This policy establishes an Investment Committee and also a Long Term Investment Strategy.
I. Role and Responsibilities of the Investment Committee
A. Investment Committee Composition
The Investment Committee (the Committee) will be composed of the following individuals:
Members serving two year terms may be renewed for up to two additional two year terms (total of six years of service). Members of the Investment Committee will nominate and approve new members for these positions.
The Bursar, Bursar’s Office staff and other Finance & Administration support staff as needed will attend Committee meetings, prepare minutes, complete analyses, coordinate all reporting and administrative functions outlined in this policy, and serve in a support capacity to the Committee.
B. Role and Responsibilities of the Investment Committee
The Committee will have standing meeting in February and September of each year.
Bursar’s Office will prepare quarterly investment performance reports and distribute to the
Committee members. The Committee will review investment performance of external
consultants or investment managers and based on those reviews, assess the need to add
or delete consultants or investment managers. The Committee will be involved in the interview
and selection of any consultants or investment managers. The Committee may also call a
meeting at any other time. At the February meeting, the Committee will conduct an investment
policy review and propose modifications to the Vice President for Finance and Administration.
At the September meeting, the committee will review the annual investment report covering the
period July 1 to June 30 which is required by the Board of Regents. The report is due by
October 31 of each year in accordance with the Board of Regents Investment Policy.
The Committee was established to assist University management in fulfilling its fiduciary investment responsibilities. The Committee shall:
The Committee may call other meetings as needed to conduct the business of the Committee.
The Bursar’s Office will work with investment advisors and managers to obtain and distribute quarterly performance reports to the Committee members.
II. Investment Policy
A. Investment Objectives
B. Investment Types
Types of investments will conform to Regents policy and applicable federal and state
assets and general investments maintained in the University’s loan and endowment funds include
equities, bonds, notes, other fixed income securities, pooled investments managed by investment
managers, land, buildings, student loans, short-term funds/cash/cash equivalents, and long-term
loans held as investments in University construction projects as authorized by the Treasurer of
the Board of Regents.
Approved investment instruments are listed below:
Due to the longer time horizon of these funds, risk includes purchasing power risk
that the nominal value of assets fails to keep up with inflation) as well as short-term price volatility.
In general losses should not exceed -8% over a three year period or -15% within one year.
IV. Asset Allocation and Diversification
Pooled investment funds managed by external investment managers should be reasonably
as to commodity, issue and maturity. Generally, funds should be invested with the following targets
and limits by class of assets:
Equity 50-75% Target of 70%
Fixed Income 25-50% Target of 30%
Cash and Equivalents 10-25%
Pooled fund asset subclasses for equities may include domestic medium to large cap
subclasses for fixed income securities may include government, corporate, and convertible bonds.
Equities and corporate bonds will be broadly diversified across industry sectors in an attempt to
control risk. The asset subclass allocation parameters should be adjusted, if necessary, by the pooled
fund investment manager to accommodate shifts in risk tolerance, changes, in the need for income
versus long-term growth, and changes in the expected returns from the capital markets.
The maximum portion of the net assets of endowment and loan funds which can be utilized
to the University for construction projects, which must be individually approved by the Treasurer of
the Board of Regents, will be 20% and 40% of the endowment and loan fund balances, respectively.
In general, endowment and loan funds should only be used for these loan purposes when a reasonable
repayment source is identified and committed and when the rate of return is at least that which can be
earned in the market.
V. Investment Guidelines
A. Rating and Maturity
Emphasis will be on securities of high credit quality. The rating systems of Standard
and Moody’s will be used to evaluate credit quality and holdings. At a minimum, holdings must be
at least investment grade (“BBB” or higher based on Standard and Poor’s or Moody’s ratings). Any
security with a split rating between agencies will be considered as only the lower of the two ratings.
The underlying corporate debt ratings should be used in the evaluation of equities. Maturities of fixed
income securities should be greater than one year and on average should range between five and
eight years. Cash and equivalents should be invested in income-producing accounts at all times and
should have maturities of one year or less.
B. Spending Policy
The annual spending rate policy for endowment funds is established to not exceed up to 4% of the average market value of the endowment over the 12 quarters of the three (3) previous calendar years. The total investment return objective is to exceed 4.0% plus the rate of inflation. This approach creates a balance between annual spending and the expected real return on assets. Each fund must be invested for one full year (as of December 31) before an annual spending limit is calculated.
Endowment and loan funds are assessed annual administrative fees by the University to support administration costs. These fees are assessed based on the June 30 market value of the individual fund and will not exceed the following schedule:
The spending rate and the management fee, in concert with the other parameters of
investment policy is intended to support current and future program needs and allow the endowment
value to grow at least equal to annual inflation.
Distributions of earnings from the endowment to support annual expenditures conforming
spending policy are expected to be equal to or less than actual real returns over the long-term,
therefore achieving the financial objective of presenting the value of the fund assets and related
revenue stream. Expenditures are supported first from current income and, as required, from
realized and unrealized gains.
This spending policy will not apply to specific quasi-endowment funds or loan funds where based on the underlying trust agreement, the expenditure of fund principal is allowed. These funds may utilize a spending limit if requested by the school, college or major unit benefiting from the fund.
Annual spending limits for the next fiscal year (beginning July 1) will be calculated every January and communicated to the chief business officer for each school, college, or major unit benefiting from the fund.
There will be an automatic transfer of income and earnings to principal funds if not used by the school/college in a two year period. Exceptions to this procedure should be requested on a fund-by-fund basis and communicated in writing to the Bursar’s Office.
Collateralization of loan and endowment funds is not required. However, all cash
or cash equivalents
held outside of pooled investment accounts will be collateralized in the same manner as noted in the
University’s short term investment policy.
Notes, equities and other investment instruments held outside of pooled investment
be held in accounts clearly designated as University of Georgia Trust Funds. All investment
accounts will be held in the name of the University of Georgia or The Board of Regents of the
University System of Georgia, by and on Behalf of The University of Georgia. Investments may
be in the University’s name, may be held by the investment’s counterparty in the University’s
name or may be held by the investment’s counterparty’s trust department or agent, but not in
the University’s name. Book entry securities are preferred to physical delivery securities.
Any physical stock certificates, bonds or notes received directly from a donor will
stored until such time they can be approved by the Treasurer of the Board of Regents for sale.
Proceeds will be placed in the pooled investment fund.
VI. Investment Manager Responsibilities
A. Use of Investment Managers
The University currently uses external investment managers. The following criteria
in the selection process:
1. Professional background and experience
2. Investment philosophy relative to the institution’s stated investment objectives
3. Organizational structure and overall product line
4. Control with respect to ensuring that individual managers adhere to policy objectives
5. Total size of managed assets
6. Record of performance measured against appropriate benchmarks
7. Ability to communicate results effectively and in timely fashion
For investment management or consultant relationships that fall outside of the Georgia
and Regents approved pooled funds, the University will formalize any relationships with the
respective manager or consultant. This will be accomplished through a contract or memorandum
of understanding, signed by the University and the investment manager or consultant and will
adequately document the expectations and responsibilities of each entity in the investment relationship.
VII. Policy to Ensure Ethical and Prudent Action
The University understands the importance of establishing an investment policy that
and prudent judgment and fiduciary responsibility in the management of assets. There can be no
guarantees about the attainment of the goals or investment objectives outlined here. Personnel
involved in the investment functions will be held to the “prudent person” standard and will be
responsible for establishing and maintaining internal controls. Training and education is also a
requirement of sound investment management.
The standard of prudence to be used by University personnel shall be the “prudent
standard and shall be applied in the context of managing an overall portfolio. Universitypersonnel
will act in accordance with written procedures and will exercise due diligence. The “prudent person”
standard is understood to mean the following: “Investments shall be made with judgment and care,
under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise
in the management of their own affairs, not for speculation, but for investment, considering the
probable safety of their capital as well as probably income to be derived.”
Training and Education
The University recognizes the need for periodic training in investments for key individuals
in the Bursar’s
Office. Examples of training opportunities include courses and seminars offered by the National Association of College and University Business Officers (NACUBO), the Government Finance Officers’ Association, and other organizations specializing in investment and treasury management.
This investment policy statement:
The University strives to eliminate the opportunity for collusion by requiring separation
and control of safekeeping of assets, and adequate documentation of investment transactions.
1) Separation of functions –
Separate the transaction authority from the accounting and record keeping authority. The
Director of the Bursar’s Office will make investment transactionrecommendations to the Associate
Vice President and Controller or the Vice President for Finance and Administration.
Investment transaction approval will be made in writing. Changes in investment policy, investment
type, asset allocation, or diversification require approval of the Vice President for Finance and Administration.
Once investment transactions are approved, the Director of the Bursar’s Office will
transfer of funds to the approved investment via Wachovia Connection Plus, software provided
by Wachovia Bank for initiating the approving funds transfers. Once the transfer has been initiated
by the Director of the Bursar’s Office, the transfer must be approved and finalized by the Accounts
Payable Manager using Wachovia Connection Plus. The Accounts Payable Manager will not approve
the transfer initiated in Wachovia Connection Plus without the signed approval from the Associate
Vice President and Controller. Wachovia Connection Plus requires each user to sign on the system
with a unique user id and password and the system does not allow the same user that initiated the
transfer to also approve it.
The investment accountant in the Bursar’s Office is responsible for the accounting entries to record
the investment and investment income. These journal entries are input to the accounting system by
the Accounting Department. The Accounting Department also prepares the monthly bank reconciliation
and financial statements thus providing another layer of control and review over these transfers.
2) Documentation of Transactions and Strategies –
Prepare written records of investment transactions. Due to the potential for errors in telephone
transactions, all transactions conducted via phone should be supported by written documentation and
approved at the appropriate level. All strategies and information used to develop the transaction should
be in writing. An agreement with the bank outlines the various controls and security provisions for making and receiving wire transfers.
Phone Number: 706-542-2542
Responsible University Senior Administrator: Vice President for Finance & Administration
Responsible University Administrator: Associate Vice President and Controller
Policy Owner: Bursar’s Office Division
Policy Contact: Judy Scott
Phone Number: 706-542-2542
Description: Records include but are not limited to reconciliation reports: annual operating statements; schedules of rates; and related correspondence.
Retention: 5 years for annual reports, 1 year for monthly and quarterly reports and working papers.
To ensure that policy changes are adequately documented, this policy will be reviewed
annually by the University of Georgia Investment Committee. Per Board of Regents Policy, changes
to the University’s investment policy must be submitted to the Board of Regents every two years
by March 31.