Guidance for Adelphi University and the investment adviser and managers in prudent supervision and management of assets and investments.
The purpose of this Investment Policy (this “Policy”) is to provide guidelines for the prudent management of the University’s investments (the “Portfolio”) and is intended to assist the University’s Board of Trustees (the “Board”) in supervising and monitoring the Portfolio. A principal goal of this Policy is to ensure the creation and implementation of a sound long-term investment strategy. The Policy defines the University’s investment objectives and the responsibilities of and standards applicable to those involved in the investment and management of the Portfolio.
This Policy is not intended to constitute a legally binding agreement between the University and the Investment Adviser or Investment Manager(s). Any agreement with Investment Adviser or Investment Manager(s) with respect to the Policy would be pursuant to a separate, written agreement with such party. It is recognized that from time to time the Board’s attitudes, expectations and objectives may change. Therefore, this Policy is intended to be used as a guideline rather than a rigid statement of policy from which there can be no deviation. This Policy is intended to be a summary of an investment philosophy and the procedures that provide guidance for the University, the Board, the Finance and Investment Committee (the “Committee”), Investment Adviser, and Investment Manager(s).
The University’s Mission and Portfolio
The University was established in 1896 as a non-profit corporation under the laws of the State of New York and is governed by the Board. The University has been recognized by the Internal Revenue Service as exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”) and is classified as a public charity. The University’s mission is to transform the lives of all students by creating a distinctive environment of intellectual rigor, research, creativity and deep community engagement across four core areas of focus: arts and humanities, STEM and social sciences, the professions, and health and wellness.
The Portfolio consists of: (a) funds that are intended to be used for short-term operating and program expenses (the “Operating Cash Assets Fund”); and (b) reserve funds which are funds to support the University’s future operations, serve as a resource during economic downturns and provide an additional source of support for the University (Adelphi University Endowment/Quasi-Endowment (the “Endowment Fund”)). The Endowment Fund includes endowment funds, as such term is defined under the Uniform Prudent Management of Institutional Funds Act, that are comingled for investment purposes. The University will maintain records to adequately account for the activity and balance of the underlying funds in the Portfolio, and reports regarding the composition of the Portfolio will be made on a periodic basis to the Committee in accordance with this Policy. The Portfolio is designed to ensure long-term financial security to the University and to provide a source of funding for the University’s activities, programs, and operating expenses.
The University’s investment objectives are to safeguard and preserve the real purchasing power of the Portfolio while earning investment returns that are commensurate with the University’s risk tolerance and sufficient to meet its operational requirements. The specific investment objectives for the Operating Cash Assets Fund and the Endowment Fund are set forth below.
Operating Cash Assets Fund
The Operating Cash Assets Fund shall be invested with the objective of preserving assets to cover the University’s operating expenses and to realize earnings in a way that allows for immediate liquidity to meet the University’s ongoing programmatic and operational needs. Operating Cash Assets Fund assets may be maintained in the checking account that the University uses for day-to-day operations and may be invested in other cash-equivalent investments, such as savings accounts, money market accounts, certificates of deposit with maturities appropriate for expected needs, Treasury bills, and other investments that are relatively easy to liquefy.
The Endowment Fund shall be invested with the objective of preserving the long-term real purchasing power of the Endowment Fund’s assets while seeking an appropriate level of investment return. More specifically, the University’s investment objectives and constraints for the Endowment Fund include the following:
- Preservation of Purchasing Power: The University aims to at least preserve the real purchasing power of its assets over time by seeking returns on its investments that are in excess of the spending rate (described below) and the rate of inflation.
- Long-Term Growth: The University seeks to achieve growth in its assets in excess of inflation by emphasizing long-term investment fundamentals in structuring its investments.
- Time Horizon: The University intends to invest for the long-term, with the total return on the Portfolio evaluated on a five-year rolling basis. It is recognized that not every five-year period will meet the University’s objectives, but the University aims to attain its objectives over a series of five-year periods. The University will monitor shorter-term investment results and trends while focusing on long-term results.
- Risk Tolerance: The University seeks to control risk and reduce the volatility in its Portfolio through diversification. However, short-term volatility is characteristic of the securities markets and will be tolerated if such volatility is consistent with the volatility of similar investment portfolios (such as the volatility of performance benchmarks, described below). The University recognizes and acknowledges that some risk must be assumed in order to achieve the long-term investment objectives of the Portfolio. In establishing its risk tolerance, the University’s ability to withstand short- and intermediate-term variability as well as the statistical probability of loss for a given period of time for the Portfolio is evaluated by the Committee].
- Liquidity Requirements: The University seeks to maintain adequate liquidity to meet its obligations, including planned expenditures. The Board or Committee will inform the Investment Adviser (as defined below) of any anticipated need for liquidity as such need becomes known. The Investment Adviser will presume no liquidity needs other than those provided by this Policy or the Board or Committee.
The Board, or such members of the Board as so designated, has responsibility for investing and managing the Portfolio as well as the responsibility for establishing and modifying this Policy, including establishing the asset allocation for the Portfolio. The Board has delegated to the Committee these responsibilities.
The Committee, the University’s designated staff, the University’s investment adviser (the “Investment Adviser”), and the investment managers (the “Investment Managers”) are charged with implementing this Policy. Their respective responsibilities are set forth below.
The Committee is responsible for:
- Establishing, reviewing periodically, and modifying this Policy and its appendices from time to time, and reporting any changes to the Board.
- Setting the asset allocation targets and ranges for the Portfolio, and modifying them from time to time.
- Implementing this Policy, with input from University staff and the Investment Adviser.
- Overseeing the Portfolio’s assets and reporting on the status of the Portfolio to the Board at least two times a year.
- Engaging the Investment Adviser to assist the Committee in carrying out its investment responsibilities and to implement the investment strategy and decisions of the Committee.
- Continuing or terminating the Investment Adviser and monitoring its performance.
- Monitoring the fees and other expenses associated with the management and administration of Portfolio.
The Investment Adviser is responsible for:
- Monitoring the investment environment and regularly communicating with the Committee concerning issues that may impact the Portfolio.
- Guiding the Committee with respect to the strategic asset allocation.
- Setting and implementing any tactical strategy that seeks to take advantage of market dislocations (i.e., underweight/overweight specific sectors).
- Implementing rebalancing on a periodic basis or when otherwise appropriate.
- Implementing the Portfolio’s asset allocation through the selection, continuation, and termination of Investment Managers.
- Selecting, continuing, or terminating Investment Managers based on appropriate criteria, including the following: investment philosophy, historical performance, experience of key personnel, and financial viability or changes in these factors. In selecting each Investment Manager, the Investment Adviser will take reasonable measures to assess the independence of the Investment Manager, including any conflicts of interest that the Investment Manager may have. (This Investment Manager selection responsibility also includes the ongoing monitoring of the Investment Managers for adherence to this Policy and his, her, or its stated investment strategy.)
- Reviewing Investment Managers, establishing the scope and terms of the delegation to Investment Managers, and monitoring their performance and compliance with the scope and terms of the delegation.
- Monitoring, analyzing the performance of, and recommending performance benchmarks for each Investment Manager.
- Preparing investment reports at least quarterly for the Committee’s review that contain the information necessary for the Committee to exercise its judgment and carry out its investment responsibilities prudently.
- Attending meetings in person or by telephone conference with the Committee and the University’s staff as requested.
- Providing necessary information to and cooperating with the Committee, University staff, and the University’s external auditors.
- Providing feedback regarding changes to this Policy when requested by the Board or the Committee and proposing corresponding amendments to the relevant account documents, if necessary.
Each Investment Manager is responsible for:
- Adhering to the investment strategy for which the Investment Manager was selected.
- Acting in accordance with the standard of care and restrictions on investment management set forth in this Policy.
- Preparing quarterly written statements, including a summary of the actions taken with respect to the University’s assets under management.
- To the extent that the Investment Manager is authorized and directed by the Investment Adviser, voting all proxies for the University’s securities.
- Taking reasonable steps to promptly communicate significant changes in the Investment Manager’s firm to the Investment Adviser, including: changes in senior management or high-level personnel; changes in the Investment Manager’s ownership; and changes in the Investment Manager’s investment strategy and/or style.
- Taking reasonable steps to promptly report to the Investment Adviser any [material] violation of this Policy, and any material adverse determinations against the firm or its principals, either by a court, the Securities Exchange Commission, or any other regulatory authority.
University staff, including the Executive Vice President of Finance and Operations, is responsible for day-to-day implementation of this policy and assisting the Committee with all components of this Policy, including coordination of outside professionals involved in supporting the investment and management of the Portfolio.
Restrictions on Investments
The University will attempt to factor socially responsible principles into its Portfolio by considering strategies and Investment Managers sensitive to these socially responsible issues. The University would not include/exclude a strategy or Investment Manager based on this criteria alone; rather it is one factor in the decision.
- All purchases of securities must be for cash and there will be [no]/[only limited short-term] leveraged purchasing or margin transactions [except for pooled investment vehicles].
- No short sales.
- Issuer concentration shall not exceed 20% within the investment portfolio of each investment manager.
- Any investment that has the potential for generating unrelated business taxable income (UBTI) shall require prior approval of the Committee.
These above restrictions will not be applied to the underlying holdings of any investments in commingled vehicles such as mutual funds or LLC structures.
Guidelines on Prudent Investing
Standard of Care
Each person responsible for managing and investing the University’s assets will do so in good faith with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and will consider both the purposes of the University and the goals of the Portfolio.
A person with special skills or expertise, or selected in reliance upon his or her representation that he or she has special skills or expertise, will use those skills or that expertise in managing and investing the University’s Portfolio.
In managing the Portfolio, the University will incur only those costs that are appropriate and reasonable in relation to the Portfolio, the purposes of the University, and the skills available to the University. The University will use reasonable efforts to verify facts relevant to the management and investment of the Portfolio.
In managing and investing the Portfolio, the following factors, if relevant, will be considered:
- general economic conditions;
- the possible effect of inflation or deflation;
- the expected tax consequences, if any, of investment decisions or strategies;
- the role that each investment or course of action plays within the overall Portfolio;
- the expected total return from income and the appreciation of investments;
- other resources of the University;
- the needs of the University and of particular funds in the Portfolio to make distributions and to preserve capital;
- an asset’s special relationship or special value, if any, to the purpose of the University;
- the requirement of diversification;
- liquidity considerations;
- the impact of management or administration costs; and
- risk management.
Management and investment decisions about an individual asset will be made not in isolation but rather in the context of the Portfolio as a whole and as part of an overall investment strategy having risk and return objectives reasonably suited to the Portfolio and the University.
The University will diversify the assets in the Portfolio unless it prudently determines that, because of special circumstances, the Portfolio is better served without such diversification.
The Committee will delegate to the Investment Adviser the management and investment of the Portfolio to the extent that it can prudently delegate under the circumstances, and will act in accordance with the standard of care described above in selecting, continuing, or terminating the Investment Adviser, establishing the scope and terms of the delegation, and monitoring the Investment Adviser’s performance and compliance with the scope and terms of the delegation.
The Committee will take reasonable measures to assess the independence of the Investment Adviser, both before and after the Investment Adviser is engaged. Investment Advisers will be selected based on competence, experience, past performance, and proposed compensation, without regard to business or personal relationships. Any actual or potential conflicts of interest possessed by a member of the Board or the Committee must be disclosed and resolved in accordance with the University’s conflict of interest policy.
The University’s spending policy is consistent with its investment objective of achieving long‑term real growth in its assets. In order to achieve such long-term real growth, the University’s expenditures should be less than the University’s total inflation-adjusted return on investments. Consistent with the University’s long-term investment objectives, the University’s spending policy targeted spending policy is to multiply 4.5% of the Portfolio’s average market value over the trailing five‑year period. The Portfolio will make quarterly distributions based on this stated spending policy.
The Board is responsible for setting this spending rate from time to time on the recommendation of the Committee. In the event the University’s budgetary needs cannot be met by the above spending policy, at its discretion, the Finance and investment Committee may recommend to the Board an appropriate course of action. Similarly, if the University’s budgetary needs are fully met without any spending from the Portfolio, earnings will be reinvested and no supplemental distribution will be made.
The Committee will establish in writing the University’s asset allocation, including minimum and maximum allocations for each asset class in the Portfolio, and will modify it from time to time, with recommendations from the Investment Adviser.
The Committee will seek to achieve a diversified Portfolio, unless it prudently determines that, because of special circumstances, the Portfolio or a particular fund or funds within the Portfolio are better served without diversification.
The current asset allocation for the Endowment Fund Portfolio is attached to this Policy as Exhibit A. Assets held for the Operating Cash Assets Fund are not subject to the target allocation listed in Exhibit A and will be invested as per the above referenced description.
Rebalancing and Cash Flows
The Committee and/or the Investment Adviser, as the case may be, should consider rebalancing at least once a quarter or more frequently, if necessary (e.g., large market moves). Rebalancing of the Portfolio may be delayed if, for example, prevailing market conditions are such that rebalancing may be detrimental to the University’s long-term goals for the Portfolio.
The Committee will identify the destination of all cash flows, including additional contributions to the University’s assets, consistent with this Policy. The University’s net cash flows may be used to implement the rebalancing activities in order to minimize transaction costs.
Performance benchmarks are used by the Committee to properly measure and evaluate the success of the Investment Adviser and the Investment Managers. The performance benchmarks selected by the Committee (with recommendations from the Investment Adviser) should be representative of the University’s long-term return objectives and risk tolerance and be calculated over the same time period as the returns on the Portfolio with which the performance benchmark is being compared. These performance benchmarks are intended as targets only and are no guarantee or assurance of the performance of any investment or of the Portfolio.
Reporting and Oversight
The Committee will meet periodically to review the reports of the Investment Adviser and the Investment Managers, and to evaluate the performance of the Portfolio and adherence by the Investment Adviser and the Investment Managers to this Policy. The performance of the Portfolio will be measured relative to appropriate and agreed upon performance benchmarks (described above). The Committee will also make periodic reports to the Board regarding the University’s investment performance.
The Committee will review this Policy periodically and recommend revisions to the Board for approval as needed. In conducting such review, the Committee may consult with the Investment Adviser regarding the performance of the University’s investments, the current asset allocation, the University’s overall investment strategy, general economic and market conditions, and any other relevant information that may bear on this Policy.
Exhibit A: Asset Allocation for Endowment Fund
|Asset Class / Subasset Class||Lower Limit||Target Allocation||Upper Limit|
|Investment Grade Fixed Income*||10%||20.8%||35%|
|Other Fixed Income||2.5%||7.1%||15%|
|Private Equity and Other Private Assets||0%||24.1%||35%|
*The allocation to investment grade fixed income includes a max allocation of 10% to tactical tilts.
Reference Benchmark: 65% MSCI All Country World Net Total Return Index, 35% Bloomberg Barclays US Aggregate Bond Total Return Index.
- Last Reviewed Date: January 25, 2023
- Last Revised Date: January 25, 2023
- Policy Origination Date: June 12, 2020