Investment Policy Statement
The purpose of this Investment Policy Statement (hereinafter, “IPS”) is to establish a clear understanding of the investment objectives and philosophy for the Wichita State University Foundation (hereinafter, "Foundation"). This document will describe the standards approved by the Wichita State University Foundation Board of Directors (hereinafter, “Board”) to direct the prudent investment of its endowed funds in the pooled portfolio (hereinafter, “Portfolio”). It will be utilized by the Investment Committee (hereinafter, “Committee”) in monitoring investment performance, as well as, serve as a guideline for any investment manager retained.While shorter-term investment results will be monitored, adherence to a sound long-term investment policy, which balances short-term distributions with preservation of the real, inflation-adjusted value of assets, is crucial to the long-term success of the Foundation.
A. Investment Objective
The primary investment objective of the Portfolio is to achieve an annualized total return (net of fees and expenses), through appreciation and income, equal to or greater than the rate of inflation (as measured by the broad, domestic Consumer Price Index) plus any spending and administrative expenses thus, at a minimum maintaining the payouts to campus, Wichita State University. The assets are to be managed in a manner that will meet the primary investment objective, while at the same time attempting to limit volatility in year-to-year spending.
B. Fiduciary Duty
In seeking to attain the investment objectives set forth, the Committee shall exercise prudence and appropriate care in accordance with theUniform Prudent Management of Institutional Funds Act (hereinafter “UPMIFA”). UPMIFA requires fiduciaries to apply the standard of prudence “to any investment as part of the total portfolio, rather than to individual investments”. All investment actions and decisions must be based solely on the best interests of the Foundation. Fiduciaries must provide full and fair disclosure to the Committee of all material facts regarding any potential conflicts of interest.
C. Description of Roles
1. Board of Directors
The Board has ultimate fiduciary responsibility for the Portfolio and has delegated general oversight to the Committee.
2. Investment Committee
The Committee is responsible for following the provisions of this IPS. This responsibility includes approving investment strategy; hiring and firing of investment managers, custodians, and investment consultants; monitoring performance of the Portfolio on a regular basis (at least quarterly); and maintaining sufficient knowledge about the Portfolio and its managers to be reasonably assured of their compliance with the IPS. Additionally, the Committee will formally review the performance of the investment consultant on at least an annual basis.
3. Vice President for Finance and Administrative Services
The Vice President for Finance and Administrative Services has daily responsibility for administration of the Portfolio. She/he will serve as primary contact for the Foundation’s investment managers, investment consultant, and custodian.
4. Investment Consultant
The Committee shall retain the services of an investment consultant.The investment consultant is responsible for assisting the Committee and Vice President for Finance and Administrative Services in all aspects of managing and overseeing the Portfolio. The consultant is the primary source of investment education and investment manager information. On an ongoing basis the consultant will:
a. Provide proactive recommendations
b. Supply the Committee with reports (e.g., asset allocation studies, investment research and education) or information as reasonably requested
c. Monitor the activities of each investment manager or investment fund
d. Provide the Committee with quarterly performance reports within 45 days following the end of the quarter
e. Review this IPS with the Committee at least annually.
f. Meet with the Committee at least quarterly, more frequently as needed.
D. Spending Policy
The distribution rate is based upon a total return approach, which utilizes both income and capital appreciation to be withdrawn for spending. The maximum allowable spending amount for the Foundation shall be the distribution rate set by the Board on an annual basis in compliance with UPMIFA. The distributions rate shall be calculated using a five-year moving average of the endowment fund market values. The current approved distribution rate is 5.90% (4.25% payout to campus and 1.65% administrative fee).
E. Investment Philosophy
The Committee understands the long-term nature of the Portfolio and believes that investing in assets with higher return expectations outweighs their short-term volatility risk. As a result, the majority of assets will be invested in equity or equity-like securities, including real assets (real estate and natural resources). Real assets provide the added benefit of inflation protection.
Fixed income and absolute return strategies will be used to lower short-term volatility and provide stability, especially during periods of deflation and negative equity markets. Cash is not a strategic asset of the Portfolio, but is a residual to the investment process and used to meet short-term liquidity needs.
F. Asset Allocation
Asset allocation will likely be the key determinant of the Portfolio’s returns over the long-term. Therefore, diversification of investments across multiple markets that are not similarly affected by economic, political, or social developments is highly desirable. A globally diversified portfolio, with uncorrelated returns from various assets, should reduce the variability of returns across time. In determining the appropriate asset allocation, the inclusion or exclusion of asset categories shall be based on the impact to the total Portfolio, rather than judging asset categories on a stand alone basis.
The target asset allocation should provide an expected total return equal to or greater than the primary objective of the Foundation, while avoiding undue risk concentrations in any single asset class or category, thus reducing risk at the overall Portfolio level. To achieve these goals, the asset allocation will be set with the following target percentages and within the following ranges:
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| ASSET CATEGORY
| Global Equity
|| 40% - 80%
| Global Fixed Income
|| 5% - 40%
| Real Assets
|| 0% - 20%
| Diversifying Strategies
|| 0% - 20%
WSU Foundation 2013 Annual Report