The following IPS is subject to change. It is the endowment's board of trustees and its officers, fiduciaries responsibility to monitor and adjust the investment policy to enhance the overall stewardship of the endowment's portfolio.
Investment Policy Statement
The Willow Endowment, Business Investor
Portfolio: Non-profit Endowment, Non- Taxable
State: North Carolina
Tax ID: 93-xxxxx
Current Assets: Initial work in progress
Return Goal: 6% (current at 5% in HYS)
One year loss limit (worst case scenario): 15-18%
Objectives:
- Long-term growth and capital preservation
- Risk profile: Conservative
- Time horizon: Greater than five years
- Short-term liquidity needs: None
- Long-term rate of return expectation: 6% (based upon historical rates of return)
Financial Advisor Duties and Responsibilities:
- Fiduciary, non-biased third-party charged with helping clients meet long-term financial goals.
- Confer with client to create asset allocation.
- Select assets in accordance with asset allocation providing sufficient diversification of risk and returns.
- Control and report all investment costs.
- Monitor all investment options and portfolio custodian. (Custodian is responsible for safekeeping of client’s assets.)
- Value all portfolio holdings on a regular basis.
- Provide monthly reports that include securities, cash flow, income, and the monthly change in value.
Portfolio Selection Guidelines:
In general, long term investment performance is determined by asset performance. Historically, stock assets offer higher rates of return along with greater volatility. Fixed income assets generally yield lower rates of return, have lower correlation with equities, and less risk. Diversification across asset geography and size is recommended.
Based on the client’s conservative risk profile, the portfolio asset allocation will be 60% stock assets and 40% fixed.
The individual composition of holdings will be selected from index funds and exchange-traded funds from the following asset classes:
Equity
- U.S.
- High-Dividend
- Value
- Small Cap
- International, including developed and developing markets
Fixed
Rebalancing of Asset Allocation:
According to data from Vanguard, there is no universally agreed upon asset allocation. Neither is there data to recommend rebalancing more frequently than annually. Thus, the portfolio will be rebalanced annually, while attempting to minimize the tax consequences of asset sales.
Performance Monitoring:
Each index mutual fund's or exchange-traded fund's return will be compared with its related benchmark. Any deviation from that benchmark will be evaluated and discussed annually. The holdings will also be compared with peer group funds.
The parameters for selling a fund due to poor performance include one year of greater than 1% deviation from the benchmark and/or falling in the bottom half of the cohort fund group.
Costs will be monitored annually to ensure that total costs do not surpass 1% of all investable assets.
Annually, at a minimum, the overall portfolio will be monitored to consider whether initial goals are in place or have changed. Performance and fees will also be included in this conference. Together, The Willow Endowment and the advisor will determine the future portfolio direction.
