Approved by the SEJ Board of Directors May 1, 2021.
I. STATEMENT OF PURPOSE AND INTRODUCTION
The SEJ Board of Directors has adopted this Investment Policy to provide guidelines for the investment of funds held by the organization, as well as a structured approach for management of SEJ’s cash reserves.
II. INVESTMENT MANAGEMENT POLICY
- Preservation of Capital — Consistent with the provisions set forth below for the organization’s operating funds, endowment funds or other accounts, SEJ will direct its investment advisor(s) to use best practices consistent with professional and ethical standards to preserve the capital in different funds, commensurate with SEJ’s investment objectives for each fund and with an understanding that losses may occur.
- Risk Aversion — Understanding that risk is present in all types of securities and investment styles, SEJ recognizes that some risk is necessary to produce short-term and long-term investment results necessary to meet the objectives for each of its funds. SEJ shall direct its investment advisor(s) to use best practices consistent with professional and ethical standards to manage risk in consultation with SEJ for each of its funds.
- Adherence to Investment Discipline — Investment advisor(s) will consult regularly with SEJ’s Executive Director, President and Treasurer on developments in or affecting each fund. SEJ will evaluate its advisors on an annual basis.
III. INVESTMENT FUNDS
Cash and Cash-Equivalent Funds (Short Term)
SEJ generally endeavors to have sufficient funds in these accounts to cover three months of operating expenses. These funds include funds in checking accounts and money market accounts. Examples of acceptable investments include treasury bills, certificates of deposit and demand accounts, such as checking, savings or money market accounts with maturities of less than one year. Funds in demand accounts preferably should not exceed applicable FDIC limits per bank and per account.
The investment objective for these funds is to earn income consistent with a conservative approach for earning income with low risk, while also guarding against loss of value due to inflation with an investing horizon beyond that for the short-term funds. Examples may include, but are not limited to, any of the accounts or instruments allowed for cash and cash-equivalent funds, plus any other federal government-issued securities or funds made up entirely or primarily of federal government-issued securities, certificates of deposit (whose maturity may exceed one year), fixed income index funds, funds for federal government-issued securities and such other investments as the Finance Committee may approve from time to time, consistent with the goals of the Investment Management Policy.
Endowment Funds: Restricted and Unrestricted
The purpose of these funds is to secure the organization's future by providing a vital layer of protection from the uncertainties of year-to-year fundraising for the operating budget.
The investment objective for these funds is long-term growth and income, consistent with a moderate tolerance for risk and an aim to achieve a diversified portfolio of investments. The portfolio shall be selected and managed by the Executive Director, in consultation with SEJ’s investment advisor(s) and the SEJ Finance Committee.
Proceeds and any withdrawals from these accounts shall be consistent with any donor restrictions and board policies.
Acceptable investments may include, but unless otherwise specified are not limited to, mutual funds, exchange-traded funds, investment-grade bonds or bond funds, government securities and certificates of deposit. No individual stocks may be held, except any such securities donated to the organization, which shall be sold within six months of receipt.
IV. RESPONSIBILITY FOR OVERSIGHT
The Board of Directors has delegated the authority for the ongoing investment of available funds to the Executive Director. The Executive Director shall have the authority to purchase and sell on behalf of SEJ within the guidelines of the established Investment Policy. The Finance Committee shall be responsible for portfolio oversight.
The Finance Committee may employ on behalf of SEJ and work with an independent advisor(s) to structure or provide counsel on the investment portfolio in order to meet the investment goals of safety, liquidity and return. The Executive Director and the Treasurer will review the investment portfolio regularly. The Finance Committee will review the investment portfolio quarterly to ensure compliance with the allocation policy and to monitor risk and return.
Investment Manager Performance Review and Evaluation
Performance reports generated by any investment advisor(s) shall be compiled at least quarterly and communicated to the Executive Director and the Treasurer as representatives of the Board of Directors for review. The investment performance of the total portfolios, as well as asset class components, will be measured against relevant performance benchmarks. These may include, but are not limited to, Russell 3000 (US Stock), MSCI All Country World Index (Foreign Stock), Russell 2000 (Small Cap) and BB Aggregate Bond (Bonds).
Consideration shall be given to the extent to which the investment rules are consistent with the investment objectives, goals and guidelines as set forth in this statement. The Board of Directors will evaluate the portfolio(s) periodically and authorize the Executive Director to terminate any investment manager(s) for any reason.
The following procedures aim to ensure the investment policy statement is consistent with the mission of SEJ and accurately reflects the current financial conditions and requirements of the association.
SEJ anticipates that from time to time the services of an investment adviser may be sought to manage portions of SEJ’s funds. The following procedure shall be followed to engage a new or replace a current investment advisor or investment consultant.
- The Executive Director will recommend the hiring or replacement of an investment advisor to the Treasurer. The Treasurer will bring the recommendation to the Finance Committee.
- The Finance Committee and the Executive Director will review the candidate(s), negotiate fee structure and make a recommendation to the Board of Directors.
- The Finance Committee will be responsible for monitoring the performance of the selected investment advisor.
The Executive Director will review the portfolio reports monthly.
The Treasurer and the Finance Committee will review the portfolio performance quarterly. The Executive Director, in conjunction with the investment advisor, shall provide an annual report to the Board to include:
- Schedule of investments held, including cost basis and market value.
- Current yield of investments compared to industry benchmarks.
VI. ALLOWABLE INVESTMENTS
Unless otherwise specifically authorized by the Board of Directors, the Executive Director and any investment advisor retained by SEJ shall be authorized to invest the SEJ funds as follows:
Allowable Assets and Underlying Assets in Various Investment Vehicles
Subject to the preceding provisions, SEJ will invest in the below listed categories using mutual funds and Exchange Traded Funds.
1. Cash Equivalents
- Treasury Bills
- Money Market Funds
- STIF Funds
- Commercial Paper
- Banker’s Acceptances
- Repurchase Agreements
- Certificates of Deposit
2. Fixed Income Securities
- U.S. Government and Agency Securities
- Corporate Notes and Bonds
- Mortgage Backed Bonds
- Preferred Stock
- Fixed Income Securities of Foreign Governments and Corporations
3. Equity Securities
- Common Stocks
- Convertible Notes and Bonds
- Convertible Preferred Stocks
- American Depository Receipts (ADRs) of Non-U.S. Companies
- Stocks of Non-U.S. Companies (Ordinary Shares)
Prohibited investments include, but are not limited to the following:
- Limited Partnerships
- Venture Capital Investments
- Private Placements
- Hedge Funds
- Hedge Fund of Funds
- Commodities and Futures Contracts
- Real Estate Properties
Asset Mix and Quality
Investments shall be so diversified as to minimize the likelihood of significant losses, unless unusual circumstances arise and the Executive Director and Finance Committee deem it prudent not to maintain the diversification. The Executive Director and the Finance Committee should review the investment portfolio regularly and direct any investment advisor(s) to do any rebalancing according to the target weights (as described below) semi-annually, or more frequently as circumstances warrant. If the investment portfolio exceeds the maximum weights, then the portfolio should be rebalanced as soon as practicable.
These guidelines allow substantial discretion in the allocation and diversification of assets for the purposes of increasing investment returns and/or the reduction of risk exposure. The Executive Director, in consultation with any investment advisor(s) and either the President or Treasurer, has broad responsibility to shift the commitment of assets among asset classes, industry sectors and individual securities to pursue opportunities presented by changing circumstances.
The chart below reflects the asset allocation for the operating reserves:
|Cash and Equivalents||10%||100%||40%|
The chart below reflects the asset allocation for the endowment accounts:
|Cash and Equivalents||0%||5%||0%|