Chapter 3361:20-41 | Investments

Rule 3361:20-41-01 | Investments: policy for administration of invested funds.

• Effective: February 10, 2020
• Promulgated Under: 111.15

The following policies govern the administration of the university's invested funds:

(A) Endowment fund "A"

(1) Goal

The goal of the university's endowment investment policy shall be to produce real growth in assets net of administrative and investment fees, by generating a total rate of return which is greater than, or equal to, the spending rate established by the university's endowment spending policy plus the rate of inflation. The university also elects to partially fund its development program via a fee to be taken annually from "A" pool assets.

(2) Uniform prudent management of institutional funds act of Ohio (UPMIFA)

The state of Ohio enacted UPMIFA by passing Amended House Bill 522, effective June 2009, providing standards for endowment investment management and spending. The university acknowledges its obligations under UPMIFA under the terms of paragraphs (A)(3) and (A)(4) of this rule.

(3) Guidelines

Investments in endowment fund "A" shall be made in accordance with investment guidelines approved by the investment committee and reviewed by it at least annually. Such guidelines shall require, at a minimum, that investments shall be diversified consistent with prudent investment management practices in accordance with asset allocation guidelines approved by the investment committee.

(4) Spending policy

The income distribution for endowment spending for fiscal year 2020 shall be 4.4 per cent times the previous twelve-quarter moving average of the market value.

The income distribution for endowment spending for fiscal year 2021 shall be 4.3 per cent times the previous twelve-quarter moving average of the market value.

The income distribution for endowment spending for fiscal year 2022 shall be 4.2 per cent times the previous twelve-quarter moving average of the market value.

The income distribution for endowment spending for fiscal year 2023 shall be 4.1 per cent times the previous twelve-quarter moving average of the market value.

The income distribution for endowment spending for fiscal year 2024 and thereafter shall be 4.0 per cent times the previous twelve-quarter moving average of the market value.

This formula shall be applied to the twelve quarters ending on December thirty-first prior to the fiscal year in question, so that final budget guidance on available income can be issued.

(B) Endowment fund "C"

Endowment fund "C" is comprised of neighborhood development corporation loans and certain strategic real estate investments previously included in endowment fund "A" in July 2016. Endowment fund "C" will be managed with the goals of (1) generating liquidity without sacrificing value; and (2) achieving the university's strategic goals including improving the safety of the areas adjacent to the university's main campus. Liquidity from endowment fund "C" assets will not be reinvested but instead used to buy new endowment fund "A" shares for the benefit of endowment fund "C" shareholders.

(C) Strategic community investments

Endowment funds may also be invested in loans, direct real estate or other investments not yielding a market rate of return, that are judged to be of a long term strategic importance to the university. Such investments shall be held separately from the endowment fund "A" and must be approved by the chair of the finance and administration committee and the president of the university, after notification to the full board of trustees. The total of such investments shall not exceed twenty-five million dollars at any time.

(D) Temporary investment pool

(1) Goal

The goal of the university's temporary investment pool ("TIP") investment policy shall be to invest operating funds and borrowed proceeds to provide, in order of priority, safety of principal, liquidity, and maximum total return consistent with safety and liquidity.

(2) Section 3345.05 of the Revised Code

(a) Pursuant to section 3345.05 of the Revised Code, all those charged with the responsibility to manage the investment of the TIP are fiduciaries required to discharge their duties 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.

(b) Pursuant to division (C)(1) of section 3345.05 of the Revised Code, at least twenty-five per cent of the average amount of the TIP over the course of the previous fiscal year shall be invested in securities of the United States government or of its agencies or instrumentalities, the treasurer of the state of Ohio's pooled investment program, obligations of the state of Ohio, or any political subdivision of this state, certificates of deposit of any national bank located in this state, written repurchase agreements with any eligible Ohio financial institution that is a member of the federal reserve system or federal home loan bank, money market funds, or bankers acceptances maturing in two hundred seventy days or less which are eligible for purchase by the federal reserve system, as a reserve.

(c) Eligible funds in amounts in excess of those necessary to meet requirements of division (C)(1) of section 3345.05 may be pooled with other institutional funds and invested in accordance with section 1715.52 of the Revised Code.

(3) TIP investment guidelines

Investments in temporary investment pool shall be made in accordance with investment guidelines approved by the investment committee and reviewed by it at least annually. Such guidelines shall require, at a minimum, that investments shall be diversified consistent with prudent investment management practices in accordance with asset allocation guidelines approved by the investment committee.

(E) Donor directed investments

On occasion the university accepts an endowed gift where the donor places restrictions as to the investment held, yield target or type of investment. If the donor's directions are not unduly onerous, then the administrative investments committee shall accept the gift but shall attempt to influence the donor to permit pooling of the assets, either immediately or at some future date.

Last updated June 6, 2021 at 1:48 PM

Supplemental Information

Authorized By: 3361
Amplifies: 3361
Prior Effective Dates: 3/16/1978, 6/13/2002

Rule 3361:20-41-02 | Investments: policy for voting stockholder proxies.

• Effective: October 20, 1999
• Promulgated Under: 111.15

(A) The administrative investments committee is responsible for voting shareholder proxies for university securities.

(B) Each designated signatory of the administrative investments committee is authorized to execute or cause to be executed shareholder proxies.

(C) The administrative investments committee may delegate to its investment advisers the authority to vote shareholder proxies, for securities under the adviser's management, in accordance with the adviser's best judgment, unless otherwise directed by the administrative investments committee or by the board of trustees.

(D) Proxies for which authority has not been delegated to an investment adviser shall be voted in accordance with the best judgment of the designated signatory of the administrative investments committee, unless otherwise directed by the administrative investments committee or by the board of trustees.

Last updated June 6, 2021 at 1:48 PM

Supplemental Information

Authorized By: 3361
Amplifies: 3361
Prior Effective Dates: 7/15/1987

Rule 3361:20-41-03 | Investments: investment committee.

• Effective: April 28, 2017
• Promulgated Under: 111.15

(A) Purpose

(1) The investment committee shall oversee the management of the university's endowment assets, subject to the investment policies stated in rule 3361:20-41-01 of the Administrative Code, which include the university's obligations under the uniform prudent management of institutional funds act of Ohio (UPMIFA), and such supplementary guidelines as may be approved by the finance and administration committee of the board of trustees.

(2) The investment committee shall oversee the management of the university's temporary investment pool ("TIP") in accordance with the provisions of section 3345.05 of the Revised, policies stated in rule 3361:20-41-01 of the Administrative Code, and such supplementary guidelines as may be approved by the finance and administration committee of the board of trustees.

(B) Voting membership

(1) Voting membership of the investment committee shall be no fewer than five and no more than ten persons, at least two-thirds of whom shall be active in the field of investment management, or have ten years' experience in the field of investment management, and at least two-thirds of whom shall have a close affiliation with the university. The field of investment management is defined by the work experience guidelines for membership in CFA institute.

(2) The chairperson of the board of trustees appoints members to the committee except as provided in paragraph (B)(3) of this rule.

(3) So long as the investments of the university of Cincinnati foundation are managed in one or more common investment pools with the investments of the university of Cincinnati, the board of trustees of the foundation may appoint the greater of three voting members of the committee, or the number of members approximately proportionate to foundation investments in the pools relative to total investments of the pools.

(4) Appointment terms are three years and will not exceed three successive terms.

(5) In making appointments, the chairperson of the board of trustees and the board of trustees of the university of Cincinnati foundation will consider the recommendations of the chairperson of the investment committee and the chief investment officer if those positions have incumbents.

(C) Ex officio members

The president, at his or her discretion, may appoint any or all of the following as nonvoting members of the committee: himself or herself; the senior vice president for administration and finance; the vice president for finance; the chief financial officer of the university of Cincinnati foundation; the controller of the university of Cincinnati foundation; and any three other employees of the university or the university of Cincinnati foundation.

(D) Chairperson

(1) The chairperson of the committee will be appointed from among the voting members by either the chairperson of the board of trustees or the board of trustees of the university of Cincinnati foundation, according to whether the university or the foundation has the greatest portion of investments in the common investment pool.

(2) In the event of a tie vote on an issue before the investment committee, the chairperson will cast the deciding vote.

(E) Chief investment officer

(1) The chief investment officer shall manage the university's endowment assets and that portion of the university's TIP not managed by the treasurer with the guidance, advice and oversight of the investment committee regarding policy and strategic direction.

(2) In appointing the chief investment officer, the president will consider the recommendations of the investment committee, and the investment committee will provide assessment of the performance of the chief investment officer to the senior vice president for administration and finance.

(F) Treasurer

(1) The treasurer shall manage that portion of the university's TIP needed to satisfy the day-to-day financial obligations of the university in amounts determined by the treasurer with the guidance, advice and oversight of the investment committee regarding policy and strategic direction.

(2) The treasurer shall be authorized to select, buy, and sell money market securities needed to invest that portion of the university's TIP needed to satisfy the day-to-day financial obligations of the university.

(G) Authorities

(1) Within the authority granted to the investment committee and such supplementary guidelines as may be approved by the investment committee, the chief investment officer, or his or her duly appointed designee subject to the terms and conditions of any delegation of authority, is authorized, without prior approval of the board of trustees or the investment committee, to approve, execute or otherwise enter into contracts or agreements, and modifications thereof and amendments thereto, and to take other actions to:

(a) Retain the services of specialized investment consultants for advice in asset allocation, performance measurement and other services which may be of value in the management of the university's endowment assets;

(b) Retain investment managers;

(c) Retain appraisers, brokers, consultants and such other financial advisers as may be necessary or advisable in the performance of his or her duties;

(d) Enter into custodial arrangements for the safekeeping of endowment securities or other assets;

(e) Buy or otherwise acquire, hold and sell or otherwise dispose of investments, including investment real estate, directly or through instructions to investment managers; and

(f) Request distributions from banks or other persons who act as third-party trustees for funds of which the university is a beneficiary to the full extent provided by law; and to correspond, communicate and, where applicable, give direction to such trustees on investment policies, asset allocation, and all other matters.

(2) The signature of the chief investment officer will be conclusive evidence of his or her authority to approve and execute any and all contracts, leases, deeds, certificates, instruments, delegations, and other documents as may be necessary or advisable to consummate transactions described in paragraph (F)(1) of this rule, and other transactions approved by the investment committee.

(3) The signature of the designee of the chief investment officer when accompanied by a written delegation of authority executed by the chief investment officer, will be conclusive evidence of such designee's authority to approve and execute such contracts, leases, deeds, certificates, instruments and other documents described in such delegation, during the absence, unavailability, or incapacity of the chief investment officer.

(4) All delegations of contracting authority by the chief investment officer pursuant to paragraph (F)(1) of this rule shall be in writing, shall identify the delegate by name, title and/or position of employment, shall describe the scope of the authority provided by the delegation, shall bear the signature of the chief investment officer, and shall expire on the earlier of: (a) the date of expiration contained in the written delegation, (b) the date of death or separation from employment with the university of the chief investment officer making the delegation, (c) the date of death or separation from employment with the university of the delegate, (d) the date written notice of revocation of the delegation signed by the chief investment officer is delivered to the delegate, or (e) the date that is three years from the date of the delegation. The chief investment officer shall provide copies of all such delegations to the board of trustees at the next regular meeting of the board following any such the delegation. No person receiving a delegation of authority from the chief investment officer may further assign or delegate to any other person all or any part of the delegated authority. No delegation of authority by the chief investment officer shall exceed the limits established herein.

(5) All contracts and other documents approved under paragraph (F) of this rule will be reviewed as to form by the office of the general counsel, and the signature of the chief investment officer will be conclusive evidence that such review has taken place.

(H) The investment committee or the chief investment officer will report to the finance and administration committee of the board of trustees:

(1) Quarterly on endowment fund investment performance;

(2) Annually on investment performance and long-range goals of the endowment fund "A", endowment fund "C", and of the university's TIP; and

(3) On other matters as the finance and administration committee requests or as the investment committee deems appropriate.

Last updated June 6, 2021 at 1:48 PM

Supplemental Information

Authorized By: 3361
Amplifies: 3361
Prior Effective Dates: 6/7/2010