Investment Policy

Responsibility for the Investment Policy of the Foundation lies with the Investment Committee of the Board of Directors. The Investment Policy statement outlines the overall philosophy that guides our Investment Committee, in-house staff, and hired investment managers to ensure the exercise of prudence and appropriate care in managing and investing our assets in accordance with the Uniform Prudent Management of Institutional Funds Act (UPMIFA).

The below Investment Policy Statement was last updated on 6/14/2013.

The University System of Maryland Foundation endowment fund’s (herein Endowment) Statement of Investment Policies and Objectives is based on certain investment principles the Investment Committee of the Board of Directors regards as fundamental and constant.  The Committee’s intent is to manage the endowment assets in accordance with these principles, regardless of cyclical ebbs and flows in the capital markets, and this documentation of these principles is intended to ensure continuity of purpose and implementation regardless of changes in the composition of the Committee.

  1. TIME HORIZON.  On the one hand, the Endowment’s investment time horizon should be infinite, since the institution is expected to exist in perpetuity.  On the other hand, the purpose of the Endowment is to provide a steady and sustainable distribution of funds, which means that large fluctuations in endowment market value over short time periods are highly undesirable.  In setting asset allocation policy, the Committee will attempt to take into account both of these conflicting time horizons.
  2. SPENDING.  The ideal endowment spending policy considers inter-generational equity, whereby the current needs of the institution are not sacrificed in the interests of the future, nor future needs sacrificed to those of the present.
  3. DIVERSIFICATION.  By allocating funds to asset classes whose returns are not highly correlated over time, the Investment Committee aims to mitigate some of the volatility inherent in equities and thereby provide greater stability in spending distributions than might be possible with a more concentrated portfolio.  Although such diversification means the endowment may not reap all of the benefits of equity bull markets, it will also avoid the full brunt of bear markets.  No more than 5% of the Fund’s assets may be invested with one investment fund and no more than 10% of the Fund’s assets may be invested with one investment manager.  The Committee may however make exceptions in special circumstances.
  4. RETURN AND RISK OBJECTIVES.  The overall goal of the Endowment is to manage the funds to an appropriate risk level that meets its long-term objectives.  The Endowment will be managed to a return commensurate with the Endowment’s objectives, relative to market conditions. Both quantitative and qualitative assessments of risk will be made on the portfolio as a whole.  Investment Staff will monitor and report to the Committee underlying portfolio allocations and risk exposures.
  5. EXCHANGE LISTED PRODUCTS.  It may be appropriate for Staff to invest in holdings of index products and their associated derivatives in order to develop core positions within the asset allocation structure, rebalance the portfolio, and/or thematically tilt the portfolio.
  6. CONFLICTS OF INTEREST.  The Foundation, Investment Committee, and Investment Staff make best efforts to avoid potential conflicts of interest.  There is a written policy detailing best efforts to avoid these situations or to appropriately manage conflicts of interest when they exist.
  7. INVESTMENT POLICY REVIEW.  The Committee will take into consideration risks and liquidity needs, with respect to changing market conditions in assessing investment policy. It is expected that the Committee will review the Endowment’s investment policy and asset allocation annually.  While it is not anticipated that the investment policy will be changed frequently, the Committee should review the policy periodically to ensure that the endowment is capitalizing on available market opportunities.
  8. ROLES AND RESPONSIBILITIES OF THE INVESTMENT COMMITTEE. The Committee has been granted the authority by the Board and bears sole responsibility for the management of the endowment and operating portfolios.
    • The Committee shall determine and review the Foundation’s investment policy for the endowment portfolio and the operating portfolio. This shall include the determination of the return objective, risk tolerance, asset allocation and other constraints. Both return objectives and risk tolerances shall be considered in the context of the spending policy and an appropriate time horizon.
    • The Committee may, within the prudence guidelines set forth in the Uniform Management of Institutional Funds Act as adopted in Maryland, delegate to external investment managers all or part of the endowment and operating portfolios.
    • The Committee may delegate to the Investment Staff authority to hire and discharge external investment managers as appropriate and to make direct investments consistent with the asset allocation and the overall return objective and risk tolerance established by the Committee. In addition, the Committee may delegate to Investment Staff authority to buy and/or sell individual securities.
    • The Committee shall periodically monitor the portfolio’s performance and risk exposures.
    • The Committee may, at its discretion, use the services of any outside advisors as the Committee determines is necessary and appropriate to enable the Committee to fulfill its responsibilities
  9. ROLES AND RESPONSIBLITIES OF THE INVESTMENT STAFF. The primary responsibility of Staff is to analyze and manage the investments of the Foundation, in accordance with the risk and return guidelines set forth by the Committee.
    • The Staff shall manage the portfolio within the risk and asset allocations set by the Committee from time to time.
    • The Staff shall monitor and maintain investment exposures, as set forth by the Committee. The parameters of the delegation to Staff shall be monitored by the Chairperson of the Committee.
    • The Staff shall use its discretion and execute the following portfolio actions, so long as Staff has followed the processes and procedures as outlined below:
      1. Terminating or partial redemption from an Investment Manager – Staff is granted full discretion to perform this action.
      2. Retaining or making an additional commitment to an Investment Manager - Staff must:
        • Gather Strategic Investment Manager's input in writing
        • Put forth the prospective investment manager to the appropriate Asset Class Committee Member Specialist (or back-up member if unavailable), the Risk Management Committee Member, and the Committee Chairperson.
        • Receive approval to invest in writing from the Committee Chairperson and at least one of the other two investment committee members consulted. Notify the full Investment Committee via e-mail of the potential action with three days notice before execution. Approval from the full committee is not required.
      3. Exiting/Selling Individual Securities - Staff is granted full discretion to perform this action.
      4. Buying Individual Securities - Staff must receive the Risk Management Committee Member or Committee Chairperson's approval in writing.
    • The Staff will promptly inform all Committee members of any manager hiring and or terminations.
    • The Staff shall work with its Strategic Investment Managers to maintain appropriate records and provide reports to the Committee and Clients on performance and risk exposures.
  10. ROLES AND RESPONSIBILITIES OF THE STRATEGIC INVESTMENT MANAGERS. The Strategic Investment Managers shall act as additional fiduciaries for the Foundation and its investment portfolios.
    • The Strategic Investment Managers shall provide additional investment expertise to the Committee and Staff.  This includes top-down portfolio asset allocation as well as investment strategy and manager sourcing, due diligence, risk measurement, monitoring, performance measurement & attribution.
    • The Strategic Investment Managers shall reconcile performance reporting with the Foundation’s other service providers and managers.
    • The Strategic Investment Managers shall maintain appropriate records. They shall also provide portfolio analysis that allows Staff to carry out its roles and responsibilities.
    • The Strategic Investment Managers shall work with Staff to generate Client and Committee reports.
  11. ROLES AND RESPONSIBILITIES OF THE INVESTMENT MANAGERS. The Investment Managers hired by the Foundation shall provide portfolio management, risk management, security selection, and performance attribution reporting in accordance with the purposes for which they were hired.
    • The Investment Managers’ goals shall meet or exceed their defined benchmarks or expected targets, as established when hired.

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