Investment Management Fees
The Foundation contracts with several banks for custody and investment of its permanent assets. Investment returns on the Statement of Financial Activity are reported net of the fees charged by the various banks.
Washington County Community Foundation Policy on Investment and Spending
I. The Board of Trustees has responsibility for the management of the Foundationʹs fiscal policies and for the investment and accumulation of its financial assets, (hereinafter “assets.”)
The Board will be governed by 15 Pa. C.S. Section 5548(c) in respect of those assets of the Washington County Community Foundation, pursuant to a resolution adopted by the Board on September 1 1999, attached in its entirety to this policy statement. The Board will follow an investment policy that seeks to achieve for the investments held in those accounts of the Foundation a reasonable long‐term total return ‐‐ consistent with acceptable investment risk ‐‐ derived both from appreciation of capital and from earnings and distributions with respect to capital.
- The Board delegates to the Investment Committee the responsibility to formulate and update the Foundation’s investment policy, to select one or more investment managers or agents to manage the Foundation’s assets, and to recommend to the Board for approval, any changes to the overall investment policy the Committee determines to be appropriate.
- The Investment Committee may, by contract, designate one or more investment managers, advisors, or agents to hold for safe‐keeping, to provide advice regarding, or to invest the designated assets of the Foundation. The investment manager shall invest assets only with well‐established and financially sound organizations consistent with the fund management requirements of organizations with characteristics similar to those of the Foundation. Provision for investment managers or advisors may be different from investment agents.
- The Investment Committee shall meet at least quarterly to review the performance of such managers or agents with regard to conformance with the investment policies, as well as the level of risk, growth, and income of the assets. The Investment Committee will meet at least once a year with each investment manager to review the performance of the investment manager. At that time, the investment manager will present to the Investment Committee an investment outlook on general assets strategy for the ensuing period and a general forecast of economic conditions and market trends for the future.
- The investment manager will provide performance measurements to the Investment Committee on a quarterly basis. In addition to providing performance data on a time‐weighted total‐return basis, each manager will compare performance to various, appropriate indices and overall performance relative to organizations with characteristics similar to those of the Foundation.
- The Investment Committee shall keep minutes of its proceedings and shall report its deliberations to the Board at its next regularly scheduled meeting.
- The Investment Committee of the Foundation will receive monthly statements in a manner and fashion necessary to facilitate the proper recording of all transactions and earnings.
II. Custodial responsibility for all securities will be designated by the Investment Committee. The Investment Committee shall designate a custodial bank to: hold assets of the Foundation; monitor investments to ensure compliance with this policy; facilitate investment decisions by investment managers; and provide coordinated, consistence performance reporting across investment managers.
- Securities purchased or transferred by the custodial bank at the recommendation of the investment managers will be registered in the name of the Foundation in accordance with SEC regulations and requirements. The custodial bank will be responsible for the safe guarding of all securities and assets under its control and supervision.
- Assets of the Foundation shall be commingled for investment purposes except in the case where a donor has requested and the Investment Committee has agreed to invest the assets separately.
- The Investment Committee will establish internal controls regarding the handling and transfer of assets. These controls will be reviewed on an annual basis at the time of the audit or review. Any management deficiencies noted in the audit or review will be reported to the Investment Committee and the Chairman.
III. Total Return Investment and Spending Policy Resolution Adopted September 15, 1999
- WHEREAS, 15 Pa. C.S. 5548(c) as amended, authorizes the Board of Trustees to adopt and follow an investment policy seeking a total return for the investment of trust assets by the Corporation, whether the return is to be derived from appreciation of capital or earnings and distributions with respect to capital, or both; and
- WHEREAS, the Board of Trustees wishes to make, in respect of the endowment and other permanent funds of the Washington County Community Foundation, the election permitted by the aforesaid 5548(c) and to adopt an investment policy seeking a total return for the trust assets;
- NOW, THEREFORE, BE IT RESOLVED, that the Board of Trustees of the Washington County Community Foundation hereby elects to be governed by 15 Pa. C.S. Section 5548(c) in respect of those assets of the Washington County Community Foundation and, to effect that election, hereby adopts and proposes to follow a total return investment policy seeking to achieve for the investments held in those accounts of the Washington County Community Foundation a reasonable long‐term total return, consistent with acceptable investment risk, derived both from appreciation of capital and from earnings and distributions with respect to capital; and
- BE IT FURTHER RESOLVED, that the term “income” with respect to those assets of the Washington County Community Foundation for any particular year shall mean an amount equal to a percentage, to be specified by the Board of Trustees, of the average fair market values of the trust assets over the preceding three years, calculated by averaging the fair market values as of the last business day of the three preceding years.
IV. The Board Investment Principles
- The long‐term investment goal of the Foundation is to maximize total return consistent with a moderate risk profile for the assets. The assets of the Foundation shall be under professional investment management. However, the Foundation may seek additional outside investment evaluation, counsel and services, subject to review by the Investment Committee and the Board of Trustees.
- The Board has the fiduciary responsibility to conserve and protect the assets of the Foundation and, by prudent management, to prevent exposure to undue and unnecessary risk while allowing the flexibility to maximize investment opportunities.
- To that end, the Board may establish from time to time specific investment guidelines, including levels of risk, to which the Investment Committee and any manager, advisor or agent contracted to invest assets of the Foundation shall adhere, although the Investment Committee may adopt stricter guidelines from time to time where appropriate. Such guidelines will be incorporated into the Foundation’s Investment Policy documents.
V. Investment Guidelines (adopted June 22, 2017)
ASSETS ALLOCATION ALLOWABLE RANGES
|International Equities|| 5% || 8% ||20%|
|Fixed Income|| 30%|| 35%||55%
|Cash Equivalents|| 0%|| 0%||10% |
|Alternative Strategies|| 0% || 5% ||15% |
- Appropriate fixed income investments may include U.S. Treasury and Federal Agency debt obligations, corporate bonds, asset backed securities, mortgage backed securities, certificates of deposit, and fixed income mutual funds that invest in substantially similar instruments. Corporate debt obligations should have a Standard and Poor’s rating of A or higher and should be limited to intermediate maturities. In addition to the performance attributed from income, fixed income investments should be structured to take advantage of capital gain opportunities for growth and appreciation. It is expected that the fixed income assets will have an average credit quality of A or higher (Standard & Poor’s for individual bond issues and Morningstar for mutual funds if available) for at least 75% of the market value of the fixed income assets.
- Appropriate equity securities shall consist of publicly traded, common or preferred stocks, in most cases listed on national security exchanges, issued by corporations having market capitalization of $300 million and above.
- Equity holdings should be diversified by investing across a spectrum of market capitalizations. Diversified investments including exchange traded funds, closed‐end mutual funds, and open‐end mutual funds are also appropriate investments within the equity assets. Investment in foreign equities also is permitted; however, the purchases should be limited to American Depository Receipts, exchange traded funds, closed end mutual funds, and open end mutual funds. In no case shall a single security exceed 10 percent, nor shall a single industry exceed 20 percent, of the total market value of the invested assets.
- Investment in non‐traditional (Alternative Investments) asset classes is permitted. The purpose for maintaining an allocation in Alternative Investments is to provide risk management and further diversification in conjunction with the use of traditional assets investments and asset classes. It is expected that the investment manager(s) will actively manage alternative strategies assets to take advantage of anticipated changes in the opportunities that exist among the various strategies. The strategies for Alternative Investments will be measured against an appropriate HFRI benchmark and must conform to the following:
- Alternative Investments shall consist only of registered mutual funds and exchange traded funds in order to maintain liquidity.
- Total Alternative Investment exposure shall not exceed 15% of the market value of the Foundation’s assets.
- Cash equivalent securities shall have stated maturities of one year or less. Excluding obligations of the United States Government and its agencies, no single issue or issuer may exceed 5% of the total assets. Commercial paper is to be rated no lower than A‐1 by Standards & Poor’s, P‐1 by Moody’s, or F‐1 by Fitch’s. Money market funds and bank short‐term investment funds may be used for the investment of cash equivalents, provided all of the above diversification and quality definitions are met by the stated guidelines of the funds.
- No single diversified investment holding, such as an exchange traded fund or mutual fund, shall exceed 10% of the total market value of the Foundation’s assets.
- Investment manager restrictions:
- With the exception of investments permissible within the Alternative Investments allocation, no investment manager shall engage in short sales, purchases on margin, or purchases of options.
- No investment manager shall make direct investments in commodities or in real estate in which he/she is a participant or underwriter, unless the acquisition is made in the secondary market.
- No investment manager shall acquire any equity issue in which he/she is a participant or underwriter, unless the acquisition is made in the secondary market.
- No investment manager shall make any other investment that would violate the manager's fiduciary responsibility to the Foundation.
- The Investment Committee may direct appropriate assets adjustments under any circumstances where, solely in the opinion of the Committee, two or more investment managers are investing in so similar a fashion with respect to individual companies, industries, or other common factors that the Foundation could be subject to an over exposure or a major risk.
- The Investment Committee will identify and monitor any new gift to a donor advised fund of any interest qualifying as an “excess business holding” under the Pension Protection Act of 2006 (PPA). The Investment Committee will exercise its best effort to dispose of the contributed interest at the best possible price within five years of the date of the gift, as required under the PPA. In any event, the Investment Committee will dispose of any excess business holdings prior to the five‐year time limit, except in the event that the Treasury Department grants an additional five‐year holding period. The Foundation President will notify potential donors of such interests of this requirement prior to the contribution of such interest. Please see Types of Funds section for additional information.
VI. Investment of Unrestricted Assets and Temporarily Restricted Assets
- The Operating Reserve consists of unrestricted financial assets and is a source of funds for current and future operations of the Foundation. The investment objectives of the Operating Reserve portfolio are to preserve principal value and to meet the Foundation’s liquidity needs. Permissible investments include Checking Account Deposits, Money Market Deposits and Certificates of Deposit. Transactions within the Operating Reserve shall be conducted by the President, in consultation with the Board Treasurer and Chairman of the Investment Committee, and shall be documented in the Foundation’s financial records.
- The Administrative Reserve consists of board designated financial assets and is a source of funds for current and future operations of the Foundation. The minimum amount to be held in the Administrative Reserve shall be three months of the current operating budget. Use of the Administrative Reserve shall be approved by the Board and shall be limited to 25% of the fund balance in any one year. The investment objectives are to preserve principal value and to earn a return that is consistent with these guidelines and market conditions. The target investment is 45% Equity and 55% Fixed Income.
- The temporarily restricted assets include those financial assets which contain a donor restriction on the use of the funds. The investment objective of temporarily restricted financial assets is to preserve principal value. Permissible investments include Checking Account Deposits, Money Market Deposits and Certificates of Deposit. Transactions regarding temporarily restricted assets shall be conducted by the President, in consultation with the Board Treasurer and Chairman of the Investment Committee.
VII. Component Funds Which Require a Separate Investment Vehicle(s), Committee, or Strategy
The Foundation may accept component funds which require a separate investment vehicle(s), investment committee, or investment strategy. Acceptance of such component funds shall be evaluated and approved by the Investment Committee on a case by case basis. The Foundation shall seek to include in the fund contract, an indemnification clause to protect the Foundation regarding investment matters of the component fund.