Investment Policy
SOUTHERN ARKANSAS UNIVERSITY FOUNDATION, INC. STATEMENT OF INVESTMENT POLICY
I. The purpose of this statement is to establish and communicate to Farmers Bank & Trust Company and Mustard Seed Financial, LLC or their successor(s) (Agents), as investment managers, the investment goals, philosophy, guidelines and tolerance for risk of the Southern Arkansas University Foundation, Inc. (SAUF).
II. The SAUF board will be responsible for monitoring the performance of the Agents. The SAUF board may delegate more specific oversight of the investment of the Foundation’s funds to a Finance Committee of the board. If the SAUF board or Finance Committee determines an Agent is acting outside the parameters established for these purposes or that performance is sub par, then the SAUF board or Finance Committee shall notify the Agents of these problems and request corrective measures.
III. The Agents are responsible for the investment of the SAUF’s assets in accordance with the goals, guidelines and objectives stated herein. Within the investment guidelines described herein, the Agents have discretionary authority to determine the allocation of assets between asset classes, individual securities, maturities and turnover. The Agents are expected to meet the investment objectives and adhere to the investment goals and guidelines stated herein. The Agents shall comply with all fiduciary standards and all other applicable laws and regulations.
IV. Investment Goals/Philosophy
1. Income and Growth are the primary concerns.
2. The SAUF’s assets are to be invested as a balanced portfolio consisting of equity, fixed income and cash equivalent securities.
3. The growth (excluding contributions and withdrawals) of the SAUF’s assets should exceed the rate of inflation.
4. The total equity component of the SAUF account shall not exceed 80%. In this regard, it is acknowledged that all of the funds managed by Mustard Seed Financial, LLC (25% of the total portfolio) may be invested in equities. The funds managed by Farmers Bank and Trust Company (75% of the total portfolio) will be divided between fixed income and equities in such proportions as determined by the agent so long as the total equity exposure of the total account does not exceed 80%.
5. At all times the portfolios will be directed so that the Foundation can meet its cash flow obligations to the scholarship program. Currently, the Endowment policy provides for a 4.25% payout based on the market value of the SAUF’s assets based on a 5 year rolling average. The Foundation will notify agents in the event this policy changes.
6. The fixed income portion of the portfolio may be invested in direct obligations of the United States Government, obligations of Agencies of the United States Government, or certificates of deposit. The Agent may also invest in corporate bonds which are considered investment grade by Standard and Poor’s and Moody’s. At a maximum, 15% of the market value of the portfolio may be invested in corporate bonds. And, at a maximum, 2.5% of the market value of the SAUF’s assets may be invested in the fixed income securities of any single corporate issuer.
The length of time to maturity of fixed income securities shall be as follows:
(0-5) years – 0% – 100% of bonds purchased
(6-10) years – 0% – 50% of bonds purchased
(10-20) years – 0% – 25% of bonds purchased
(21-25) years – 0% – 15% of bonds purchased
The fund’s manager in his/her discretion shall not be required to purchase any bonds or fixed investments exceeding a ten-year term. The average life of any mortgage securities shall be considered as the maturity rather than the final stated maturity.
7. The cash equivalent portion of the portfolio may be invested in money market funds or government bonds with one year or less to maturity at time of issue.
8. Equities shall include common, preferred and convertible preferred stocks, American Depository Receipts, convertible bonds, no-load equity mutual funds (both domestic and international), and Exchange Traded Funds (ETFs). Not more than 2.5% of the market value of the portfolio’s assets should be invested in the equity securities of anyone company. The minimum market capitalization of any single equity security held in the portfolio should be $250 million. Not more than 30.0% of the equity portion of the portfolio’s assets should be invested in international funds.
The Agents shall be prohibited from investing in options, derivatives, futures, swaps or structured notes.
V. Investment Objectives
The Agent shall attempt to exceed the S P 500 index over a full market cycle of three-to-five years for the equity portion of the portfolio. The Agent shall attempt to exceed (a recognized indicator – will provide later) for the fixed income portion of the portfolio. The fixed income objective will also be measured over a three-to-five year time horizon.
VI. Investment performance reviews will be conducted at least quarterly by the SAUF board, the Finance Committee or its designated agent/consultant. The purpose of these reviews will be to monitor the over-all performance of the Agents and to determine if the Agents are meeting the objectives and adhering to the investment guidelines and restrictions. Such reviews will also ensure that the Agents have not taken excessive risk in achieving rates of return and have added value through active management.
VII. The SAUF board will advise the Agents of any future changes in the nature and structure of the endowment; the assets to be managed; the level of expected contributions to or withdrawals from the endowment; the investment objectives against which the Agents will be assessed; and the investment guidelines and restrictions and other provisions of this statement to which it must adhere.
VIII. The Agents shall provide to the SAUF board or Finance Committee a semi-annual report of its beliefs about the current and expected future investment environment, and a description of the current investment portfolio strategy. The Agents shall also explain any and all occurrences when the portfolio falls outside of the guidelines and policies stated herein. On at least an annual basis the Agents will meet with the SAUF board or its designated representatives and review the performance of the portfolio. The Agents shall also inform the SAUF board of any major changes in the structure of the Agents, including a change in ownership; the departure of one or more investment professionals; or a change in investment style and/or approach.
IX. Miscellaneous
1. The Agent shall be entitled to charge a reasonable fee for the administration of this trust as agreed upon by the SAUF Board and its Agents.
2. This trust shall be revocable by the combined action of the officers of the Foundation on written notice to the Agents.
3. All instructions to the Agents from the Foundation will be in writing and signed by the Treasurer of the Foundation. The Agents shall follow the written instructions of the Foundation within the limits stated above.
4. This document supersedes all other agreements and instructions.
5. This agreement shall terminate June 30, 2009.
On January 30, 2009, the Board of Governors at a regular scheduled meeting voted to extend this policy through June 30, 2010.
Modified: February 26, 2010 at 2:52 pm
