, 1985, p. 19). We can gauge reliability by the<br />
consistency of scores (p. 76). Reliability is a necessary, but NOT sufficient<br />
condition for validity, reliability can also create a tension with validity.<br />
Test-retest: short time between tests, stability (error due to time)<br />
Alternate forms: forms match better in content and stat properties,<br />
equivalence (error due to form or internal consistency)<br />
Inter-rater: standardizing procedure including training, rubrics and<br />
monitoring. Scorer or rater consistency.<br />
Split-half: reliability is higher when forms are matched in content and stat<br />
properties, internal consistency (consistency across items – content<br />
sampling error, flawed items)<br />
Internal consistency: longer tests: wide range of individual variability on<br />
construct; freedom from distractions, misunderstandings, use of items of<br />
medium difficulty on cognitive measures (two primary methods for increasing<br />
test reliability), consistency across items – content sampling error, flawed<br />
items.<br />
Standard Error of<br />
Measurement (SEM)<br />
Alternative index for reporting random error based on confidence intervals<br />
(reliability presentation)<br />
Uses and Advantages<br />
Interpretation – 68% of the time the true score is in the interval of x +/- SEM)<br />
95% of the time the true score is in the interval X +/- 1.96*SEM), it is sample<br />
from estimation also important (Reliability, presentation)<br />
Construct Validity<br />
Definition-Construct Validity-“refers to the appropriateness, meaningfulness,<br />
and usefulness of the specific inferences” made from the measures (p.76)
Construct Validity<br />
(Sources of Evidence)<br />
Content-analysis of the relationship between the test’s content and the<br />
construct of interest. It refers to the themes, wording, and format of the<br />
items tasks, or question on a test, as well as the procedural<br />
Substantive /Response Process: <strong>The</strong>oretical and empirical analyses of the<br />
response processes of examinees are used to determine the fit between the<br />
construct and detailed nature of the examinees actual performance or<br />
responses.<br />
Internal: Analysis of the internal structure of a test can indicate the degree to<br />
which the relationship among test items and test components conform to the<br />
construct on which the proposed test score interpretations are based<br />
(construct validity – presentation)<br />
Relationships with External Variables: Analysis of relationship of test scores<br />
to variables external to the test (construct validity – presentation)<br />
Consequences: Appraises the value implications of score interpretation as a<br />
basis for action as well as the intended and unintended consequences of test<br />
use, especially in regard to sources of invalidity relation to issues of bias,<br />
fairness and distributive justice (construct validity, presentation)<br />
Construct Irrelevant<br />
Variance: “surplus<br />
construct irrelevancy”<br />
(construct validity,<br />
presentation)<br />
Construct<br />
Underrepresentation:<br />
Internal Validity<br />
Construct irrelevant difficulty: Aspects of the task are extraneous to the focal<br />
construct – can make the test more difficult for some individuals or groups<br />
Construct irrelevant easiness – when extraneous clues in the time or format<br />
results in correct responses<br />
<strong>The</strong> test is too narrow and fails to include important dimensions of the<br />
construct (construct validity, presentation). For example, one test is one test<br />
is trying to measure the mathematics curriculum including probability,<br />
algebra, measurement, data analysis, etc. however, if the test only includes<br />
the terms relating algebra.<br />
Definition – Isolation; Refers to whether or not the relationship between two<br />
variables; refers to the truthfulness of the claim that one variable causes<br />
another
Threats to Validity<br />
History: Refers to the threat that some coincidental event outside the study<br />
caused the observed change; can control by reducing time between measures<br />
<strong>The</strong> situation in which some specific event occurs during the study, which in<br />
turn affects the results. <strong>The</strong> specific event is an effect other than the<br />
experimental treatments. To prevent this threat use a control group, shorten<br />
time between testing, select a dependent variable less prone to history<br />
effects, or insulate participants.<br />
Maturation: refers to any naturally occurring process within individuals as a<br />
function of time per se that may cause a change in their performance.<br />
Processes include fatigue, boredom, growth, or intellectual maturation. Time<br />
threat to internal validity in which internal or normal developmental<br />
processes cause the observed change. To prevent this threat, conduct the<br />
study over shorter period of time or use a control group with a comparable<br />
maturation rate.<br />
Testing: refers to a response to the pretest that causes the observed change<br />
in the outcome variable; can reduce by disguising the pretest or dropping it<br />
completely<br />
Instrumentation: when observed changes results from shifts in the way<br />
measures are collected; can be controlled by carefully standardizing and<br />
monitoring the measurement procedures<br />
Regression: Comes from the tendency of scores from unreliable measures to<br />
move toward the mean on retest; affects one group studies that select<br />
subjects for their extreme scores; To prevent avoid the selection on the basis<br />
of extreme scores or create a control group of extreme scores. Can also use<br />
highly reliable measures.<br />
Mortality: subject attrition from pretest to posttest, which casts doubt on<br />
validity of the study; protection of this threat cannot be provided by a control<br />
or random assignment<br />
Selection<br />
Selection Interactions
Design<br />
True Experimental Designs<br />
Role of control/comparison groups<br />
Detect and explain possible confounding variables<br />
Role of random assignment<br />
Increases isolation by removing the relationship between the<br />
treatment and other confounding variables. Results in<br />
equivalent groups<br />
Experimental Designs<br />
Designs that involve some form of control/comparison group but do<br />
NOT use random assignments. Generally, selection and selectioninteraction<br />
are the greatest type of threats.<br />
Pre-Experimental Designs<br />
Experimental design without control/comparison group. Weak design,<br />
but useful when pretests are not possible (i.e., pilot testing)<br />
Random Assignment (Internal Validity): method of placing subjects in<br />
different conditions so that each subject has an equal chance of being in any<br />
group to avoid systematic subject differences between the groups (p. 349)<br />
Random Selection (External Validity): drawing a representative group from a<br />
population by a method that gives every member of the population an equal<br />
chance of being drawn (p. 349)<br />
Matching: Exact equivalence on select variables – uncertainty on all others<br />
Statistical Adjustment: Argue theoretical model – each model leads to a<br />
different solution (Experimental design, presentation)
Appendix D<br />
APPENDIX D: SAMPLE BUSINESS PROPERTY STATEMENT<br />
BOE-571-L (S1F) REV. 7 (8-02)<br />
BUSINESS PROPERTY<br />
STATEMENT FOR 2003<br />
(Declaration of costs and other related<br />
property information as of 12:01 A.M.,<br />
January 1, 2003)<br />
RETURN THIS ORIGINAL FORM. COPIES WILL NOT BE ACCEPTED.<br />
(Make necessary corrections to the printed name and mailing address.)<br />
RETURN THIS COPY BY APRIL 1, 2003<br />
LOCATION OF THE PROPERTY<br />
STREET<br />
CITY<br />
PART I:<br />
GENERAL INFORMATION<br />
COMPLETE (a) THRU (g)<br />
Block Business chain<br />
a. Enter type of business:<br />
b. Enter local telephone number ( 419 ) 460 - 8213 FAX number ( 614 )- 340 - 2272<br />
E-Mail Address (optional)<br />
c. Do you own the land at this business location? Yes No<br />
If yes, is the name on your deed recorded<br />
as shown on this statement? Yes No<br />
d. When did you start business at this location? DATE:<br />
If your business name or location has changed from last year, enter the former name<br />
and/or location:<br />
e. Enter location of general ledger and all related accounting records (include zip code):<br />
PART II:<br />
1. Supplies<br />
DECLARATION OF PROPERTY BELONGING TO YOU<br />
(attach schedule for any adjustment to cost)<br />
2. Equipment (From line 35)<br />
3. Equipment out on lease or rent to others (Attach Schedule)<br />
4. Bldgs., Bldg. Impr., and/or Leasehold Impr., Land Impr., Land (From line 71)<br />
5. Construction In Progress (Attach Schedule)<br />
6. Alternate Schedule A (See instructions)<br />
7.<br />
8.<br />
PART III: DECLARATION OF PROPERTY BELONGING TO OTHERS – IF NONE WRITE “NONE”<br />
(SPECIFY TYPE BY CODE NUMBER)<br />
Report conditional sales contracts on Schedule A<br />
1. Leased equipment 4. Vending equipment<br />
2. Lease-purchase option equipment 5. Other businesses<br />
3. Capitalized leased equipment 6. Government-owned property<br />
Tax Obligation: A. Lessor B. Lessee<br />
9. Lessor’s name<br />
Mailing address<br />
10. Lessor’s name<br />
Mailing address<br />
OWNERSHIP TYPE (✓)<br />
Proprietorship<br />
Partnership<br />
<strong>Corp</strong>oration<br />
Other ______________<br />
Retail<br />
Wholesale<br />
BUSINESS<br />
DESCRIPTION<br />
Manufacturer<br />
Service/Professional<br />
Roots of Progress<br />
(✓)<br />
(File a separate statement for each location.)<br />
f. Enter name and telephone number of authorized person to contact at location of<br />
accounting records:<br />
g. During the period of January 1, 2002 through December 31, 2002:<br />
(1) Has all or part of this real property been subject to a change in ownership?<br />
Yes No<br />
(2) Are any related entities conducting business in the county? Yes No<br />
If yes, provide name, mailing address, and locations:<br />
(3) If you leased this real property, has it been the subject of a lease agreement for a<br />
period of 35 years or more (including options)? Yes No<br />
(4) Did you acquire “control” through acquisition of stock or otherwise of a legal entity<br />
which owns real property in this county? Yes No<br />
(5) Did another person or entity acquire “control” through acquisition of stock or<br />
otherwise of this corporation or entity? Yes No<br />
COST<br />
(omit cents)<br />
(see instructions)<br />
▼<br />
▼<br />
Year<br />
of<br />
Acq.<br />
Year<br />
of<br />
Mfr.<br />
ASSESSOR’S USE ONLY<br />
Description<br />
and Lease or<br />
Identification<br />
Number<br />
Cost to<br />
Purchase<br />
New<br />
Note: <strong>The</strong> following declaration must be completed and signed. If you do not do so, it may result in penalties.<br />
I declare under penalty of perjury under the laws of the State of California that I have examined this property statement, including accompanying<br />
schedules, statements or other attachments, and to the best of my knowledge and belief it is true, correct, and complete and includes all property<br />
required to be reported which is owned, claimed, possessed, controlled, or managed by the person named as the assessee in this statement at<br />
12:01 a.m. on January 1, 2003.<br />
SIGNATURE OF ASSESSEE OR AUTHORIZED AGENT*<br />
NAME OF ASSESSEE OR AUTHORIZED AGENT* (typed or printed)<br />
NAME OF LEGAL ENTITY (other than DBA)(typed or printed)<br />
PREPARER’S NAME AND ADDRESS (typed or printed) TELEPHONE NUMBER TITLE<br />
* Agent: See page S4B for Declaration by Assessee for instructions.<br />
✍<br />
Ryan Stengle<br />
Recovery and Wealth<br />
100,000<br />
90,000<br />
45,000<br />
DECLARATION BY ASSESSEE<br />
Sean Stengle 906 W. Broadway St. ( 419- ) 460-8213<br />
DATE<br />
TITLE<br />
Nov. 6, 2023<br />
Founder<br />
Annual<br />
Rent<br />
FEDERAL EMPLOYER ID NUMBER<br />
Partner<br />
AH 504 208 October 2002