I. INTRODUCTION
The intent of this statement is to establish a philosophy to guide
the Board of Directors, Finance Committee or Investment Committee,
Executive Director, and any Investment professional, to achieve the
desired investment performance for JAPA funds. These policies
are intended to be specific enough to be meaningful, yet flexible enough
to be practical.
A. MISSION
The Jane Addams Peace Association is a nonprofit corporation established
in 1948 to fund educational projects, programs and activities which
further peace, the abolition of war, and the elimination of all forms
of discrimination and violence.
B. FUNDING SOURCES
The JAPA receives donations, bequests, annuities and other charitable
gifts from members of WILPF and other individuals who support the aims
of WILPF. Some of these gifts are designated by the donor for
specific purposes. For example, the Miami Fund is restricted
for general peace education purposes.
C. INVESTMENT PHILOSOPHY
The investment philosophy of the Association reflects the underlying
mission and politics of the organization. It includes investment
strategies and vehicles which provide capital for WILPF educational
programs and projects. JAPA defines an investment as a political/social,
as well as a financial relationship.
Therefore, the overall investment goal is to achieve a high rate of
return (measured by market standards), while preserving and protecting
capital, and to support WILPF educational programs through investment
in socially screened market securities.
D. LINES OF RESPONSIBILITY
The Board of Directors is charged with the overall responsibility
for the investment of JAPA’s assets. The Board shall discharge
its duties for the long term benefit of WILPF educational programs
and projects with care, skill, prudence and diligence appropriate to
the circumstances then prevailing. The Board reserves to itself
the exclusive right to change policies and to revise and grant exceptions. Policy
will be reviewed as needed by the Finance Chair and Finance Committee.
The Finance Committee (or, if so designated by the Board, a special
Investment Committee) of the Board is charged with overseeing the long
term, actively invested funds of JAPA. These funds include, bequests,
endowments, annuities (Charitable Remainder Annuity Trusts and Charitable
Remainder Annuities), and any long term donor advised or restricted
funds. Its responsibilities in this regard include: recommendations
on general investment policy; review of any special donor fund investment
request or restraints; the selection of investment manager(s) and/or
mutual funds; and the monitoring and management of the investment manager(s). the
Finance Committee may delegate day to day or other aspects of these
responsibilities to the Executive Director or other appropriate staff
persons. The active management of short-term, liquid funds (JAPA’s
operating funds and short-term reserves) shall be the responsibility
of the Finance Chair and the Executive Director.
II. CATEGORIES OF ASSETS
All JAPA assets shall be subject to the general guidelines established
by the Board of Directors as set forth in this document. However,
different categories of assets may have specific guidelines related
to their purpose. These categories are:
A. OPERATING FUNDS AND SHORT-TERM
RESERVES provide cash flow and support for operations, and
anticipated payments to fund the annual educational budget of WILPF
educational programs. Short-term reserves should be equivalent
to 3-12 months of operating expenses. Liquidity and safety
are of primary importance.
B. GIFT ANNUITIES: JAPA administers a
number of gift annuity contracts. Under a gift annuity contract
the donor gives funds or securities to JAPA as an outright gift, and
in return JAPA agrees to pay the donor a monthly or quarterly annuity
for the donor and/or beneficiary’s life. New York state
law, which governs JAPA’s gift annuity contracts, requires that
JAPA set aside a reserve for the purposes of funding gift annuity obligations. the
remainder of this reserve passes to JAPA upon the death of the donor. JAPA
commits to complying with all legal requirements governing the investment
of statutory reserves. The legal obligations that must be met
in investing these reserve funds are listed under section IV below.
C. CHARITABLE REMAINDER TRUSTS: A
charitable remainder trust is a trust agreement between the donor and
JAPA, under which the donor deposits funds to be held in trust for
the lifetime of the donor or beneficiary, with JAPA as the trustee. In
return, JAPA as trustee agrees to make quarterly or monthly annuity
payments to the donor and/or beneficiary for life. On the death
of the donor or beneficiary, the trust terminates, the annuity obligation
ends, and the trust funds are released to JAPA. JAPA commits
itself to complying with all legal requirements governing the investment
of trust funds. Specifically, in investing trust funds, each
charitable remainder trust must be treated as a separate investment
unit. Trusts may not be lumped together for purposes of developing
overall investment strategy. Instead, each trust must independently
meet the prudent investment standard.
D. RESTRICTED GRANT FUNDS: Donor
endowed funds: These funds are comprised of endowments by donors who
have permanently restricted the use of the corpus (principal) of their
gift. The income from these funds may have a restricted purpose. JAPA
has no discretion to spend their corpus, but does have discretion and
responsibility to oversee the investment of their corpus. a schedule
of these restricted funds clearly specifying the restrictions which
apply to each restricted fund is incorporated in the financial statements
of the Association.
E. LONG-TERM RESERVES AND UNRESTRICTED GRANT FUNDS: The
purpose of these funds, the corpus of which has been restricted by
the JAPA board, is to provide income to support the Association’s
grantmaking and operations.
III. SOCIALLY RESPONSIBLE INVESTING
A. CRITERIA: JAPA’s assets shall
be managed according to socially responsible investing principles to
promote social goals such as:
• full equality of rights regardless of sex, race, national origin, age,
disability, marital status, immigration status or sexual orientation;
• decreased production of weapons, nuclear power and military
systems with the elimination of all weapons of mass destruction;
• a clean and healthy environment, including the production of
healthful, safe and environmentally safe products;
• policies providing for fair and humane labor practices;
• the promotion and empowerment of women to combat racism, sexism,
homophobia, and violence against women and children;
• the nonsupport of repressive regimes.
B. STRATEGIES TO ATTAIN THESE GOALS MAY INCLUDE:
1. Exclusion Criteria: avoidance of investments in companies
known to violate or mitigate against the goals described above;
2. Promotion Criteria: investments in companies taking positive steps
to achieve goals stated above;
3. Shareholder Activism: JAPA will support shareholder actions consistent
with the criteria above. Investment managers shall be authorized
to include JAPA’s shares when they are involved in supporting
such shareholder actions.
IV. INVESTMENT MANAGEMENT AND LONG-TERM GOALS
The JAPA may decide to engage the services of an investment manager(s)
as needed. the finance committee is authorized to engage the
service of one or more investment managers who possess the necessary
specialized research facilities and skills to meet the investment objectives
of the asset categories of JAPA. the JAPA requires that any investment
manager be registered under the Investment advisers act of 1940 and
to provide the JAPA, annually, a copy of their form ADV part II, as
referenced by Rule 204-3 of the Act.
With the exception of the investment of gift annuity reserves which
are subject to separate conditions, the JAPA expects the Trustee to
adhere to the prudent investor rule under such federal or state laws
as now apply, or may in the future apply, to the investment of any
assets subject to their control. (See Appendix A.) the
JAPA’s primary objective of investment is to preserve and protect
its assets by earning a total return for each category of assets appropriate
to the asset’s term of investment, liquidity needs and risk tolerance. In
compliance with the “prudent investor” standard, higher
income return should be sought only to the extent it is consistent
with overall preservation of capital.
A. CATEGORIES OF ASSETS:
1. Operating funds and short-term reserves shall
be invested in short-term case equivalent income instruments such as:
money market funds, credit union accounts, CD’s short term or
convertible bonds, and/or cash equivalents f one year or less. Management
of these funds is delegated to the Executive Director or Finance
Chair of JAPA.
2. Charitable Remainder Trusts, restricted and unrestricted
grant funds and long-term reserves shall be invested according
to the prudent investor standard as noted above and in compliance with
those investment objectives and goals established in Section V. Such
investments may include:
a. U.S. Government and government-guaranteed fixed income investments
should have the maturities of these investments managed to ensure that
funds are reasonably protected against market risk.
b. Equity mutual funds that mirror the Standard and Poor’s
Index and/or the stock market as a whole.
c. Diversified portfolios of individual common stocks and/or corporate
bonds and government securities with the approval of the Finance Committee. No
more than 10% of any such funds should be invested in both equity and
debt holdings of any one company of the types described in this paragraph.
B. PROHIBITED INVESTMENTS:
At no time
shall JAPA invest in the following instruments:
1. Real estate except such as real estate which houses JAPA or WILPF
offices or is used for major JAPA activity or program.
2. Privately held securities, securities which are not publicly traded.
3. Mortgage securities which are not backed by an agency of the United
States.
4. Options and futures, while acceptable for reducing risk, may not
be used for speculative purposes.
5. Commodities, oil and gas wells, securities with limited transferability,
purchases of securities on margin and short selling and other speculative
instruments.
6. Physical assets not used in the normal operations of the organization,
such as jewelry and precious metals.
7. Loans made to borrowers other than through the purchase of commonly
sold financial instruments.
8. Investments made for purposes of exercising management control.
9. An investment manager may not invest in securities issued by its
parent company or in the securities of a custodial company.
10. An investment manager may not mortgage, pledge or otherwise hypothecate
securities in the portfolio under management unless such transactions
are approved by the Finance committee. JAPA shall not engage
in short term trading or speculation.
11. Companies identified as being inconsistent with the JAPA’s
social investment guidelines.
V. INVESTMENT GOALS AND OBJECTIVES:
The primary investment objective is to maintain a high level of income
consistent with overall preservation of capital.
1. Total fund performance will be reviewed and evaluated by Finance
committee quarterly using a rolling 3-5 year period performance basis.
a, The total return objective for the assets fund as a whole, after
fees, is to equal or exceed the CPI + 5%.
b. The equity portion of the Fund should earn an average annual total
return of at least 6% plus CPI over a rolling 3-5 year period; should
perform as well as the Standard and Poor’s Index net of fees. Any
international equities should perform as well as the Morgan-Stanley
Capital EAFE Index (GDP weighted, half-hedged).
2. The investment objective of the fixed income portion is to
match relevant benchmark index.
3. It is not the policy of JAPA to invest in real estate, although,
from time to time JAPA May receive gifts of real estate from donors. In
such cases, JAPA shall normally sell the real estate in as timely a
fashion as possible. Any such real estate investments shall not
be managed by an investment manager, but shall be the responsibility
of JAPA Executive Director of Finance Chair.
4. With respect to both common stock and bond investments, portfolio
holdings must be of high quality, chosen with prevailing standards
for care, skill, fiduciary prudence, and diligence, and may include
holdings in appropriate mutual funds. High quality is defined
for each type of investment below. Individual security selection,
security size, number of portfolio industries of holdings, current
income yields, and turnover are left to manager-discretion, except
that:
a. For at least 90% of bond holdings, only bonds rated “A” or
better by Standard and Poor’s or Moody’s shall be purchased
for any portfolio, and only bonds rated “BBB” by S&P’s
shall be held in any portfolio.
b. The remaining 10% of the bond holdings, rated below “A” may
be purchased or held, in the judgment of the manager, if they are of
investment quality.
c. Purchase of so-called “junk bonds” (those rated below “BBB” by
Standard and Poor’s and Moody’s is prohibited.
e. Private placement of any kind may not be purchased.
f. The use of margin purchases, and short sales are prohibited and
use of options, futures, and warrants are prohibited for speculative
purposes.
VI. INVESTMENT GUIDELINES
1. All of JAPA’s managed portfolios will be monitored
for consistency in each manager’s investment philosophy, return
relative to objectives, and investment risk as measured by asset concentrations,
exposure to extreme economic conditions, and market volatility.
2. Total equities should represent not more than 60% of the
Association’s non-operating fund assets. The term “equities” includes
common stocks, convertible preferred stocks, and international stocks. To
assure reasonable diversification, no industry should represent more
than 20% of managed assets, and no single issue more than 5% of managed
assets.
a. Large capitalization stocks, defined as stocks with market capitalization
greater than $2 billion, will represent up to 50% of the equity part
of the total fund.
b. Small capitalization stocks, defined as stocks with market capitalization
less than $750 million and medium capitalization stocks, defined as
stocks with market capitalization of between $750 million and $2 billion,
may represent up to to 25% of the equity portion of the fund.
c. International stocks, defined as stocks of companies located
outside the United States, may represent up to 25% of the equity portion
of the total fund. To assure reasonable diversification, the
use of international mutual funds should be encouraged until the growth
of assets justifies purchase of individual equities.
3. Fixed income assets will be targeted to represent not less
than 40% of the total non-operating fund assets. To assure reasonable
diversification, no single issue (excluding direct U.S. Government
and Federal Agency obligations) shall represent more than 5% of managed
assets, and all assets must be investment grade quality securities
as defined by Moody’s or Standard and Poor’s.
4. The balance of the funds may be invested in money market
funds, CD’s and other short-term liquid instruments for the operating
and reserves of the Association.
VII. COMMUNICATION AND REPORTING
Investment manager(s) will be continually evaluated. In
this regard, the board relies upon the Finance Committee to monitor
manager(s) performance on a quarterly basis.
The objective monitoring is not to set in opposition one investment
manager against another, but rather to ensure prudent management of
funds and compliance with investment objectives and guidelines.
A. Communication with Investment Managers:
1. JAPA encourages, and the investment managers are responsible
for, frequent and open communication with the Finance Committee on
all significant matters pertaining to investment policies. Such
communication may be transmitted to the Finance Chair as appropriate.
2. Whenever an investment manager believes that any particular
policy, objective, or guideline should be altered, it is the responsibility
of the investment manager to initiate written communication with JAPA.
3. Communication with JAPA should include:
a. Quarterly written reports showing securities held, cost, current
market value, transactions of the investment portfolio, income received,
projected 12 month income, and performance reports comparing the portfolio
and its components to the objectives and indices described above;
b. At the discretion of the Finance Committee , an annual meeting
should be held with the Finance Committee at a date, time and location
determined by the Committee.
B. Reporting to the Board of Directors:
1. The Finance Committee shall report fund performance and investment
income to the Board of Directors on an annual basis, at minimum.
2. The Board will act on the recommendations concerning the
fund performance and investment income to ensure the long-term financial
health of the Association.
Appendix A: The prudent investor rule:
“The prudent investor rule: applies to the rule of ‘prudence’ in
overall investment strategy for an entire portfolio of securities. New
York Law, which applies to the JAPA’s gift annuity and charitable
remainder trust contracts, recently established the “prudent
investor rule” for trustees administering trust funds (New York
Estates, Powers and Trusts Law, Sec. 11-2.3), which states in part
as follows”
1. The prudent investor rule requires a standard of conduct, not outcome
performance. Compliance with the prudent investor rule is determined
in light of facts and circumstances prevailing at the time of decision
or action of a trustee. A trustee is not liable to a beneficiary
to the extent that the trustee acted in substantial compliance with
the prudent investor standard or in reasonable reliance on the express
terms and provision of the governing instrument.
2. A trustee shall exercise reasonable care, will and caution to make
and implement investment and management decisions as a prudent investor
would for entire portfolio, taking into account the purposes and terms
and provisions of the governing instrument.
3. The prudent investor standard requires a trustee:
(A) to pursue an overall investment strategy to enable the trustee
to make appropriate present and future distributions to or for the
benefit of the beneficiaries under the governing instrument, in accordance
with risk and return objectives reasonably suited to the entire portfolio;
(B) to consider, to the extent relevant to the decision or action,
the size of the portfolio, nature and estimated duration of the fiduciary
relationship, the liquidity and distribution requirements of the governing
instrument, general economic conditions, the possible effect of inflation
or deflation, the expected tax consequences of investment decisions
or strategies and of the overall portfolio, the expected total return
of the portfolio (including both income and appreciation of capital),
and the needs of beneficiaries (to the extent reasonably known to the
trustee) for present and future distributions authorized or required
by the governing instrument;
(C) to diversify assets unless trustee reasonably determines that
it is in the interest of the beneficiaries not to diversify, taking
into account the purposes and terms and provisions of the governing
instrument; and
(D) within reasonable time after the creation of the fiduciary relationship,
to determine whether to retain or dispose of initial assets.
4. The prudent investor standard authorizes a trustee:
(A) to invest in any type of investment consistent with the requirements
of this paragraph, since no particular investment is inherently prudent
or imprudent for purposes of the prudent investor standard...
Hence, the prudent investor rule does not establish any limits or
prohibitions as to common stocks, mutual funds, or any other particular
investments, for investments ot trust funds. It does not require
that the portfolio be balanced in any particular formula between, for
example, bonds and stocks. Instead, it gives the trustees broad
range to determine prudently, the overall investment strategy for the
funds being invested.
