Statement of Investment Policies and Objectives. GiveWell Community Foundation, Inc.

Transcription

1 Statement f Investment Plicies and Objectives GiveWell Cmmunity Fundatin, Inc. June 6, 2013

2 Cntents Cntents I. PURPOSE... 3 II. DEFINITIONS... 4 III. ROLES AND RESPONSIBILITIES... 5 IV. GENERAL INVESTMENT PRINCIPLES... 8 V. GUIDELINES FOR EQUITY INVESTMENTS VI. GUIDELINES FOR FIXED INCOME VII. GUIDELINES FOR CASH AND CASH EQUIVALENTS VIII. UTILIZATION OF MUTUAL FUNDS IX. SELECTION OF INVESTMENT MANAGERS X. INVESTMENT MANAGER REVIEW AND EVALUATION XI. SPECIFIC INVESTMENT OBJECTIVES LONG TERM ASSETS XII. SPECIFIC INVESTMENT GOALS LONG TERM ASSETS XIII. ASSET ALLOCATION GUIDELINES LONG TERM ASSETS XIV. SHORT TERM ASSETS XV. REBALANCING GUIDELINES XVI. ACKNOWLEDGEMENT AND ACCEPTANCE Page 2

3 I. PURPOSE The Investment Plicy Statement establishes the guidelines by which the Investment Assets f the Fundatin shuld be managed. The guidelines within the Investment Plicy statement were designed t enhance the prbability f achieving the gals and bjectives f the GWCF in a manner that is cnsistent with the laws, regulatins and plicies that gvern the prudent management f investment assets in a fiduciary setting. The dcument is further intended as a reference tl as well as an perating cde and cmmunicatins link between the GWCF Bard f Directrs, the GWCF Investment Cmmittee, the GWCF staff, its Investment Cnsultant and its Investment Managers. The Investment Plicy Statement further prvides guidance in the fllwing areas: Defining the respnsibilities f the Investment Cmmittee fr managing the investment prcess and verseeing utside investment prfessinals Selecting Investment Managers Seeking t ensure prudent diversificatin f the Investment Assets Establishing asset allcatin ranges fr asset classes and investment styles deemed suitable fr these Investment Assets Establishing investment perfrmance bjectives fr the Investment Assets Determining an apprpriate risk level fr the Investment Assets Page 3

4 II. DEFINITIONS Bard f Directrs is the gverning bdy f the legal entity knwn as the GiveWell Cmmunity Fundatin. Fiduciary shall mean any individual r grup f individuals that exercise authrity r cntrl ver management, dispsitin r administratin f the Fundatin s assets. Investment Cmmittee is a cmmittee appinted by the GWCF Bard charged with recmmending plicy, verseeing management f the Investment Assets and executin f the Investment Plicy. Investment Assets f the Fundatin cnsists f all assets s designated. The purpse f the Investment Assets is t prvide capital appreciatin and earnings sufficient t fulfill the purpse and missin f the Fundatin. Investment Cnsultant shall mean any individual r rganizatin emplyed t prvide advisry services t the Investment Cmmittee, including advice n investment plicy, investment gals and bjectives, asset allcatin, manager search and selectin, and perfrmance measurement and evaluatin fr bth the Investment Assets and fr Investment Managers. Investment Manager shall mean any individual r grup f individuals selected and emplyed by the Investment Cmmittee t manage all r part f the Investment Assets. Investment Plicy is this Investment Plicy Statement f the Fundatin, as apprved by the Bard f Directrs based n the recmmendatins f the Investment Cmmittee. Page 4

5 III. ROLES AND RESPONSIBILITIES The GiveWell Cmmunity Fundatin recgnizes its respnsibilities t manage the investment assets and will seek t d s prudently and in full cmpliance with all plicies, applicable laws and regulatins, and t enhance the lng-term returns within the established risk parameters. The GiveWell Cmmunity Fundatin thrugh its Bard f Directrs has delegated certain investment respnsibility fr the assets t the Investment Cmmittee. The cmmittee, in turn, has delegated certain investment, administrative, perating and supervisry respnsibility fr the assets t designated staff members and ther prfessinal experts as defined abve. Respnsibilities f the Investment Cmmittee Oversee the management f the investment assets. Develp and revise, as needed, a frmal statement f investment plicies and bjectives fr Bard apprval. Develp plicy guidelines fr allcatin f the assets, taking int accunt near term cash needs and liquidity as reprted by Fundatin Staff, fr Bard apprval. Develp plicy guidelines fr hiring and retentin r terminatin f all investment management cnsultants, investment managers and custdians. Review reprts frm Fundatin staff r utside prfessinals n the status f the Investment Assets. Review the quarterly reprt issued by the Investment Cnsultant, designed t measure and evaluate the perfrmance f the Investment Managers against established gals and bjectives. This will be cmpleted fr each individual Investment Manager and fr the Investment Assets as a whle. Cnsider, revise and accept (r reject) recmmendatins made by Fundatin staff r the Investment Cnsultant regarding the investment and administratin f the assets. Prvide ntice t the Bard f Directrs f any temprary exceptins r deviatins frm this stated and apprved Investment Plicy Statement. Respnsibilities f GiveWell CmmunityFundatin Staff Review statements and investment activities fr cmpliance with the plicies established by the Investment Cmmittee and reprt all deficiencies. Receive and review r cmpile as requested and distribute t the Investment Cmmittee reprts frm the Investment Cnsultant, Investment Managers and/r utside prfessinals regarding the investment accunts. Insure and reprt that sufficient liquidity exists in the investment accunts t handle bth anticipated and unanticipated cash needs f the GiveWell Cmmunity Fundatin. The GWCF Page 5

6 Staff will ntify the Investment Cnsultant in a manner sufficient t allw fr the build up f necessary liquid reserves. Respnsibilities f the Investment Cnsultant The Investment Cnsultant s rle is t serve as an advisr t the Investment Cmmittee. As such, the Investment Cnsultant will nt have discretin t make investment r allcatin decisins. All investment advice ffered by the Investment Cnsultant will be cnsistent with the investment bjectives, plicies, guidelines and cnstraints as established in this Investment Plicy Statement. The Investment Cnsultant will assist in the develpment, implementatin and peridic review f the Investment Plicy. The Investment Cnsultant will cnduct Investment Manager searches when requested by r apprved by the Investment Cmmittee. The Investment Cnsultant will prvide research and general infrmatin n Investment Managers. The Investment Cnsultant will mnitr the perfrmance f the Investment Managers and will reprt these findings t the Investment Cmmittee. This may include, but nt be limited t the fllwing: - statements shwing cmpliance with asset allcatin guidelines - cmparisn f returns t benchmarks - cmparisn f returns t the perfrmance f a universe f cmparable investment managers - as requested, a statement f expected fees and expenses paid by the Fundatin including management fees, custdy, trading, etc. - any ther relevant infrmatin bearing n r ptentially bearing n investment perfrmance Respnsibilities f the Investment Managers The Investment Managers have full and sle discretin t manage the assets f the GiveWell Cmmunity Fundatin in accrdance with the investment bjectives and asset allcatin guidelines expressed by this Investment Plicy Statement and in accrdance with the individual investment manager guidelines, when prvided. Cmmunicate with the Investment Cnsultant r Fundatin Staff regarding all significant matters that the Investment Manager deems material, such as changes in the firm s wnership, rganizatinal structure r prfessinal staffing, and ther changes f a substantive nature Cmply with all legislatin and regulatins as it pertains t the manager s duties, functins and respnsibilities as a fiduciary. Vte all prxies n the securities held within the GiveWell Cmmunity Fundatin accunts in the Fundatin s best interests and in accrdance with its fiduciary duties and prfessinal judgment. Page 6

7 Prvide mnthly statements setting frth all accunt activity and the financial psitin f the accunt. If called upn, prvide expanded analyses t Investment Cnsultant r t the Investment Cmmittee. This may include, but nt be limited t the fllwing: - statements shwing cmpliance with asset allcatin guidelines - cmparisn f returns t benchmarks - cmparisn f returns t the perfrmance f a universe f cmparable investment managers - as requested, a statement f expected fees and expenses paid by the Fundatin including management fees, custdy, trading, etc. Page 7

8 IV. GENERAL INVESTMENT PRINCIPLES Investment Return. In rder t meet its needs, the investment strategy f the Fundatin is t emply a mderately cnservative risk prfile that emphasizes ttal return (the aggregate return frm capital appreciatin plus dividend and interest incme) cnsistent with capital preservatin. Each segregated investment fund shuld be managed t ptimize the lng-term inflatin-adjusted investment returns given that fund s investment cnstraints. Preservatin and Appreciatin f Capital. Cnsistent with their respective investment styles and philsphies, Investment Managers shuld make reasnable effrts t preserve and appreciate capital, understanding that lsses may ccur in individual securities, asset classes r the market as a whle. Definitin f Risk. The Investment Cmmittee realizes that there are many ways t define risk. The Investment Cmmittee believes that any persn r rganizatin invlved in the prcess f managing the invested assets understands hw they define risk s that the assets are managed in a manner cnsistent with the investment bjectives and investment strategy as defined in this Investment Plicy. The Investment Cmmittee defines risk as the prbability f nt meeting the investment bjectives and nt maintaining purchasing pwer. Risk Aversin. Understanding that risk is present in all types f securities and investment styles, the Investment Cmmittee recgnizes that sme risk is necessary t prduce lng-term investment results that are sufficient t meet the gals and bjectives fr the Investment Assets. Hwever, the Investment Cnsultant and Investment Managers are t make reasnable effrts t cntrl risk, and will be evaluated regularly t ensure that the risk assumed is cmmensurate with the given investment style and bjectives. Vlatility f Returns. The Investment Cmmittee understands that in rder t achieve its bjectives fr the Investment Asset, the varius investment accunts will experience vlatility f returns and fluctuatins f market value. Diversificatin. The Investment Cmmittee recgnizes that the brad diversificatin f the Investment Assets amng varius asset classes will help mitigate the magnitude f a lss in any single year. Market Timing and Shifts. The Investment Cmmittee wishes t allw its Investment Managers the pprtunity t practice their skill withut und interference. Hwever, it is hereby made clear that this plicy statement was the prduct f the study f prven perfrmance patterns in the capital markets. The Investment Cmmittee recgnizes that there is cnsiderable evidence that the passage f time causes the greatest rewards t accrue in favr f cnsistent investing appraches. Furthermre, the verall risk expsure culd becme uncntrllable withut reasnable, careful adherence t the asset allcatin guidelines in this plicy. It is nt, therefre, the general intentin f this plicy t allw shrt-term judgments t intrduce significant unplanned risk. The Investment Cmmittee recgnizes that adherence t this plicy will ccasinally appear t be either t risky r t cnservative fr current market cnditins. Hwever, the Investment Cmmittee als recgnizes that experts rarely agree abut the near-term directin f the capital markets, and that such pinins have generally prven t be a pr guide fr actin. Page 8

9 Adherence t Investment Discipline. Investment Managers are expected t adhere t the investment management styles fr which they were retained. Investment Managers will be evaluated regularly fr adherence t investment discipline. Benchmark Indices and Perfrmance Objectives. The Investment Cmmittee recgnizes that investment managers must use the brad capital markets as their basic tls fr investment and that a substantial prtin f investment returns will nt be attributable t management skills, but rather t markets themselves. Hwever, the Investment Cmmittee expects that its investment managers will add value t the brad market returns ver a full market cycle, net f fees. Accrdingly, the Investment Cmmittee will cnsider perfrmance t be adequate if the investment manager utperfrms their respective index ver a full market cycle. Full Market Cycle. The Investment Cmmittee defines a full market cycle t be a perid f time during which the lng-term histric rates f return are realized, generally assumed t be 5 t 7 years. The Investment Cmmittee reserves the right t evaluate Investment Managers ver a shrter time hrizn. Page 9

10 V. GUIDELINES FOR EQUITY INVESTMENTS The dmestic asset allcatin fr the Investment Assets shuld be balanced verall as t style (value vs. grwth) and as t capitalizatin (large-, mid- and small-cap). Equity hldings may be selected frm any U.S. r freign exchange. In rder t achieve a prudent level f prtfli diversificatin, any individual security managed by any ne investment manager shuld nt exceed 10% (at cst) f the ttal assets cntained in their respective prtfli. Allcatins t any specific cuntry shall nt be excessive relative t a bradly diversified internatinal equity manager peer grup. Internatinal will be defined t include emerging market expsure; hwever, this expsure shuld limited t n mre than 30% f the verall internatinal allcatin. It is expected that the nn-us equity prtfli will have n mre than 40% expsure t any ne cuntry. Investment Managers must seek apprval frm the Investment Cmmittee prir t purchasing and/r implementing the fllwing securities and transactins: Cmpanies with a market capitalizatin less than $100 millin Private placements, letter stck and ther unregistered securities Cmmdities r ther cmmdity cntracts; nt t include investments in publicly traded cmpanies prviding gds and services related t cmmdities. Optins, shrt sales r margin transactins Securities whse issuers have filed a petitin fr bankruptcy Varius benchmarks and indices will be used fr perfrmance evaluatin purpses. The Investment Cmmittee, in cnsultatin with the Investment Cnsultant, will select ne r mre indices fr each f the Investment Managers. Page 10

11 VI. GUIDELINES FOR FIXED INCOME Investments in fixed incme securities will be managed actively t pursue pprtunities presented by changes in interest rates, credit ratings, and ther factrs. The Investment Manager may select frm apprpriately liquid preferred stcks, crprate debt securities, asset-backed securities, and bligatins f the U.S. Gvernment and its agencies. These investments will be subject t the fllwing limitatins: Investments f a single issuer (with the exceptin f the U.S. Gvernment and its agencies) shuld nt exceed 10% (at cst) f the ttal assets cntained in any ne investment manager s prtfli. Only preferred stcks r crprate debt securities that have a Standard & Pr s rating r a Mdy s rating f Investment Grade r higher may be purchased r held. The Investment Manager is prhibited frm investing in private placements and frm speculating in fixed incme r interest rate futures, swaps and derivatives. Varius benchmarks and indices will be used fr perfrmance evaluatin purpses. The Investment Cmmittee, in cnsultatin with the Investment Cnsultant, will select ne r mre indices fr each f the Investment Managers. VII. GUIDELINES FOR CASH AND CASH EQUIVALENTS Liquid Reserves r Cash Equivalents are defined as Cmmercial Paper, Certificates f Depsit, Banker s Acceptance, Repurchase Agreements, STIF Funds, Mney Market Funds r Treasury Bills. Investments in cmmercial paper can nly be made in institutins rated at least P-1 by Mdy s r A-1 by Standard and Pr s. VIII. UTILIZATION OF MUTUAL FUNDS If mutual funds are utilized, the restrictins utlined in Sectin VI. And VII. d nt apply. Instead, the existing plicy utlined in the prspectus f the fund wuld take precedence. Page 11

12 IX. SELECTION OF INVESTMENT MANAGERS Investment Managers must be registered under the Investment Advisers Act f 1940 r Investment Cmpany Act f The Investment Cmmittee requires that each Investment Manager prvide, in writing, acknwledgement f fiduciary respnsibility fr the assets under their management. The Investment Cmmittee is respnsible fr the selectin f the Investment Managers. The criteria fr selecting Investment Managers include, but are nt necessarily limited t: Histrical perfrmance f the Investment Manager s cmpsite Risk taken by the Investment Manager as measured by standard deviatin and beta Cnsistency f the Investment Manager s investment style Overlap f investment style and/r fund hldings with ther Investment Managers Ttal firm assets under management and assets specific t the prduct f interest Prtfli manager s tenure with the specific prduct f interest Quality f the Investment Firm and its persnnel X. INVESTMENT MANAGER REVIEW AND EVALUATION The investment perfrmance f each investment manager will be measured against cmmnly accepted perfrmance benchmarks. Cnsideratin shall be given t the extent t which the investment results are cnsistent with the investment bjectives, gals and guidelines as set frth in this statement f plicy. The Cmmittee will review Investment Manager returns versus apprpriate indices as well as cmparable perfrmance t similar managers by investment style. Over a full market cycle, Investment Managers are expected t utperfrm the specific market index assigned t the allcated prtin f the investment assets under their directin. The Cmmittee intends t evaluate the Investment Managers quarterly but reserves the right t terminate a manager fr any reasn at any time with r withut cause. Page 12

13 XI. SPECIFIC INVESTMENT OBJECTIVES LONG TERM ASSETS In rder t meet its needs, the investment strategy f the GiveWell Cmmunity Fundatin is t emphasize ttal return (the aggregate return frm capital appreciatin plus dividend and interest incme). The investment accunts shuld be managed t ptimize the lng-term inflatin-adjusted investment returns within the investment cnstraints described herein. Over a full market cycle, the Fundatin has set as its gals, the fllwing: An abslute annualized rate f return f 7.5%, net f fees. T exceed the rate f inflatin (as measured by the Cnsumer Price Index) by 5.0%. The return f a cmpsite prtfli cmprised f apprpriate market indexes with the same average asset allcatin as the Fundatin Accunts. XII. SPECIFIC INVESTMENT GOALS LONG TERM ASSETS The gal f each Investment Manager shall be t: Meet r exceed the market index, r blended market index fr that categry f funds, selected and agreed upn by the Investment Cmmittee. Display an verall level f risk in the prtfli that is cnsistent with the risk assciated with the asset style and relevant index. Risk will be measured by the standard deviatin f quarterly returns. Each Investment Manager shall receive a written statement utlining their specific gals and cnstraints as they differ frm thse bjectives f the entire Fundatin Fund. Page 13

14 XIII. ASSET ALLOCATION GUIDELINES LONG TERM ASSETS Asset Class Investment management f the assets f the GiveWell Cmmunity Fundatin shall be in accrdance with the asset allcatin guidelines. The current verall target allcatin is 55% equities, 20% alternatives and 25% cash and fixed incme securities. Additinally, the assets f the GiveWell Cmmunity Fundatin can be invested in mutual funds. The Fundatin als recgnizes that asset allcatin guidelines fr fixed incme and equity mutual funds may differ frm the guidelines stated belw due t the inability t custmize the stated investment strategy f the underlying mutual funds. Prtfli Cmpsite The prtfli cmpsite shall invest in accrdance with the fllwing asset allcatin: Allcatin Range Strategic Target Index fr Perfrmance Measurement Equities Large Cap Large Cap Cre 5% - 25% 10% S&P 500 r Russell 1000/3000 Large Cap Grwth 5% - 25% 7.5% Russell 1000 Grwth Large Cap Value 5% - 25% 7.5% Russell 1000 Value All Cap All Cap Cre 0% - 15% 10% S&P 500 r Russell 3000 All Cap Grwth 0% - 15% 0% Russell 3000 Grwth All Cap Value 0% - 15% 0% Russell 3000 Value Small/Mid Cap Small Cap Grwth 0% - 10% 3.75% Russell 2000 Grwth Small Cap Value 0% - 10% 3.75% Russell 2000 Value *Internatinal 5% - 30% 12.5% MSCI EAFE Ttal Equities 45% - 65% 55% **Alternatives Real Return (Cmmdities, REITs, Natural Resurces) 0-15% 5% Varies Tactical (Asset Allcatin r Fund f Funds) 0-15% 10% Varies Opprtunistic Fixed Incme (Multi-sectr, High Yield, Nn-dllar) 0-15% 5% Varies Ttal Alternatives 10% - 30% 20% Fixed Incme Intermediate Investment Grade 15% - 35% 25% LB Int Gv/Credit r Agg Shrt Term Investment Grade 0% - 10% 0% Merrill Lynch 1-3 Year Cash 0% - 10% 0% 90 Day T-Bill Ttal Fixed Incme 15% - 35% 25% *The Internatinal asset allcatin includes bth established and emerging markets. The target range f 15% is fr direct internatinal expsure: that is, funds placed in internatinal investment vehicles r in securities f firms based utside the United States. The Investment Cmmittee recgnizes that there will be additinal indirect internatinal expsure which arises frm investment in U.S. based cmpanies (r frm funds that invest in such cmpanies) that derive a significant prtin f their revenues frm internatinal sales. Indirect expsure will nt be a factr in determining the Internatinal allcatin. **Alternative Investments. Securities which fall utside the scpe f traditinal investments (stcks, bnds, and cash). Such alternative investments and strategies will be limited t: real estate investment trusts (REITs), high-yield bnds, internatinal bnds, cnvertible bnds, multi-sectr fixed incme, natural resurces and cmmdity funds. Page 14

15 XIV. SHORT TERM ASSETS Thugh a traditinal endwment may target a 5% spending plicy, the GWCF may experience significant inflws and utflws f funds in the curse f a calendar year. Given the unpredictability f these flws and the ptential fr the utflws t be greater than 5%, the Investment Cmmittee has frmed the Shrt Term Asset Pl with the fllwing bjectives: T set aside 6-12 mnths f anticipated gifts T be pprtunistically replenished frm the Lng Term Assets r anticipated cntributins. T allw the Lng Term Assets t be invested cnsistent with a lnger term hrizn. The gal f these investments will be t achieve a cmpetitive rate f interest relative t the 90 day T-Bill. Allwable investments will be: Cash r cash equivalents (as previusly defined). Separately managed bnds, bnd funds r exchange traded funds (ETFs) where the verall credit rating is AA r higher and the duratin is less than 3. Page 15

16 XV. REBALANCING GUIDELINES Because different asset classes will perfrm at different rates, the Investment Cmmittee will mnitr the asset allcatin shifts caused by perfrmance. Accrdingly: The Cmmittee, with the assistance f the Investment Cnsultant, will review the relative market values f the asset segments whenever there is t be: a) a cntributin t the fund and will generally place assets in the categry(ies) which are furthest belw the target allcatin utlined in this plicy r b) a distributin frm the fund and will generally remve assets frm the categry(ies) which are furthest abve the target allcatin utlined in this plicy T the extent that adequate re-balancing amng asset categries cannt be affected via the allcatin f cntributins/distributins, the Cmmittee may redirect mnies frm ne manager t anther, if necessary, t maintain the target ranges f this plicy. During January and July f each year the Investment Cmmittee will review the allcatin f funds t the Specific Asset Classificatin Managers and if any manager is mre than 5% abve its allcatin target, funds may be withdrawn frm the ver funded asset class and invested in the under funded asset class(es) in a manner t bring the asset classes t the strategic targets. Hwever, the Cmmittee recgnizes that a rigid asset allcatin wuld be bth impractical and, t sme extent, undesirable under varius market cnditins. Therefre, the allcatin f the Fundatin s ttal assets may vary frm time t time frm the allcatin guidelines, withut being cnsidered an exceptin t this investment plicy. When such variatins r deviatins ccur, the Investment Cmmittee will prvide ntice t the Bard f Directrs at the next Bard meeting. ACKNOWLEDGEMENT AND ACCEPTANCE The undersigned acknwledges that this Investment Plicy was revised and apprved by the Investment Cmmittee and the GWCF Bard f Directrs, effective the first f the mnth fllwing apprval. Signed/Date: / Printed Name: Signed/Date: / Printed Name: Page 16