INVESTMENT POLICY. To provide general guidelines, policies and principles for the investment of funds.

Transcription

1 The University Crpratin San Francisc State Rm ADM Hllway Ave. San Francisc, CA ucrp.sfsu.edu INVESTMENT POLICY Purpse: T prvide general guidelines, plicies and principles fr the investment f funds. Effective Date: Revised - September 12, 2016 I. Backgrund It is the rle f the Bard f Directrs ( Bard ) t develp investment gals, bjectives and strategies fr funds ( Fund ) held by the University Crpratin, San Francisc State ( Crpratin ). This Investment Plicy Statement ( Plicy ), established by the Bard, serves t gvern the financial management f the Fund. The purpse f the Plicy is t guide the Crpratin, the Finance Cmmittee ( Cmmittee ), the Investment Managers ( Managers ) and the Investment Cnsultant ( Cnsultant ) in effectively supervising, mnitring and managing the investments f the Fund. This Plicy allws fr sufficient flexibility in the management versight prcess while setting frth reasnable parameters t ensure prudence and care in the executin f the investment prgram. Additinally, Managers are expected t fllw specific Investment Manager Guidelines, which utline prtfli guidelines, authrized investments, prhibited securities, perfrmance bjectives and reprting requirements. This Investment Plicy Statement incrprates the Crpratin s plicies, bjectives, lngterm asset allcatin plan, and implementatin prgram fr fulfilling its fiduciary bligatin t manage the Fund s assets with the care, skill, prudence, and diligence under the circumstances then prevailing f a prudent persn acting in a like character and with like aims. II. Plicy A. Investment Gals The primary gal f the Crpratin investments is t earn a ttal return n the investable assets t supprt the current and future perating needs f the Crpratin while taking a mderate amunt f investment risk. B. Investment Return Objectives The perfrmance bjectives shuld emphasize reliability f returns ver time:

2 Page 2 f 9 1. Return The lng-term return bjective f the Fund is t exceed the apprpriate custm benchmark (Plicy Index) ver a full market cycle, recgnizing that full market cycles vary and are measured as either trugh t trugh r peak t peak. 2. Risk In light f the Fund s lng-term time hrizn, the Fund can invest in individual assets, which may have high vlatility as lng as the aggregate prtfli risk is in line with that expected f a prudently managed prtfli. Reasnable cnsistency f returns is desirable as a means f prviding stability t the prcess f managing all Crpratin financial assets. The Fund shuld experience risk as measured by vlatility and variability f return, cmmensurate with that f the market as expressed by the Prtfli Plicy Index. 3. Diversificatin Fund assets will be diversified amng classes f assets, as well as within each asset class including diversificatin amng sectrs and industries, quality, market capitalizatin, and investment strategy n the premise that prtfli diversificatin and equity style diversificatin prvide prtectin against a single security r class f securities having a disprprtinate impact n aggregate perfrmance. C. Asset Allcatin 1. Ranges The asset allcatin f the Crpratin will depend upn the expected term f the investment. Invested funds will be classified as lng term alng with ther investments that will nt be due fr mre than seven years. Medium term investments will invlve prjects where the principle must be returned in tw t five years and shrt term investments are due in less than tw years. In the case f shrt and medium term investments fixed incme duratins may be set t match the expected date when the funding will be needed. Specific targets fr each asset class will be determined by the cmmittee based n the guidelines and ranges set in this plicy. Lng Term (Seven years r mre) Asset Class Target Allwable Allcatin Range Equities 48% 33% - 63% Fixed Incme 40% 28% - 52% Alternatives 12% 8% - 14% Cash 0% 0% - 10%

3 Medium Term (Tw t Five years) University Crpratin, San Francisc State Page 3 f 9 Asset Class Target Allwable Allcatin Range Equities 25% 0% - 40% Fixed Incme 50% 35% - 100% Alternatives 5% 0% - 10% Cash 20% 0% - 50% Shrt Term (Tw years r less) Asset Class Target Allwable Allcatin Range Fixed Incme 0% 0% - 25% Cash (LAIF) 100% 75% - 100% 2. Liquidity Per the shrt-term guidelines abve, the Crpratin will maintain sufficient liquidity t all f its current spending needs and will hld assets in liquid funds and securities (e.g., LAIF, mney market funds, bank accunts, shrt term securities r CDs) as necessary. D. Rle f Asset Classes Equities It is anticipated that the ttal returns f equities will be higher than the ttal returns f fixed incme securities ver the lng run. Equities are likely t be subject t greater vlatility ver shrter perids. T avid the risk f cncentratin, individual equities shuld cmprise n mre than 5% f the ttal market value f the stck prtfli. In additin, investment in any ne stck is nt t exceed 5% f that crpratin's utstanding cmmn stck. (Mved frm Cncentratin f Assets) US Equities - It is intended that the dmestic equity prtin f the prtfli will prvide expsure t different investment styles as well as the full range f market capitalizatin. The purpse f expsure t different investment styles is t reduce prtfli vlatility as well as t enhance returns because different styles have histrically had different perfrmance cycles. Inclusin f managers specializing in managing prtflis with an emphasis n different market capitalizatins is als imprtant t vlatility and enhance returns as cmpanies with different market capitalizatins ften have different grwth cycles and stck prices that mve in different patterns. Dmestic equities include bth the rdinary shares f US cmpanies and American Depsitry Receipts (ADRs) traded n American exchanges. Nn-US Equities - This segment prvides access t majr equity markets utside the US and cnsequently plays a significant rle in diversifying the Fund s equity

4 Page 4 f 9 prtfli. This segment will prvide expsure t develped and develping nn-us markets, as their grwth and returns are nt highly crrelated t thse f the US. This cre internatinal segment will cncentrate n larger cmpanies in established nn-us equity and emerging markets and will exhibit bth grwth and value characteristics. Internatinal equities include bth the rdinary shares f nn-us cmpanies and American Depsitry Receipts (ADRs) traded n American exchanges. Fixed Incme The primary rle f the fixed incme prtfli is t prvide a surce f stability that acts as a buffer relative t mre vlatile prtfli segments, i.e., equities. In additin, the Fund s bnd prtfli will cntribute t the incme needs f the Crpratin. Fixed incme generally prvides a diversified prtfli with deflatin prtectin during perids f financial duress. Bnds dampen the verall vlatility f ttal Fund results, which is imprtant t help mitigate lsses in perids f falling equity markets. It is intended that the verall fixed incme prtfli will be f high quality. Average credit quality shuld be investment grade. T avid the risk f cncentratin, individual bnd psitins ther than bligatins f the U.S. gvernment shuld nt cmprise mre than 5% f the ttal fixed incme prtin f the prtfli. (Mved frm Cncentratin f Assets) Alternative Investments The purpse f using alternative investments is t reduce the vlatility f the verall prtfli and t prvide an alternative surce f return frm that f the traditinal dmestic and internatinal capital markets. Alternative asset classes may include marketable securities, real estate, venture capital, private equity, cmmdities, hedged equity r hedge funds. Alternative investment strategies are defined as investment prgrams that ffer the prtflis access t strategies that have lw relative crrelatin t the dmestic and internatinal equity and fixed incme markets. Managers explit market inefficiencies while minimizing expsure and crrelatin t traditinal stck and bnd investments. The average amunt f leverage amng alternative funds (cmbined) shall nt exceed 60%. III. Plicies and Prcedures A. Rebalancing and Cash Flws Cash flws t and frm the prtfli will be used t rebalance the prtfli and may be allcated t r frm the Managers. The Asset Allcatin guidelines are established t maintain the lng-term strategic asset allcatin f the Fund. The rebalancing prcess results in the mvement f assets frm recently strng perfrming asset classes, which may be vervalued, int weaker perfrming asset classes, which may be undervalued. The need t rebalance culd be ccasined by the disprprtinate mvement f asset prices within a class relative t the mvement f prices in ther classes, significant inflw f new gifts and/r

5 Page 5 f 9 extrardinary funding requirements f participating prjects. Over the lng term, this discipline is expected t enhance prtfli returns while reducing risk (vlatility) by realizing gains in ne asset class and using thse funds t make additinal purchases in the undervalued asset class. T minimize expense, rebalancing shall ccur in the fllwing rder. First, Cntributins will be used t maintain target allcatins; secnd, funds will be transferred amng asset classes. Rebalancing shuld be dne at least annually, fllwing the end f the fiscal year. B. Prxy Vting Vting f prxies in stcks held by the Fund will be dne in a manner that is in the best financial and ecnmic interests f the Fund and its beneficiaries by thse best able t make such assessments. Nrmally this will be the Manager. Each Manager shall match prxies received with hldings n applicable recrd dates, and ensure that all prxies fr which the Manager is respnsible are received. In additin, the Managers shall submit written reprts t the Cmmittee upn request advising f the manner in which each prxy was vted during the preceding perid. C. Prtfli Management Plicy The Cmmittee will recmmend fr Bard apprval managers fr a specific investment style r strategy prvided that the verall bjectives f the Fund are satisfied. The Managers will have full discretin and authrity fr determining investment strategy, security selectin and timing (subject t this Plicy). With the assistance f the Cnsultant, the Cmmittee will review n a regular basis, each Manager's adherence t the Plicies, and any material changes in the Manager's rganizatin such as staffing changes and new business develpments. Perfrmance f Managers will be reviewed by the Cmmittee n a quarterly basis. 1. Guidelines fr the Selectin f Traditinal Investment Managers In general, Managers shuld pssess the fllwing attributes: An apprpriate perfrmance histry in the discipline specified by the appintment; Demnstrated adherence t the investment style fr which they were engaged and adherence t the firm's stated investment discipline; Experience in managing mney fr institutinal clients in the asset class/prduct categry specified by the appintment; A recrd f stability in retaining and attracting qualified investment prfessinals, as well as a recrd f managing asset grwth effectively, bth in gaining and retaining clients;

6 Page 6 f 9 A sufficient asset base. In general, Managers shuld have at least $250 millin f discretinary assets under management, and the assets f the Fund shuld make up n mre than 10% f Manager's ttal asset base; A fee structure that is cmpetitive with industry standards fr the prduct categry; SEC-Registratin as an Investment Advisr (r exempt frm registratin) that is recgnized as prviding demnstrated expertise in the management f investments fr tax-exempt institutins and a defined investment specialty; The willingness and ability t cmply with the "Duties f the Investment Managers" utlined herein; A firm where Principals have wrked tgether at a prir rganizatin may als be cnsidered; T the extent that the Fund invests thrugh mutual funds, cmmingled accunts r limited partnerships, it is expected that the bjectives and guidelines will be clsely aligned with the plicy statement with the understanding, hwever, that these investments will be managed accrding t their prspectus and limited partnership agreements, and that custmizatin f guidelines will generally nt be pssible; and Cnfrm t Glbal Investment Perfrmance Standards (GIPS) fr perfrmance reprting. 2. Guidelines fr the Selectin f Alternative Investment Managers It is recgnized that the selectin prcess fr managers f alternative asset classes and alternative strategies requires due diligence because f the general nature f the investments as well as the lack f publicly mnitred and recrded data. Investments in these strategies shall be made by becming a limited partner in sme frm f partnership structure. Particular care will be given t the identificatin and understanding f the fllwing: A descriptin and understanding f the partnership structure; An understanding f the strategy as described in the Private Placement Memrandum r Offering Memrandum; Identificatin f any allwable security r strategy that is identified as specifically prhibited in ther parts f this Plicy; Identificatin f the amunt f leverage allwed; The terms include the terminatin date f the fund, the ability t withdraw funds, the management fee structure, allcatin f prfits and lsses, incentive allcatin, and distributin rules. In additin t the clarity f the strategy, particular attentin will be given t:

7 Page 7 f 9 The reputatin f the General Partner(GP); The track recrd f the Manager r the GP in prir funds; The length f time that the GPs have wrked tgether as a team; The amunt f financial cmmitment by the GP; The existence f a third-party administratr and external auditr; and Other relevant factrs in determining the integrity f Manager. These attributes are nt meant t be all-inclusive. It may be necessary in certain circumstances t cnsider additinal prcedures. D. Rles and Respnsibilities 1. Duties f the Investment Managers Fr individually managed accunts, the Managers shall: Prvide Crpratin each year with the updated ADV Part II filed with the SEC; Prvide Crpratin each year with updates n SEC vilatins by the firm Vte the prxies in accrdance with this Plicy; Prvide quarterly transactin, valuatin and perfrmance reprts; Prvide its valuatin methdlgy and plicy, as apprpriate; Recncile mnthly accunting, transactin and asset summary data with custdian r trustee valuatins and cmmunicate and reslve any significant discrepancies; and Maintain frequent and pen cmmunicatin with Crpratin and Cnsultant n all significant matters pertaining t the Plicy including, but nt limited t, the fllwing: The Manager s investment utlk, strategy and prtfli structure; Significant changes in wnership, rganizatinal structure, financial cnditin r senir staffing; Changes in the prtfli manager r ther staff members assigned t manage the allcatin; Other issues which the Manager deems t be f significant interest r material imprtance; Be available t meet with the Cnsultant and/r Cmmittee upn request. 2. Duties f the Investment Cnsultant

8 Page 8 f 9 The principal rle f the Cnsultant is t prvide independent advice t the Crpratin and their Cmmittee. The Cnsultant shall be respnsible fr the fllwing: Making recmmendatins t the Crpratin regarding investment plicy and strategic asset allcatin including the additin r substitutin f new asset classes; Selectin f qualified Managers; Assisting in the versight f existing Managers, including perfrmance evaluatin and mnitring changes in staffing, wnership and the investment prcess; Preparing a quarterly reprt n the Managers perfrmance, and n the perfrmance f each prtflis in ttal including a review f guideline cmpliance and adherence t investment style and discipline; Prvide research and due-diligence materials n investment manager searches; Wrking directly with the Crpratin n any investment-related tpic; Prviding tpical research and educatin n investment subjects that are relevant t Fund prtflis; Meeting with the Crpratin and their Cmmittee as requested. 3. Duties f the Cmmittee The Finance Cmmittee is charged with an annual review f the Plicy. This review will fcus n the cntinued feasibility and the apprpriateness f the asset allcatin plicy, the investment bjectives, the investment plicies and guidelines, and the investment restrictins. The Cmmittee shall recmmend apprpriate changes t the Bard fr apprval. Cpies f this plicy statement (and any subsequent amendments) will be prvided t all investment managers whenever changes are apprved by the Bard. E. Meeting Schedule The Cmmittee will meet t review the perfrmance and cmpliance f the Fund with bjectives and guidelines at least fur times per year and n an as needed basis. IV. Manager Guidelines and Objectives A. Definitin Fr the purpse f this Plicy, Managers refers t thse managers investing in traditinal asset classes f stcks, bnds, and cash equivalents as well as in traditinal lng-nly strategies. Guidelines fr selectin f Alternative Investment Managers are included in Sectin III, C, 2.

9 B. Discretin University Crpratin, San Francisc State Page 9 f 9 Managers shall have cmplete discretin in the management f the assets subject t the Plicy set frth herein. Cmpliance with this Plicy remains the respnsibility f each Manager. It is the respnsibility f each Manager t reprt cmpliance exceptins t the Crpratin /Cnsultant as they arise. Managers may request an exceptin f Plicy, which may r may nt be accepted by the Cmmittee. Mutual funds, ETFs r ther cmmingled funds may be used in any categry f investment management. C. Use f Cash Equivalents Cash equivalents may be held in any Manager's prtfli at the Manager's discretin. Managers will be evaluated, hwever, based upn the perfrmance f their ttal fund cmpnent relative t the apprpriate index benchmark, regardless f the amunt f cash equivalents held during any perfrmance measurement perid. V. Custdial Arrangements A custdian r custdians apprved by the Bard will hld all securities. Such a custdian must be registered and licensed by apprpriate bdies, e.g. Federal Reserve Bank, Securities and Exchange Cmmissin. The terms and cnditins f this custdial relatinship shall be detailed in a written agreement with the custdian. VI. Scial Respnsibility Plicy and Prhibited Investments The Crpratin is sensitive t the issue f scial respnsibility when making investment decisins. The Crpratin Bard cntinues t mnitr and take int accunt a wide variety f infrmatin t help it in determining what it cnsiders t be scially respnsible investments. In carrying ut its scially respnsible investment plicy, the Bard will cntinue t give specific instructins t its investment managers abut investing r nt investing in particular prducts, cmpanies, and cuntries. In accrdance with this plicy: 1. Direct wnership f cmpanies which derive mre than 10% f their revenue frm the prductin r use f cal and tar sands is prhibited. 2. Careful mnitring f cmingled funds t assess apprximately the percentage f these investments in cmpanies which derive mre than 10% f their revenue frm the prductin r use f cal and tar sands. 3. Direct wnership f cmpanies which derive mre than 10% f their revenue frm the prductin r sale f tbacc is prhibited.