The purpose of the Investment Policy Statement (“Policy”) is to establish oversight and objectives for investing Saginaw Valley State University’s (“University”) pooled cash investments. The Policy will also discuss standards and benchmarks that will be utilized by the University to evaluate these investments. In addition, the Policy describes the responsibilities of all involved parties. The Policy is intended to be sufficiently specific to be meaningful, yet flexible enough to be practical.
The objective of this Policy is to manage and invest the University Pooled Cash to sufficiently cover short-term needs of the University and to attain a greater return on those assets not needed in the short-term. The primary intention is to provide sufficient liquidity for the needs of the University. Alternatively, by permitting a moderate amount of investments such as intermediate-term fixed income,
equities, and alternative investment strategies, the University also aims to produce modestly higher returns than a cash only portfolio would yield over longer periods of time. Three pools (Short-term, Intermediate, Long-Term) of assets have been established with each having its own guidelines and performance standards.
The cash management and investment activities for University Pooled Cash shall be the responsibility of the University Board of Control (“Board”). The Board has delegated oversight responsibility to the SVSU Foundation’s Finance and Investment Committee (“Investment Committee”). The Vice President for Administration & Business Affairs (“VPABA”) should report meaningful decisions made by the Investment Committee to the Board. The Board is responsible for setting the Policy of the University Pooled Cash while the Investment Committee is responsible for making investment decisions and oversight within the parameters of the Policy. The Investment Committee shall delegate the day-to-day oversight of these investments to the VPABA of the University. The VPABA may choose to retain an independent advisor to advise on these assets and to exercise more comprehensive oversight and reporting on the investments. The following will describe further responsibilities of all involved parties. The following groups are considered fiduciaries of the University Pooled Cash. As fiduciaries, these groups should adhere to their defined responsibilities and prudently act in the best interest of the University Pooled Cash.
The Board has responsibility for ensuring that the Policy is prudent and aims to preserve principal while achieving reasonable investment returns. The Board has authority to set investment objectives, set asset allocation parameters, and delegate investment oversight. This includes, but is not limited to, selection of acceptable asset classes, allowable ranges of holdings by asset class and individual investment classes as a percent of total assets, the definition of acceptable securities within each asset class, and investment performance expectations.
The investment policies and restrictions presented in this Statement serve as a framework to achieve the investment objectives at a level of risk deemed acceptable. These policies and restrictions are designed to minimize interference with efforts to attain overall objectives and to minimize the potential of excluding any appropriate investment opportunities.
The Investment Committee is responsible for oversight of the University Pooled Cash. The Investment Committee should review policy compliance, asset allocation, performance, investment managers, and all other pertinent information on a quarterly basis. In addition the Investment Committee is responsible for hiring and terminating investment managers. The Investment Committee will rely on the Vice President of Administration & Business Affairs for information on cash needs and relative information regarding the University
Moreover, in accordance with the State of Michigan’s adoption of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), the Investment Committee will take the following into consideration when making investment decisions but not limited to:
The VPABA is responsible for the day-to-day management of cash needs of the University. The VPABA should provide future cash flow
information to the Investment Committee and investment consultant to support investment decisions. The VPABA should also provide any information to the Investment Committee that is relevant to making investment decisions. The VPABA will report to the University Board of Control’s Finance and Audit Committee high level reports on the Foundation Finance and Investment Committee’s investment performance and substantive decisions.
The investment consultant is responsible for providing information and analysis to assist the Investment Committee and VPABA with the following:
Each investment manager has discretion to purchase, sell, or hold the specific securities that will be used to meet the University’s investment objectives. Each investment manager will be held responsible and accountable to achieve the objectives herein stated.
While it is not believed that the limitations will hamper any investment manager, the investment manager should request modifications that it deems appropriate.
The custodian will physically maintain possession of securities owned by the University, collect dividend and interest payments, redeem maturing securities, and affect receipt and delivery following purchases and sales. The custodian shall also perform regular accounting of all assets owned, purchased, or sold, as well as movement of assets into and out of the University accounts. The custodian is also responsible for providing monthly statements to the University and investment consultant. Access to online balances and statements should be made available.
Additional specialists such as attorneys, auditors, and others may be employed by the University to assist in meeting its responsibilities and obligations to administer the University Pooled Cash. All expenses for such experts must be customary and reasonable, and will be borne by the University as deemed appropriate and necessary.
The University Pooled Cash should provide for both short and longer-term needs. Short-term obligations of the University are
the primary concern. It is also understood that there may be assets in excess of what would satisfy short-term cash needs that could be exposed to reasonable amounts of risk to support the longer term missions of the University. Asset will be separated into three investment pools, short-term, intermediate-term, and long-term. These investment pools directly relate to the investment time horizon of those assets. There should be more short-term investments than the forecasted need to error on the side of caution for unforeseen obligations. This Policy will detail specific guidelines and objectives of each investment pool.
The ranges between the three investment pools have been established in order to maintain ample liquidity while allowing for a portion to be invested in longer-term investments. As a result, these pooled cash assets will be positioned to appreciate over time. Due to the dynamic nature of these three pools, performance will be separately monitored.
It is the responsibility of the VPABA to periodically, but not less than annually, determine the appropriate allocation between the three investment pools. Allocation decisions between investment pools will be made in accordance with an assessment of the University’s short- and intermediate-term cash and liquidity needs.
Allowable ranges between pools:
Short-Term Pool 0% - 100%
Intermediate Pool 0% - 70%
Long-Term Pool 0% - 30%
The objective of the short term pool is to preserve capital and cover the short-term operating needs of the University. This pool also looks to maximize income without taking on any undue risk. Preservation of capital overrides any contemplation of appreciation of
principal. All cash and equivalent investments should be made with concern for quality and liquidity.
Investment Time Horizon:
The investment time horizon for these investments is less than one year.
Objective: The objectives for the intermediate-term pool are to preserve capital and earn a greater return than the short-term
pool. This investment pool should deliver reasonable liquidity should additional funds be required by the University above what had been allocated to the short-term pool.
Investment Time Horizon: The investment time horizon for these investments is one to five years.
Objective: The objective of the long-term investment pool is to provide long-term growth to funds that are not needed for
expenditure over the next five years. It is the intention of the University to diversify this long-term pool between fixed income, equity, and alternative investments. This long-term pool is intended to enhance the overall performance of the University Pooled Cash.
Investment Time Horizon: The investment time horizon for these investments is greater than 5 years.
Asset Allocation Guidelines:
Asset Class Allowable Range
Cash 0% - 10%
Fixed Income 20% - 40%
Domestic Equity 30% - 50%
International Equity 15% - 25%
Alternatives 0% - 20%
Performance will be evaluated every quarter but an emphasis will be given towards three- and five-year rolling periods.
Merrill Lynch 91-day T-Bill Index
Barclays Capital Intermediate Government/Corporate Bond Index
The benchmark is a blended benchmark based on the asset allocation for the Long-Term Pool:
The total portfolio will be constructed and maintained to provide prudent diversification with regard managers, styles, regions, sectors, and number of holdings.
To assure the continued relevance of the guidelines, objectives, financial status and capital markets expectations as established in this Statement of Spending and Investment Policy, the Board plans to review this statement annually, or as deemed necessary.
The Board requires that University Pooled Cash be primarily invested in liquid securities, defined as securities that can be transacted quickly and efficiently for the University with minimal impact on market price.
The Custodian shall vote the proxies for separately managed accounts on behalf of the University. When mutual funds are used, the fund company will vote proxies.
When separate accounts are used, the Investment Committee expects the purchase and sale of securities to be made in a manner
designed to receive the combination of best price and execution.
The Investment Committee has the responsibility to hire and monitor investment managers to carry out the objectives of the University Pooled Cash. Some or all of the following attributes should be considered when selecting an investment manager:
Assuming the minimum criteria are met, the particular investment manager under consideration should meet the following standards for selection:
The investment manager performance will be reviewed on a monthly and quarterly basis and a report will be provided by the investment consultant. The manager will be welcomed to provide any suggestions regarding appropriate adjustments in this statement or the manner in which investment performance is reviewed. Investment manager results will be reviewed quarterly with an emphasis on longer term performance and also measured over rolling three and five year periods.
Each investment manager must advise the Investment Committee and the investment consultant concerning any changes in their
investment philosophy and of changes in ownership, personnel or any other matter that may impact the performance of the portfolio.
Taking into account many factors, along with advice from the investment consultant, the Investment Committee has the authority to remove an investment manager. Following are the general guidelines which may give reason to remove an investment manager:
Each investment manager shall be reviewed at a minimum annually regarding performance, personnel, strategy, research capabilities, organizational and business matters, and other qualitative factors that may impact its ability to achieve the desired investment results.
If the investment manager has consistently failed to adhere to one or more of the above conditions, it is reasonable to presume a lack of adherence going forward. Failure to remedy the circumstances of unsatisfactory performance by the investment manager, within a reasonable time, shall be grounds for removal.
Any recommendation to remove an investment manager will be treated on an individual basis, and will not be made solely based on quantitative data. In addition to those above, other factors may include professional or client turnover, or material change to investment processes. Considerable judgment must be exercised in the removal decision process.
A manager shall be removed using one of the following approaches:
For purposes of this Statement, the following definitions apply: “University Pooled Cash” refers to cash and non-Foundation investment assets used for operational and long-term needs of the University.
Revised 03/18/02 VP-ABA
Revised 10/11/10 BC
Revised 05/11/13 BC