(A) Policy statement. This policy ensures
sufficient liquidity to meet the university's cash flow needs and further
ensures compliance with the Revised Code and all other applicable laws and
regulations while optimizing opportunities for growth in invested assets in a
responsible and prudent manner. The president and the vice president for
finance and administration business operations, or designee, is authorized to
invest university funds in compliance with this policy, provisions of section
3345.05 of the Revised Code and all other applicable laws and
regulations.
(1) For the purpose of
this policy on the investment of the university's non-endowment and
endowment funds (the "policy"), the non-endowment and endowment
portfolios shall include:
(a) All tuition and mandatory fees, registration,
non-resident tuition fees, academic fees for the support of on- and off-campus
instruction, laboratory and course fees when so assessed and collected, all
other fees, deposits, charges, receipts, and income from all or part of the
students, all subsidy or other payments from state appropriations, and all
other fees, deposits, charges, receipts, and income received. These funds shall
be held and administered by the board of trustees.
(b) Notwithstanding any provision of the revised code to
the contrary, the title to investments made by the board of trustees with funds
derived from revenues described above shall not be vested in the state but
shall be held in trust by the board. Such investments shall be made pursuant to
this investment policy adopted by the board in public session. Such investments
shall be made with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.
(c) It is the intention of the board of trustees that
actions taken pursuant to this policy shall be in compliance with all
applicable laws as they may be amended from time to time. No university
representative, employee, or agent shall take any action prohibited by or fail
to take any action required by all applicable laws in carrying out this
policy.
(d) Members of the board of trustees will annually provide
to the chair of the board of trustees a statement disclosing the nature, if at
all, of any relationship with the financial institutions involved with the
university's non-endowment and endowment funds. Any member having a
relationship that creates a conflict prohibited by the ethics laws with any
investment entity will withdraw from participating in the selection of, or
authorizing the contracts of, those investment managers and/or consultants.
(e) External investment managers, consultants and advisors
retained by the university shall immediately notify the chair of the investment
subcommittee and the vice president for finance and business operations, or
designee, of any potential conflicts of interest which may develop from time to
time. In any such situation, the external investment manager, consultant and/or
advisor shall identify the nature of the conflict of interest and its potential
impact, if any, on the university.
(f) The university's non-endowment portfolio will
remain sufficiently liquid to enable the university to meet all operating
requirements. Portfolio liquidity is defined as the maturity or ability to sell
a security on short notice near the purchase price of the security. To help
retain the desired liquidity, no security shall be purchased that is likely to
have few market makers or poor market bids. Additionally, liquidity shall be
assured by keeping an adequate amount of short-term investments to accommodate
the cash needs of the university.
(g) The university's non-endowment and endowment
portfolios shall be structured with the objective of attaining the highest
possible total return for the investment portfolio while adhering to a prudent
level of risk.
(2) Specific
responsibilities of the investment subcommittee of the finance and facilities
committee of the board of trustees (hereafter referred to as the
"subcommittee") in the investment process include:
(a) The application of a total return philosophy of asset
management;
(b) Developing sound and consistent investment policy
guidelines;
(c) Setting forth an investment structure for managing the
university's assets. This structure includes identification of asset
classes, strategic asset allocation, and acceptable asset ranges above and
below the strategic asset allocation;
(d) Providing guidelines that control the level of overall
risk and liquidity assumed for the investment portfolio so that all assets are
managed in accordance with stated objectives;
(e) Complying with all applicable fiduciary, prudence, due
diligence requirements, and with all applicable laws, rules and regulations
from various local, state, federal, and international political entities that
may impact fund assets;
(f) Selecting and monitoring investment
managers;
(g) Selecting an investment consulting
organization;
(h) Communicating clearly the major duties and
responsibilities of those accountable for achieving investment
results;
(i) Monitoring and evaluating results to assure that the
guidelines are being adhered to and the objectives are being met;
(j) To control costs of administering and managing the
funds;
(k) Taking appropriate action to discharge an investment
manager for failure to perform as mutually expected at the time of selecting;
and
(l) Undertaking such work and studies as may be necessary
to keep the board of trustees of the university adequately informed as to the
status of the investment of the balance sheet assets (the
"assets").
(3) This policy shall be
reviewed every five years by the subcommittee or upon the advisement of
investment advisors or management. All material changes to the policy will be
approved by the subcommittee and submitted to the university's board of
trustees for final approval.
(B) UPMIFA considerations. In accordance
with the state of Ohio's adoption of the Uniform Prudent Management of
Institutional Funds Act ("UPMIFA"), effective June 1, 2009, the
subcommittee will take the following into consideration when making investment
decisions:
(1) General economic
conditions.
(2) The possible effect
of inflation or deflation.
(3) Expected tax
consequences.
(4) The role that each
investment plays within the overall portfolio.
(5) Expected total return
from income and appreciation.
(6) Other resources of
the institution.
(7) Need of the
institution to make distributions and preserve capital.
(8) Assets special
relationship or special value to the charitable purpose.
(C) Purpose. Investments shall be managed
for the use and benefit of the university in a diversified portfolio that
focuses, over time, on the preservation of capital, minimization of cost and
risk, maintenance of required levels of liquidity in the overall portfolio to
meet cash flow requirements, and compliance with state statute. The
non-endowment and endowment portfolios are intended to achieve a reasonable
yield balanced with a component invested for longer-term appreciation.
(1) The purpose of this
policy is to assist the university in more effectively supervising and
monitoring the investment activities of its assets. This policy is designed to
assist university staff and the investment subcommittee with regard to its
fiduciary responsibility by:
(a) Defining the responsibilities of university staff, its
investment managers, and its investment consultant;
(b) Stating in writing the universitys attitudes,
expectations, and goals for the investment of the assets;
(c) Providing a basis for reviewing investment management
organizations in the selection process;
(d) Encouraging effective communication between the
investment managers, investment consultant, the subcommittee, and Youngstown
state university; and
(e) Setting objectives against which the performance
results of the investment managers, operating within the constraints imposed by
the university's policy guidelines, can be measured.
(2) A primary expectation
for university assets is to support the university by providing current income
to the university from both non-endowed and endowed funds, managed on behalf of
the university by outside investment professionals, while concurrently growing
principal. The asset base is dedicated to providing a reliable source of funds
for current and future enhancements at the university.
(D) Parameters.
(1) Investment assets are
to be held by a reputable custodian/trust company. Investment assets are to be
held in safe-keeping in the name of the university. Evaluation, selection, and
monitoring of the university's custodian will include, but not be limited
to, the following factors:
(a) Size and scalability of the underlying financial
institution;
(b) Delivery of competitive safe-keeping and trust services
as measured by attributes such as systems functionality, statement delivery,
client service, audit controls and reporting capabilities; and
(c) Safe-keeping and trust service pricing and
fees.
(2) The management of the
non-endowment and endowment funds involves a tradeoff between two competing
goals. On the one hand, the funds must preserve capital and maintain liquidity
sufficient to distribute cash to fund immediate operating needs and prior
spending commitments. To accommodate these objectives, the university will
establish the operating and short-term pool. On the other hand, the funds must
accumulate capital sufficient to support nominal growth in expenses for
existing programs and to establish new quasi-endowment funds. To accommodate
these objectives, the university will establish the long-term/reserve pool. The
goal of the funds is to accommodate these competing needs by providing adequate
short-term liquidity along with long-term capital appreciation.
(3) The subcommittee
recognizes that risk and volatility are present to some degree with all types
of investments. However, high levels of risk are to be avoided at the total
asset level. This is to be accomplished through diversification by asset class,
style of investment manager, and sector and industry limits.
(4) The following
statements and guidelines are set forth in an effort to provide direction to
each of the investment managers that manage separate accounts for the
university. Managers are retained to manage separate pools of assets, and funds
are allocated to such managers in order to achieve an appropriate, diversified,
and balanced asset mix. The subcommittee, from time to time, may shift assets
from one manager to another to maintain the appropriate mix. Additionally, the
subcommittee recognizes that mutual or commingled funds used by the university
may not adhere to these guidelines. However, when selecting mutual or
commingled fund products, the subcommittee will refer to these guidelines as a
basis to select new funds.
(5) Evaluation,
selection, and monitoring of the university's individual investment
managers will include, but not be limited to, the following factors:
(a) Each investment manager should have clearly stated
investment objectives.
(b) The performance (return) and volatility (risk) of each
investment manager should be evaluated over time, evaluating performance in
light of how closely the investment manager has adhered to its stated
investment objectives.
(c) The depth and experience of the portfolio manager(s)
should be evaluated (both with respect to the current investment portfolio he
or she manages and any funds previously managed).
(d) The depth and financial stability of the relevant
investment fund company should be considered.
(e) The fees and expenses charged with respect to such
investment management services should be considered.
(6) A written
"Investment Guideline Statement" or prospectus clearly outlining
objectives and responsibilities will be in place with each investment manager.
For the non-endowment funds, the managers shall have discretion to invest
assets in cash reserves as they deem appropriate but will be expected under
normal circumstances to be fully invested in their assigned asset class. A
manager's performance will be evaluated against their fully invested
passive benchmark and against similar portfolio results. Passive benchmarks
will be used for comparative purposes which most closely approximate the
investment mandate's duration, credit quality, security composition,
capitalization, style, asset class, etc.
(7) To the extent
bequests are made to the university via shares of marketable equity securities,
the following provisions apply:
(a) The policy on bequests as defined by rule 3356-5-07 of
the Administrative Code will supersede all provisions within this
policy.
(b) If the bequest is a non-endowed gift, the securities
will be sold as soon as prudently possible.
(c) If the bequest is an endowed gift, the securities will
be invested as specified by the donor and agreed to by the board of
trustees..
(E) Procedures.
(1) The vice president
for finance and business operations, or designee, shall be accountable to the
board of trustees for implementing this policy.
(2) The vice president
for finance and business operations, or designee, will report to the investment
subcommittee at least quarterly on the status of the non-endowment and
endowment portfolios.
(3) It shall be
permissible for the vice president for finance and business operations, or
designee, to realize gains and losses if such an action is consistent with the
universitys investment goals. Losses and gains realized on the
non-endowment portfolio shall be charged against current income unless
otherwise approved by the investment subcommittee.
(4) Between meetings of
the board of trustees, if deemed advisable, other investments not specifically
authorized by this policy may be made if approved by the investment
subcommittee. Any such actions shall be taken to the board of trustees for
review at its next meeting.
(F) Spending policy. The board has
established a spending policy for certain funds. This policy reflects the
tradeoffs between short-term liquidity and long-term capital appreciation
needs, as described in paragraphs (C) and (D) of this policy.
(1) Non-endowment assets.
Non-endowment assets are comprised of operating and non-operating funds and
include cash, cash equivalents, and investment assets.
(2) Operating funds
comprised of cash, cash equivalents, and certain investment assets make up the
university's general funds. The use of cash, cash equivalents, and
investment assets in these general funds is not subject to any board-approved
spending policy as the university's annual operating budget establishes
parameters for the use of these funds.
(3) The university's
remaining non-endowed investment assets are primarily in reserve for
project-related funds. Spending within these funds is subject to rule
3356-3-11.1 of the Administrative Code, project-specific spending plans, and
various other university operating and financial policies and procedures. If
deemed necessary for university operations, university management, working with
the investment consultant, has authority to raise an appropriate level of cash
from non-operating investments.
(4) Income earned on
non-endowed investment assets is primarily used to support university
operations; thus, it is the policy of the board not to limit annual
distributions of realized investment income. The annual operating budget
establishes parameters for the use of this income, and the disposition of total
annual net operating inflows over outflows requires board approval. Unrealized
investment income from non-endowment assets shall always be non-spendable.
(5) Endowment assets. It
is the policy of the board to set annual distributions each fiscal year to five
per cent of the twelve-quarter average of the market value for the preceding
twelve calendar quarters. In calculating the twelve-quarter average, census
dates of March thirty-first, June thirtieth, September thirtieth, and December
thirty-first for the previous three years shall be used. Any distribution
greater than this would require written justification and approval by the board
of trustees. For all other managed funds, distributions are project-specific
and, thus, are limited only to the extent needed to sustain appropriate cash
flow for the expenditure cycle of the corresponding project.
