Â鶹´«Ã½

Policy Name: Investment Policy
Policy Number: 04-01-002
Accountable Senior Administrator: Chief Financial Officer
Date Issued: 2/26/18
Last Updated: 2/26/18

 

Policy Statement

This statement of investment objectives and policies governs the investment of the University's cash balances. This policy will be subject to periodic review and modification by the Board of Trustees as is considered necessary to achieve cash management and investment objectives.

Policy Text

A. GOVERNING AUTHORITY

This Investment Policy Statement (the "Policy") for the New Â鶹´«Ã½ City University (the "University") governs the investment of the University's funds. This Policy shall be subject to review and/or modification by the Board of Trustees (the "Board") as necessary.

The Higher Education Restructuring Act of 1994 grants the Board with oversight authority for the investment and reinvestment of the University's funds. The Board has granted the authority and responsibility for administering and interpreting this Policy to the Chief Financial Officer and Treasurer (the "CFO").

The CFO may designate one or more staff members to directly coordinate the day-to-day investment activities. The Board designates other independent investment advisors which the Board has delegated such authority, to invest the University's funds within the guidelines set forth in this Policy.

This Policy, its goals and guidelines, are considered to be an integral component of the University's enterprise risk management system.

B. SCOPE

This Policy applies to all University financial assets for which the University retains daily control. Funds for which the University has retained outside investment management services shall also be governed by this Policy. Currently, this Policy applies to the following funds:

1. Liquidity Funds
   • This segment is utilized for working capital expenditures with requirements of preservation of principal and liquidity on demand. These funds are needed on a day-to-day basis, and shall be managed to provide daily liquidity.
     • This segment shall make up approximately 15-50% of the University's funds with a target of30%.
2. Contingency Cash - Short duration Fixed Income
   • The contingency cash segment requires preservation of principal, and withdrawals are forecasted over a longer period of six months to a year. This segment serves as a supplement to the liquidity funds, and is highly liquid in case it is necessary to utilize the funds for operating activities.
     • This segment shall make up approximately 35-50% of the University's funds with a target of 45%.
3. Core Cash - Multi Asset Class
   • The core cash segment also requires preservation of principal, but these assets are not likely to be needed within the next one to ten (1-10) years. This segment serves as a base to invest in funds with higher returns over a longer period of time.
     • This segment shall make up approximately 20-35% of the University's funds with a target of 25%.

C. GENERAL OBJECTIVES

The University's three primary investment objectives, in order of priority and importance, are:

1. Safety: preservation of principal is the foremost objective;
2. Liquidity: investments shall be made for such periods, and in such investments, as to meet all liquidity needs of the University; and
3. Return on investment: within the constraints listed above, the CFO or its investment advisor(s) should invest funds in a manner that maximizes investment return, on a time weighted basis.

D. STANDARDS OF CARE

1. Prudence: the standard of prudence to be used shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investment officials acting in accordance with written procedures and this Policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this Policy.
   
   Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.

2. Ethics and Conflicts of Interest: officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial or investment positions that could be related to the performance of the University's funds. Officers and employees shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the University.

E. AUTHORIZED FINANCIAL INSTITUTIONS

All broker/dealers that desire to become qualified for investment transactions with the University shall meet the following:

1. Primary dealers and regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule);
2. Capital of at least $25,000,000 or capital of $5,000,000 for films incorporated in the State of New Â鶹´«Ã½;
3. Registered as a dealer under the Securities Exchange Act of 1934;
4. Member of the Financial Industry Regulatory Authority (FINRA);
5. Registered to sell securities in the State of New Â鶹´«Ã½; and
6. Engaged in the business of effecting transactions in authorized investments of the Policy for at least five (5) consecutive years.

To the extent the University utilizes the services of an outside investment advisor, it shall be the responsibility of said investment advisor to maintain an approved list of brokers.

F. SAFEKEEPING AND CUSTODY

To ensure that securities are deposited in an eligible financial institution prior to the release of funds, all trades of marketable securities will be executed by delivery vs. payment ("DVP").

Further, all securities will be held by an independent third-pai1y custodian, in the name of the University, and evidenced by safekeeping receipts in the University's name. The custodian shall provide the CFO of the University along with its independent investment advisor(s) daily confirmation of held securities as well as a monthly transactions and holdings report.

G. AUTHORIZED INVESTMENTS

The University's funds shall only be invested in the types of securities listed below. Unless stated below, the maximum stated maturity of any individual fixed income security shall be limited to 10 years from time of purchase. For federal agency and U.S. Government mortgage backed securities, the maximum maturity shall be defined as the weighted average life ("WAL"). WAL is a convention that estimates the expected weighted amount of time, in years, for the principal amount of an issue to be fully paid. For this sector, WAL shall be limited to 10 years from time of purchase, measured at the original purchase date, provided by Bloomberg Financial Markets. All sector and issuer limits in this Policy shall be based on book value (amortized cost) at time of purchase. All ratings requirements shall be based on ratings at time of purchase.

Every effort shall be made, to the extent practical, prudent and appropriate, to select commingled funds and/or mutual funds that have investment objectives and policies that are consistent with the Policy. However, given the nature of commingled funds and mutual funds, it is recognized that there may be deviations between the Policy and the objectives of these pooled vehicles. A commingled fund or mutual fund will not be included in the University's portfolio unless it complies with the Investment Company Act of 1940's diversification requirement.

1. Equities (Permitted for use only in Core Cash Portfolio)
   • Equity assets held in pooled investment vehicles, being either an investment company, or in the case of an investment company that is organized as a series company, an investment company series, that in either case, is registered with the United States SEC under the Investment Company Act of 1940.
   • The overall non-U.S. equity allocation should include a diverse global mix that is comprised of the stocks of companies from multiple regions and sectors. To maintain an effective money management structure that is diversified, the target allocation to growth stocks and value stocks should be closely even with a one-to-one ratio target. In no case should the allocation to growth stocks be twice as much as the allocation to value stocks and vice versa.
   • No more than the greater of 5% or weighting in the relevant index (Russell 3000 Index for U.S. issues and MSCI ACWI ex-U.S. for non-U.S. issues) of the total equity portfolio valued at market may be invested in the common equity of any one corporation; ownership of the shares of one company shall not exceed 5% of those outstanding; and not more than 40% of equity valued at market may be held in any one sector, as defined by the Global Industry Classification Standard (GICS).
   • Domestic Equities: Other than the above constraints, there are no quantitative guidelines as to issues, industry or individual security diversification. However, prudent diversification standard should be developed and maintained by the Manager.
   • International Equities: The overall non-U.S. equity allocation should include a diverse global mix that is comprised of the equity of companies from multiple countries, regions and sectors.
2. Real Estate Assets (Permitted for use only in Core Cash Portfolio)
   • Consists of publicly traded Real Estate Investment Trust ("REIT") securities and/or non-publicly traded private real estate and shall be diversified across a broad airay of property types and geographic locations. Investments of this type are designed to provide a stable level of income combined with potential for price appreciation, particularly in periods of unexpected inflation. For private real estate, the illiquid, long-term nature should be considered. For purposes of asset allocation targets and limitations, publicly traded REITs will be categorized as "Other" under the Growth Assets category. Depending on the investment characteristics of a private real estate fund, the fund will be categorized as "Other" under either the Income Assets category, for example, a core real estate fund, or under the Growth Assets category, for example, an opp01tunistic real estate fund where capital gains are expected to make up a significant portion of the total return.
3. Inflation Hedge (Permitted for use only in Core Cash Portfolio)
   • Inflation hedging assets will include pooled vehicles holding among other assets: Treasury Inflation Protected Securities ("TIPS"), commodities or commodity contracts, index-linked derivative contracts, certain real estate or real property funds and the equity of companies in businesses thought to hedge inflation. Inflation hedge assets will be reported in the Real Return Assets category.
4. Fixed Income Securities, in the form of mutual funds and individual securities of the following sectors
   • United States Government Securities
     • Marketable securities issued by the U.S. Government and suppo1ted by the full faith and credit of the U. S. Treasury either by statute or an opinion of the attorney general of the United States.
       • Sector limit: up to 100% of the University's aggregate portfolio may be invested in this sector.
   • Government Agency Securities
     • Debt securities issued by government sponsored enterprises ("GSE") of the United States, federal agencies, and federal financing banks.
       • Sector limit: up to 100% of the University's aggregate portfolio may be invested in this sector.
   • Corporate Debt Instruments
     • Debt instruments include only the following:
       • Corporate Notes and Bonds
         • Non-convertible senior debt securities (bonds and debentures) issued in U.S. dollar denominations.
           • i. This sector shall include corporate obligations issued by corporations that participate in the Federal Deposit Insurance Corporation's (the "FDIC") Temporary Liquidity Guarantee Program and that are fully insured by the FDIC and guaranteed by the full faith and credit of the United States Government.
         • ​​​​​​​​​Ratings: issuers must be rated at least investment grade by any one nationally recognized statistical rating organization (NRSRO).
         • Maturity limit: the maximum maturity of any investment in this sector shall be limited to five (5) years from time of purchase.
     • Certificates of Deposit
       • Certificates of Deposit must be issued or endorsed by a domestic bank or a savings and loan association organized and supervised under the laws of the United States and denominated in U.S. dollars.
       • Ratings: issuers must be rated at least investment grade by any one nationally recognized statistical rating organization (NRSRO).​​​​​​​
       • Maturity limit: the maximum maturity of any investment in this sector shall be limited to five (5) years from time of purchase.​​​​​​​
     • Commercial Paper
       • Issued in U.S. dollar denominations.
       • Ratings: issuers must have a short-term rating of at least A-1 by Standard & Poor's or Pl by Moody's Investor's Services.
       • Maturity limit: the maximum maturity of any investment in this sector shall be limited to 270 days from time of purchase.
     • Bankers' Acceptances
       • Any such instrument must be issued by a domestic bank, including a branch office of a foreign bank which branch office is located in the United States, provided legal options are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank.
       • Ratings: issuers must have a sh01i-term rating of at least A-1 by Standard & Poor's or P1 by Moody's Investor's Services.
       • Maturity limit: the maximum maturity of any investment in this sector shall be limited to 180 days from time of purchase.
   • Sector limit: in aggregate, up to 50% of the University's aggregate portfolio may be invested in corporate debt instruments.
   • Issuer limit: no single corporate issuer shall exceed 5% of the University's portfolio.

• ​​​​​​​Municipal Debt Obligations
  • Taxable and tax-exempt securities issued by state and local governments and public authorities in the United States.
  • Ratings: issuers must be rated in the A category or above any one (NRSRO).
  • Sector limit: up to 50% of the University's aggregate portfolio may be invested in this sector.
  • Issuer limit: no single issuer shall exceed 5% of the University's portfolio.
  • Maturity limit: the maximum maturity of any investment in this sector shall be limited to five (5) years from time of purchase.
• Repurchase Agreements
  • Collateralized only by direct obligations of the U.S. government, GNMA's, or GSE's.
  • Shall only be entered into with U.S. government securities dealers, as posted by the Federal Reserve Bank of New York.
  • A master repurchase agreement or specific written repurchase agreement must govern the transaction.
    • Collateral will always be held by an independent third party. Such third party must be either (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has capital of not less than $500 Million, or (iii) a bank approval in writing for such purpose by Bond Insurer, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee.
    • A perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.l et seq. or 31 C.F.R. 350.0 et seq. in such securities must have been created for the benefit of the Trustee.
    • Trustee or an independent third party acting solely as agent for the Trustee will value the collateral securities no less frequently then weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two Business Days of such valuation.
    • The fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 102%.
      • Sector limit: up to 25% of the University's aggregate portfolio may be invested in this sector.
      • Issuer limit: no single repurchase agreement counterparty shall exceed 15% of the University's portfolio.
      • Maturity limit: the maximum maturity of any investment in this sector shall be limited to 90 days at time of purchase.

5. State of New Â鶹´«Ã½ Cash Management Fund
   • Sector limit: up to 100% of the University's aggregate portfolio may be invested in the State of New Â鶹´«Ã½ Cash Management Fund.
6. Registered Investment Companies (Money Market Funds)
   • Before investing in any registered investment company, the most recently updated Prospectus must be obtained and reviewed by the CFO or its investment advisor(s). Additionally, the University must be presented with holdings reports of said funds on at least a monthly basis.
     • Ratings: funds must be rated AAm by Standard & Poor's or Aa-mf by Moody's Investor's Services.
     • Sector limit: up to 25% of the University's aggregate portfolio may be invested in registered money market funds.
     • Issuer limit: no single fund in this category shall exceed 15% of the University's portfolio.

H. PROHIBITED INVESTMENTS

The following securities and transactions are not authorized and shall not be purchased: Letter stock and other unregistered securities; private placements; futures; derivatives; swaps; commodities or other commodity contracts; puts; calls; straddles; hedging; short sales or margin transactions; uncovered and covered options; investments for the purpose of exercising control of management; investments in companies that have filed a petition for or who have declared bankruptcy; and issues of or by instrumentalities deemed to be in violation of the prohibited transactions standards of the prudent man rule. Natural resource properties such as oil, gas or timber may not be held except by purchase of publicly traded securities. The purchase of collectibles is also prohibited.

I. ASSET ALLOCATION GUIDELINES

The University believes that it has the greatest likelihood of achieving its investment objectives by balancing risk and return for optimal diversification. The University's assets will be invested in accordance with the targets for each asset class as follows:

PORTFOLIO ASSET ALLOCATION RANGES

Long-term Investment Objectives and Risk Management

The primary investment objectives of the portfolio represent a long-term goal of maximizing the returns without exposure to undue risk, as defined herein.

It is understood that fluctuating rates of return are characteristic of the securities markets. The primary concern should be long-term appreciation of the assets and consistency of total return on the portfolio. Recognizing that short-term market fluctuations may cause variations in the account perfom1ance, the portfolio is expected to achieve the following objectives:

• The total return for the Core Cash fund is expected to match or exceed the performance of the appropriate benchmark index over a rolling three-year period given the appropriate level of risk. The performance of each investment manager will be evaluated against a comparable peer group and should rank above the median of that peer group over a rolling five-year period.

Understanding that a long-term positive correlation exists between performance, volatility, risk and expected returns in the securities markets, the University has established the following short term objective:

• The portfolio should be invested to minimize the probability of low negative total returns defined as a one-year fiscal year return worse than negative l0%.

Volatility

The volatility of the portfolio should be reasonably close to the volatility of the benchmark.

​​​​​​​​​​​​​​Risk Management

The University's risk management investment philosophy for its overall investment program is to prevent any unnecessary portfolio concentration risk through the broad diversification among asset classes and securities, while remaining consistent with the investment policy objectives. To manage risks in its investments, the University has created diversification standards, listed herein, in the form of credit, issuer, and sector concentration limits.

Rebalancing Philosophy

Asset allocations established by the Policy represents a long-term perspective. Rapid and unanticipated market shifts or changes in economic conditions may cause the asset mix to fall outside of the Policy allocation ranges. When these divergences occur, the CFO or investment advisor(s) shall rebalance the asset mix to its appropriate ranges and targets. Similarly, if the cash requirement to handle liquidity needs falls to a level where near-term distributions cannot be met and no contributions are anticipated, the CFO or investment advisor(s) will rebalance the fund to its appropriate ranges and targets.

When new proceeds are added, the CFO or its investment advisor(s) will review the cun-ent allocation and fill the liquidity allocation first and the remaining investment allocations thereafter. Portfolio allocations shall be rebalanced and reviewed on at least an annual basis.

​​​​​​​J. INTERNAL CONTROLS

The CFO is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the University are protected from loss, theft, or misuse. The CFO shall also establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures and the accuracy of the investment valuation. The internal controls shall address the following:

• Control of collusion
• Separation of transaction authority from accounting and recordkeeping
• Custodial safekeeping
• Prohibition of physical delivery securities
• Clear, written delegation of authority to subordinate staff members
• Written confirmation of transactions for investments and wire transfers

K. PERFORMANCE STANDARDS

On at least a quarterly basis, the CFO shall compare the University's portfolio results with selected publicly available performance indices, in terms of time-weighted total return and average duration for the period under review. The composite benchmark should consist of the following market indexes:

Multi-Asset Class Portfolio

• Russell 3000
• MSCI All Country World Index (ACWI) ex US
• Barclays Aggregate

Fixed Income Portfolio

• Bank of America Merrill Lynch 0-3 Year U.S. Treasury Index

L. MANAGEMENT REPORTING

The Investment Manager will provide reports on the performance of the investment portfolio to the Finance and Audit Committee at their regularly scheduled meetings.

M. POLICY CONSIDERATIONS

If securities owned by the University are downgraded by either Standard & Poor's or Moody's to a level below the quality required by this Policy, it shall be the policy of the University to review the credit situation in consultation with the investment advisor and make a determination as to whether to sell or retain such securities in the portfolio. The investment advisor will notify the University within one business day if a security holding is downgraded.

​​​​​​​N. PROXY VOTING

Investment manager(s) are expected to be aware of corporate provisions that may adversely affect stockholdings, including but not limited to "golden parachutes," "super majorities," "poison pills," "fair price" provisions, staggered boards of directors, and other tactics. Proxies should be voted with the interest of preserving or enhancing the security's value.

The investment manager(s) of a commingled fund or mutual fund that holds the assets of the University along with assets of other funds with conflicting proxy voting policies must reconcile the conflicting policies to the extent possible, and, if necessary, to the extent legally permissible, vote the proxies to reflect the policies in proportion to each fund's interest in the pooled fund.

O.  EXCEPTIONS TO THE POLICY

Exceptions to this Investment Policy are prohibited without the prior approval of the Board of Trustees.

P. APPROVAL OF INVESTMENT POLICY

The investment policy shall be formally approved and adopted by the Board and reviewed annually.

Q. INVESTMENT MANAGER RESPONSIBILITIES

The portfolio(s) under the management of Investment Manager(s) represents the assets of Â鶹´«Ã½. The Investment Manager(s) and Â鶹´«Ã½ recognize the fiduciary nature of the portfolio and the imp01tant responsibilities associated with its management. The Investment Manager is responsible for optimizing investment return and growth of Â鶹´«Ã½'s assets within the guidelines that have been established and are identified herein. The Investment Manager has investment discretion over the assets in the portfolio within the context of this policy while ensuring that the assets will be invested with care, skill, prudence, and diligence.

Responsibility

Chief Financial Officer and Treasurer

Contact For Questions

Vice President, Chief Financial Officer and Treasurer
Hepburn Hall, Room 102
Phone: 201-200-3041
Fax: 201-200-2323