Section 6.12

INVESTMENT POLICY

Investment Policy

1. PURPOSE

To set forth the policy and procedures governing the investment management of the Society's financial assets (reserves).

2. INVESTMENT OBJECTIVES

ASSE’s primary investment objective is to maintain the safety of principal.  Secondarily, the ASSE strives for a conservative, long-term real return on total investment of 3.5% to allow for modest growth while protecting the principal from risky investments.  Real rate of return is defined as that return in excess of inflation as measured by the Consumer Price Index.  Long-term is defined as a 5 year period.  This objective is reviewed annually by the finance committee. 

3. INVESTMENT GUIDELINES

These guidelines shall be reviewed regularly by the Finance Committee for any update or changes to the guidelines.  It is the ASSE’s intent to invest in high-quality, liquid securities.  

The following asset allocation model provides a range and a maximum commitment to each asset class intended to limit the overall risk to the portfolio. There may be circumstances when we and/or our independent investment manager feels that a variance from the target percentages may be warranted based on economic or market conditions.

 

Asset Class

Allocation

Equities (Stocks)

30% - 60%

Fixed Income (Bonds)

30% - 50%

Cash Equivalents

0% - 20%

 

Socially Responsible Investing

While the ASSE does not recommend any specific securities to the investment manager, it is ASSE’s intent to avoid investing in organizations that have exhibited unethical or illegal behavior.   Such behavior is in conflict with the ASSE’s mission and values.  

4. INVESTMENT POLICY

The target asset allocation ranges listed above were determined as a result of the desired objectives and risk tolerances of the Finance Committee.  Should the percentage investment in any class rise above the stated maximum as a result of market appreciation, the investment manager shall be restricted from future net purchases of that asset class as long as such situation prevails. The investment manager shall, at all times, be free to switch funds presently invested in an asset category to other securities within the same category.

Liquidity

The liquidity needs of the ASSE will be monitored by the Finance Committee and the investment manager notified of any changes.

Diversification

Within the asset allocation classes, ASSE assets are to be broadly diversified in order to minimize risk.  

Equities

  • Only highly marketable securities are to be acquired.
  • The investment manager may invest in quality equity securities listed on the principal U.S. exchanges.
  • No assets will be invested in securities whose issuers are reasonably expected to become insolvent or have filed a petition under any state or federal bankruptcy statute.  
  • Equity investments may include mutual funds or exchange traded funds.  
  • The investment manager should rely on industry-accepted methodologies to assure the appropriateness of any individual equity security. 
  • Adequate diversification by industries and individual securities should be maintained.  No security will be acquired that accounts for more than 5% of the total equity portfolio market value. Consideration should be given to reducing individual holdings representing over 7% of the equity portfolio.
  • Not more than 20% of the Total Portfolio will be invested in small capitalization stocks.
  • Not more than 20% of the Total Portfolio will be invested in international equities.
  • Not more than 50% of the international equities will be invested in emerging markets. 
  • Leverage of any kind or trading in uncovered options, commodities or currencies is prohibited.
  • Investments in private placements or restricted stock is prohibited.  
  •  

Fixed Income

  • Only highly marketable securities are to be acquired.
  • Only bonds having a rating of "A" or better by Moody’s or Standard and Poor’s rating service will be purchased.  Conversely, all bonds being downgraded to a B-rating should be sold within six months.
  • Bond funds are to be rated “investment grade” or better.  
  • Investment in real estate investment trust (REITs) funds are allowed.  Not more than 10% of the fixed income portfolio will be in REITs. 
  • Adequate diversification by issue, maturity date and sector should be maintained. The securities of any one issue should not exceed 5% of the total fixed income portfolio on a market value basis at the time of purchase. U.S. Government or Government Agency Obligations are excluded from this limitation.
Cash Equivalents
  • Short-term investments should be of high quality and liquidity involving minimal risk of principal.
  • High quality institutional money market funds, commercial paper rated A-1/P-1, certificates of deposit of investment grade banks, short-term Government securities and high quality corporate debt may be utilized as cash equivalents.
  • Excluding money market funds and U.S. Government securities, participation in any one issue should not exceed 5% of the portfolio’s market value.
Guidelines for Other Asset Classes

Investment in other asset types not described here is subject to the approval of the Finance Committee and Board of Directors.

5. PROFESSIONAL MANAGERS

Investment policies, objectives and guidelines will be reviewed by the Finance Committee annually, or whenever circumstances change to the extent that the policies are ineffective or inappropriate. If changes are required, the Finance Committee will make appropriate adjustments.

The ASSE will employ a professional, independent portfolio manager who will be charged with implementing these policies and the day-to-day operations of the investment portfolio.  

Review of Performance
  • The performance of the investment manager will be reviewed at least annually by the Finance Committee. 
  • This review will focus on achievement of objectives and adherence to policy and guidelines.
  • In addition, the review will compare results versus major indexes and barometers identified by the investment manager.
Reporting by Investment Management
  • The investment manager will keep the Finance Committee informed of the investment manager’s organization and decision-making structure.  Any significant changes in ownership, decision-making process, style or personnel should be communicated to the Finance Committee immediately. 
  • At least annually, the investment manager will meet with the Finance Committee to discuss the economy, securities markets, portfolio structure, performance and strategy.
  • On a monthly basis, the investment manager will provide a report to the Controller reflecting portfolio activity, investment gains and losses and security listings.
 

Approved By/Date:Finance Committee, Board of Directors 06/2017

Replaces Edition Dated: 06/2014

Next Revision Due: 06/2019

 
 

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