Wisconsin Arborist Association. Investment Policy

Transcription

1 Wisconsin Arborist Association Investment Policy PURPOSE AND OBJECTIVE The purpose of this investment policy is to establish the guidelines and direction for the implementation of sound investment objectives by the Wisconsin Arborist Association (WAA). Accounts comprising the corporation s investment portfolio are to be managed for a maximum return considering the Association s short, intermediate and long-term needs, in a manner that is consistent with sound investment practices. Specifically, the goals will be structured to the following guidelines: 1. Primary investment objective is to maximize total rate of return, consistent with preservation of principal. 2. Maximize profits on all funds invested, subject to policy restrictions. 3. Achieve full employment of all available funds as earning assets. 4. Provide funds for purposes specified by the Wisconsin Arborist Association. RESPONSIBILITIES 1. The Wisconsin Arborist Association Board of Directors and Finance Committee are responsible for approving the investment policy. To maintain a flexible policy, the Finance Committee shall review the policy annually. Any recommended changes must be approved by the Board of Directors. 2. The Wisconsin Arborist Association Board of Directors will give full discretion with respect to investment decisions to the investment manager, who shall manage the Mid and Long Term Pool fund within the guidelines established by this investment policy. 3. The Finance Committee will re-allocate funds as directed by this policy to appropriate accounts at the end of each fiscal year. 4. Long and mid-term investment funds can be withdrawn by the President or Treasurer but only with the vote of approval by the Board of Directors. 5. The WAA treasurer will coordinate the purchase and sale of CD s and other cash instruments in the Short Term Pool of Investments.

2 QUALITY 6. The Investment Manager is expected to: a. Exercise complete investment discretion within current guidelines including the selection of securities and the implementation of the purchase and sale of those securities for the Mid and Long Term Pool of Investments b. Communicate frequently and openly with the Committee on all matters of significance regarding changes in its management, organization or structure. c. Provide reports of the investment portfolio on a monthly basis. d. Help in the development and review the appropriateness of guidelines, policies and objectives. e. Provide objective advice on all investment matters. Quality will be the primary objective in the operation of the investment portfolio. Earnings will be achieved at the highest level consistent with safety and liquidity. 1. Wisconsin Arborist Association shall maintain sufficient records and information on file to provide for proper Board supervision. Such records, at a minimum, include the retention of the interim and annual account statements of the investment manager. Targeted Investment Allocation The Finance Committee and the Board of Directors has determined that there should be a Short Term Investment Pool to accommodate the short term needs of the organization and a Mid and Long Term Pool which will be separately managed to address the organizations longer term needs. Short Term Pool of Investments A short term pool will be established consisting of short term Certificates of Deposit (CD) and checkbook balances. The CD s will have maximum maturity dates of four (4) months or less. The amount will be determined annually and equal 60% of annual budgeted operating expenses for the coming year. The targeted mix of the Short Term Pool is as follows: Certificates of Deposit: 60% Checkbook Balances: 40% The goal of short term investments will be to allow for the effective management of cash flows for operations, while still making the most of the interest potential of the funds. 2

3 Investment Objectives and Spending Rate of Mid and Long Term Pool of Investments The general policy shall be to diversify investments within both equity and fixed-income securities so as to provide a balance that will enhance total return while avoiding undue risk concentration in any single asset class or investment category. The objective to preserve the real purchasing power by seeking long-term returns which either match or exceed the spending rate plus inflation It is the policy of WAA to annually make available per board approval 4% (after investment fees) of the trailing 12 quarter average of the pool s total asset value for mid-term allocations, with the expectation that, over time, the total real return (return net of inflation) from investments will exceed the pool s pay-out rate, thus allowing for real growth of investment assets. However, no distributions will be made prior to January 1, Mid and Long Term Pool Asset Allocation A mid-term and long-term investment pool will be established consisting of equities and fixed income instruments. The amount in the pool will be a function of the Association s available funds after the Short Term Investment Pool and allocations are determined. The following asset categories will guide the investment decisions. Lower Limit Target Upper Limit Equities International 2% 2% 5% Small Cap 5% 7% 10% Medium Cap 5% 7% 10% Large Cap 33% 44% 58% Total Equities 50% 60% 70% Fixed Income 30% 40% 50% Cash Equivalents 0% 0% 5% The primary goal of the mid-term account is to set aside money for use in an emergency or for funding an extraordinary project. The primary goal of the long term account is to set aside money as a long-term asset to ensure the continuing stability of Wisconsin Arborist Association. 3

4 ACCEPTABLE INVESTMENTS 1. Fixed Income Investments a. Securities of the U.S. Government or agencies thereof. b. Taxable fixed income securities with a minimum rating of A by Moody s or S&P. c. Commercial paper and variable rate demand notes of domestic corporations rated A-1 or P-1. d. Bankers agreements 100% collateralized with respect to market value plus accrued interest in direct U.S. Government Securities. e. Repurchase agreements collateralized with respect to market value plus accrued interest in direct U.S. Government Securities. f. Money market funds adhering to quality guidelines described in items a - c above. g. Bank money market accounts and certificates of deposit or similar depositary Instruments of an FDIC insured institution. h. Mutual funds consisting of any of the above securities as specified. 2. Equities International and domestic common stock, preferred stock, and securities convertible into stock of publicly traded firms believed to represent no substantial risk of major principal loss qualify as equity investments. Also, mutual funds consisting of any of these equity securities further qualify as an equity investment. DIVERSIFICATION 1. Total issues of any one corporation may not exceed 15% of the market value of the fixed income portfolio at time of purchase. 2. Fixed income securities of any one issuer may not exceed 10% of the market value of the fixed income portfolio at time of purchase. This restriction does not apply to issues of the U.S. Government or to any issues guaranteed as to both principal and interest by the U.S. Government. 4. Any one equity investment may not exceed 15% of the market value of the equity portfolio at time of purchase. 4

5 5. Equity Mutual Funds Equity mutual funds should be diversified within 3 of these fund objectives, however no single equity mutual fund should exceed 50% of the long-term equity portfolio. a. Aggressive Growth Funds in this objective seek rapid growth of capital. They often invest in small or emerging growth companies, and are most likely than other funds to invest in IPOs and in companies with high price/earnings and price/book ratios. Aggressive Growth funds may also use such investment techniques as heavy sector concentrations, leveraging and short-selling. b. Equity-Income Funds in this objective are expected to pursue current income by investing at least 65% of their assets in dividend-paying equity securities. c. Growth Growth funds pursue capital appreciation by investing primarily in equity securities. Current income, if considered at all, is a secondary concern. d. Growth and Income Growth of capital and current income are near-equal objectives for these funds. Investments are typically selected for both appreciation potential and dividend-paying ability. e. Small Company (Small Cap) Small company funds seek capital appreciation by investing primarily in stocks of companies with market capitalization of less than $1 billion. In this objective, income payments from dividends are unlikely. f. Foreign Stock These funds invest primarily in equity securities of issuers located outside the United States. g, Balanced Mutual Fund A fund that buys both growth and income securities on an effort to get the highest returns with least amount of risk. Securities listed on principal U.S. stock exchanges or traded on NASDAQ. PROVISIONS FOR EXCEPTIONS 1. This policy is intended to be flexible to deal with rapidly changing conditions in the money, bond and stock markets. Therefore, the Board of Directors may approve specific exceptions to this policy. 5

6 PROHIBITED TRANSACTIONS 1. Commodities 2. Options 3. Futures 4. Real Estate 5. Short Sales 6. Warrants 7. Transactions Made On Margin 8. Other financial instruments, which do not meet the prudent man standard of ERISA or other, stated objectives of this investment policy. 6

7 PERFORMANCE REVIEWS 1. Periodic reviews of investment performance at the request of the Wisconsin Arborist Association Board of Directors. 2. Annual review with the Finance Committee and with the full Board of Directors as requested. 3. Investment performance is computed monthly using a standard time-weight rate of return calculation to minimize the impact of external cash flows. Results are reported on a total return basis. 4. Investment performance is reviewed and evaluated in the context of the portfolio s polices and objectives. 5. Portfolio investment policies and objectives are reviewed at least annually to ensure their continued relevance to Wisconsin Arborist Association Board of Director s requirements. 6. Portfolio return performance shall be measured against a weighted target mix benchmark such as the Russell 2000; the Standard and Poors 500; Morgan and Stanley EAFE; Lehman Intermediate Gov/Corp.; as established by the Investment Manager. 7