Investment Policy

This Investment Policy (“Policy”) defines the criteria and provides the direction for the management of the assets of the Arcadia University Endowment Fund (“Fund” or “the Fund”). This Policy provides for the continuing management and investment of Fund assets, consistent with the long-term goals of Arcadia University (“University”).

The Fund may consist of cash, securities, and other investments. The use of the assets of the Fund may be restricted or unrestricted. The Fund may receive donor-restricted gifts and bequests to provide a permanent endowment or provide permanent sources of income or term endowments (income for a specified period). The principal of a permanent endowment must be maintained permanently and is classified as permanently restricted net assets. The Arcadia University Board of Trustees (“Board”) may earmark a portion of the University’s unrestricted net assets as a board-designated endowment to be invested to provide income of a long but unspecified period. The principal of board-designated endowments, which results from an internal designation, is not donor restricted and is classified as unrestricted net assets.

The Board has stipulated that all bequests to the University, not otherwise designated, will be added to the Fund as unrestricted net assets.

The Board has the final authority for approval of this Policy. The Institutional Sustainability Committee of the Board of Trustees (“Committee”), or any designated subcommittee to whom the Committee has delegated investment management responsibility for Fund assets (“Designee”), has the responsibility to establish the investment policy that guides Fund investments and for monitoring the Fund. The Committee is responsible for the hiring, retaining, and releasing of any investment advisor(s) and for monitoring the performance of such investment advisor(s). The Committee, or Designee, will work closely with the Vice President of Administration and Finance and Treasurer, along with such investment advisor(s), to accomplish the objectives of this Policy. The Committee shall report Fund investments and their returns During regularly scheduled Board meetings. Any significant event that merits the attention of the Board of Trustees will be reported by the Committee immediately to the Executive Committee of the Board of Trustees which shall discuss the matter as expeditiously as possible with the Committee Chair, and such discussions shall be reported at the next scheduled Board meeting.

Notwithstanding the foregoing, the Committee, or any Designee, is acting in a fiduciary capacity with respect to the Fund and is accountable to the Board for overseeing the investment of all assets owned by, or held in trust for, the Fund.

This Policy sets forth the investment objectives, distribution policies, and investment guidelines that govern the activities of the Committee or any Designee.

This Policy has been formulated consistent with the University’s anticipated financial needs and in consideration of the University’s tolerance for assuming investment and financial risk.

The Policy is intended to provide boundaries, where necessary, for ensuring that the Fund’s investments are managed consistent with the short-term and long-term financial goals of the Fund. At the same time, this Policy is intended to provide for sufficient investment flexibility in the face of changes in capital market conditions and in the financial circumstances of the University.

Because the University will have various portfolios of Fund assets that have differing risk profiles and time horizons, a “One Size Fits All” policy for investment of all Fund assets would not be appropriate. Instead, the University will employ this Policy that will govern practices and procedures for all investments of the University and each portfolio will follow this Policy, but each portfolio will also have specific investment guidelines adopted by the Committee, or its Designee, tailored to that portfolio.

The University may take on other campaigns or have other funds to invest, which are intended for specific purposes, such as capital campaigns. The Committee will create appropriate account structures commensurate with the intended timing of receipts and expenditures of these funds.  The financial goals of these accounts will be preservation of capital and liquidity, or will be assessed at the time of receipt of funds.

The Committee will review this Policy at least once per year. Changes to the Policy can be made only by affirmation of a majority of the members of the Committee or its Designee, and written confirmation of the changes will be provided to all Committee members and to any other parties hired on behalf of the Fund as soon thereafter as is practical. The Policy and all changes to the Policy shall also be provided to donors and prospective donors of any gifts to the Fund.

The Committee shall retain one or more independent investment advisor(s) to advise the Committee on overall asset allocation levels as they relate to equity, fixed income, and cash requirements. The Committee will be responsible for selecting investment advisor(s). When it becomes necessary, the Committee shall interview a minimum of (3) candidates for the position of outside investment advisor. Qualified candidates will be regulated banks and brokers or Registered Investment Advisors (RIA).  The Committee will pay special attention to the custodian of the assets in the Fund. In the case of a management team at a bank or brokerage firm, a review of Financial Industry Regulation Authority (FINRA) files will be made to be sure the firm is in good standing. If an RIA is used, the Committee will review both the RIA and the custodian that they use. The Committee will choose an investment advisor with a custodian that is reputable and generally well known.

The investment advisor(s) are responsible to the Committee for carrying out this Policy.

The investment advisor(s) are responsible for:

The investment advisor(s) will invest the Fund assets with money managers in accordance with this Policy.

The investment advisor(s) will recommend money managers based upon the University’s objectives, time horizon, and risk tolerance.  These recommendations will have undergone a due-diligence process by the investment advisor(s) and/or their firm. The recommendation of a money manager shall take into account such relevant factors as: (a) price and commission; (b) the manager’s facilities, reliability, and financial responsibility; and (c) the ability of the manager to effect transactions particularly with regard to such aspects thereof as timing, order size, and execution of orders. The investment advisor(s) shall make all reasonable efforts to obtain the most competitive rate.

The investment advisor(s) will send monthly statements to the Vice President of Administration and Finance and Treasurer, produce performance reports on a regularly scheduled basis or more frequently as requested, and attend regularly scheduled meetings of the Committee or its Designee, or more frequently, when requested.

The investment advisor(s) should immediately inform the Committee regarding all significant matters pertaining to the investment of the Fund assets in writing. The Committee should be notified of major changes in investment strategy, portfolio structure, market value of the assets, and other matters affecting the investment of the Fund assets. The Committee should also be informed immediately of any significant changes in ownership, affiliation, organizational structure, financial condition, or professional personnel, staffing of the investment advisory firm or any money manager managing Fund assets.

It is the duty of an investment advisor to notify the Committee in writing whenever it believes the current Policy should be altered. No deviation from Policy should occur until after such communication has occurred and the Committee has approved such deviations.

Upon making a recommendation for a potential investment, the investment advisor(s) shall disclose whether the investment advisor is holding interests in that fund for its own account and disclose all fees received by the investment advisor(s) and its affiliates from any investment made in the recommended fund. The investment advisor(s) may not use any transaction involving the University’s assets for purposes of receiving hard or soft-dollars paybacks or credits with the exception of credit for research used in the investment advisory process. Obtaining any goods or services from any money manager, broker dealer or other person other than for the purpose of research is prohibited.

The primary Fund goal is to support the mission of the University through Fund growth and to provide a predictable level of endowment spending support to the annual budget. The return objectives are to earn an average annual total real rate of return (adjusted for inflation) in excess of spending requirements, as measured over a 3 to 5-year market cycle, and to outperform selected weighted market indices. The asset allocation and spending strategies set forth in this Policy will be consistent with the stated goals and objectives of the Fund. See below for key goals and investment objectives:

The Fund is to be invested with the objective of preserving the long-term, real purchasing power of assets while providing a relatively predictable and growing stream of annual distributions in support of the Institution.

For the purpose of making distributions, the Fund shall make use of a total return-based spending strategy, meaning that it will fund distributions from net investment income, net realized capital gains, and proceeds from the sale of investments.

The distribution of Fund assets will generally be permitted to the extent that such distributions do not exceed a level that would erode the Fund’s real assets over time, however, consideration will be given to the University’s need for funding to fulfill its mission. The Committee, or its Designee, will seek to reduce the variability of annual Fund distributions by factoring past spending and portfolio asset values into its current spending decisions. The Committee, or its Designee, will review its spending assumptions annually for the purpose of deciding whether any changes therein necessitate amending this Policy, its target asset allocation, or both.

Periodic cash flow, either into or out of the portfolio, will be used to better align the investment portfolio to the target asset allocation outlined in the asset allocation below.

The Board recognizes the importance of the asset allocation decision in meeting the objectives of the Fund. The goal is to diversify investments across a broad spectrum of investment strategies so as to provide a balance that will meet the total return objectives and avoid undue risk concentration in a single asset class or investment category. Because allocation targets may change occasionally, specifics of the current allocation targets and ranges are listed in Exhibit A of this Policy.

The three-year average market value of the assets of the Fund shall be the fair market value of the assets so held for the Fund, determined at least annually and averaged over a period of three preceding years. However, if the assets in the Fund have been held for less than three years, the average market value of such assets shall be determined during the period during which the assets have been held. On an annual basis, the University will set a spending rate for budgeting purposes. The spending rate will be a percentage of assets based upon the three-year average market value of the Fund as of the close of the calendar year preceding its fiscal year. All returns, regardless of source, above the spending rate will be retained to enhance the growth of the Fund. The current spending rate is listed in Exhibit A of this Policy.

Investment returns will be measured quarterly. Each strategy’s returns will be compared against a market index. The total portfolio will be compared to a blended index and to the Consumer Price Index. Specifics regarding index comparisons and other comparative guidelines are listed in Exhibit A. The Committee, or its Designee will be expected to meet at least annually, or more frequently as requested by the Committee Chair.

The costs of managing the Fund’s assets should be competitive within the marketplace of similar investment portfolios. All fees will be monitored by the investment advisor(s) to ensure that the Fund is not overpaying for services. Transaction fees, brokerage commissions, and security mark-ups should be within the norms for institutional accounts of similar trading volume. Though the allocation of trades will be left up to the investment advisor(s), it should be understood that best execution, at the lowest reasonable cost, is expected.

This Policy is effective when approved by the Arcadia University Board of Trustees.

February 18, 2021

Reviewed and amended – October 24, 2022

Reviewed and amended – February 15, 2024