IV.J. Investment Management: Difference between revisions

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==PURPOSE OF BSC INVESTMENT POLICY==
====Mission Statement====
The BSC Investment Management Committee (IMC) will assist the BSC Board of Directors, including its Financial Affairs Committee, in fulfilling its oversight responsibility for the investment of BSC assets.  The IMC is responsible for monitoring the BSC’s investments for compliance with BSC investment policies.
The purpose of this Investment Policy is to support the mission of the BSC by providing guidelines for the BSC, its Board of Directors, and Investment Management Committee (IMC) to effectively invest the BSC’s non-real property assets.
   
The mission of the Berkeley Student Cooperative is to provide a quality, low-cost, cooperative housing community to university students, thereby providing an educational opportunity for students who might not otherwise be able to afford a university education.


==GENERAL INVESTMENT OBJECTIVES==
====Organization====
   
:1. The Investment Management Committee shall consist of:
The objective of the BSC’s investment strategy is to maximize returns within prudent levels of risk appropriate for each of the BSC’s investment fund accounts.
::a. The Executive Director
::b. The Vice President of Financial Affairs
::c. A Board Representative who sits on the Financial Affairs Committee
::d. A Board Representative or Cabinet Member approved by the Board
::e. The Accountant or other professional staff member as determined by the Executive Director
::f. Up to five Advisors recommended by the Executive Director and approved by the Financial Affairs Committee who are neither employed by the BSC nor a current member of the BSC. Advisors serve at the pleasure of the IMC and Board of Directors.
:2. The Chair of the IMC shall be the Executive Director. The IMC may elect an alternative chair by majority vote.
:3. The IMC shall meet once in the Fall semester and once in the Spring semester.
:4. Either the Executive Director or any four members of the IMC may call a special meeting of the IMC.
:5. A majority of the IMC shall constitute a quorum for the transaction of business at any meeting thereof, and the act of a majority of the members of the IMC present at any meeting at which a quorum is present shall be the act of the IMC.
:6. Representatives of the custodian of BSC funds may attend meetings at the pleasure of the IMC, but shall not have voting rights.


In addition, the BSC shall evaluate return by taking into account the cost of the investment transaction.


====Roles and Responsibilities====
In general, investments shall be diversified so as to minimize the risk of large losses from a single cause, unless under the circumstances it is not prudent to do so. Care shall also be taken to diversify internationally unless under the circumstances it is not prudent to do so.
:1. Disclose any affiliations with a proposed investment, fund, or manager by a IMC member.
:2. Provide high level of input on investment strategy to Chair.
:3. Oversee investment of the funds of the BSC, monitor the risk and potential reward of specific investments and consider new investments.
:4. Recommend whether the BSC should retain a professional investment advisor, subject to approval by the Board of Directors and Finance Committee.  If a professional investment advisor is retained, the IMC shall evaluate performance.
:5. Evaluate investment performance based on a comparison of actual returns with the BSC’s return objective and other appropriate benchmarks.
:6. Prepare instructions for the custodian of BSC accounts.
:7. Periodically review and assess the adequacy of this charter and recommend any changes to the Board of Directors.
:8. Attend to such other matters as the Board of Directors, Financial Affairs Committee or Chair may from time to time determine.
:9. Maintain minutes of IMC meetings and report regularly to the Financial Affairs Committee.


The investments for each investment fund account shall be selected with the care, skill, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in with respect to an investment fund with similar aims and constraints.


The BSC relies on the return on its investments to achieve socially responsible goals that directly further its mission, including the award of scholarships for needy members, the improvement of its buildings to make them safe and accessible, and the development of new co-ops.
====Investment Policy====
==ASSET CLASS AND INVESTMENT INSTRUMENT GUIDELINES==
'''Permissible Investments'''


The BSC may invest in the following asset classes using the described investment instruments selected for each investment fund account under the specific guidelines adopted for each of the individual investment funds accounts:
The purpose of this Investment Policy is to support the mission of the BSC by providing guidelines for the BSC, its Board of Directors, and IMC to effectively invest the BSC’s non-real property assets.


 
:1. The objective of the BSC’s investment strategy is to maximize returns within prudent levels of risk.
<table border="1" bordercolor="#000000" style="background-color:#FFFFCC" width="400" cellpadding="3" cellspacing="3">
:2. The BSC shall take into account the cost of the investment transaction (including any professional fees) in evaluating investment returns.
<tr>
:3. In general, investments shall be made so as to minimize the risk of large losses from a single cause, unless under the circumstances it is not prudent to do so.  
<td>Cash and Cash Equivalents</td>
:4. The investments for each investment fund account shall be selected with the care, skill, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use with respect to an investment fund with similar aims and constraints.
<td>Interest bearing checking accounts in federally insured banks; money market accounts; federally insured certificates of deposits
[''Last revised 5/7/2013'']
</td>
[[Category:Section IV - Finances]] [[Category:Policy]]
</tr>
<tr>
<td>Equities</td>
<td>US and international mutual funds and ETFs</td>
</tr>
<tr>
<td>Fixed Income</td>
<td>US government bonds, US agency bonds, US treasury bonds, US and international bond funds and ETFs</td>
</tr>
<tr>
<td>Commodities</td>
<td>Commodity ETFs and mutual funds</td>
</tr>
</table>
 
 
Instruments will be appropriate in light of the BSC’s management capacity and whether the BSC retains a professional investment manager or advisor.
The IMC will choose specific investments based on the different purpose and investment objectives of each investment fund account.
 
'''Prohibited Investments'''
 
It is the policy of the BSC not to invest in individual stocks or bonds (other than US government or US agency bonds), except with the approval of the BSC Board of Directors. Investments in private placements and entities that are not publicly traded are prohibited.
 
==PROFESSIONAL INVESTMENT ADVISOR==
It is the responsibility of the IMC, from time to time, to consider and make a recommendation to the Board of Directors as to whether the BSC should retain a professional investment advisor.  If the BSC Board of Directors approves the use of a professional investment advisor, it is the responsibility of the IMC to monitor and evaluate the performance of the advisor.
==MONITORING ROLE==
 
'''Investment Performance'''
 
At least quarterly, the IMC shall measure the performance of the BSC’s investments against each account’s investment objective as set out below.
At least annually, the IMC shall evaluate the effectiveness of the asset allocations set out below in meeting investment objectives.
 
'''Rebalancing'''
It is expected that the actual asset allocation for each fund will vary from the target asset allocation as a result of the varying periodic returns earned on investments.  At least annually, the IMC will rebalance investments in each investment account to reach target asset allocation using the following procedures:
 
 
:1. To the extent feasible, the IMC will use incoming cash flow (contributions) or outgoing money movements (disbursements) of each investment fund account to realign the current weightings closer to the target asset allocation.  The IMC may in its discretion achieve rebalancing by selling from one asset class to buy into another.
 
:2. At least annually, the IMC will review the actual asset allocation existing in each investment fund account to determine the deviation from the target asset allocation for that account.  During each annual review, if any asset class within an investment account is found to deviate +/- 5% from its target asset allocation, the investments will be rebalanced.
 
:3. The IMC may rebalance more frequently than annually in its discretion.
 
'''Costs'''
:1. The IMC shall monitor all costs associated with the management of the BSC’s investment program, including:
:2. Expense ratios of each investment option against the appropriate peer group.
:3. Custody fees for the holding of the assets, collection of the income and disbursement of payments.
:4. Any other professional fees.
 
==SPECIFIC INVESTMENT OBJECTIVES FOR BSC INVESTMENT ACCOUNTS==
'''Scholarship Fund Account'''
The BSC contributes annually to and solicits alumni donations to the Scholarship Fund Account for the specific purpose of aiding needy individual members in paying a portion of their BSC housing cost.  The Scholarship Fund is dedicated to this purpose, and neither its principal nor its earnings are available to meet the operating or capital improvement needs of the BSC.  Given the current value of the Scholarship Fund’s assets and assuming an annual rate of return of at least 4%, the Scholarship Fund should currently be able to fund 40 scholarships per year, each equal to one-third of one semester’s room and board rate (i.e., in Spring 2011 each scholarship was $1,110) without depleting principle.
 
''Investment Objectives''
 
:1. Time Horizon: The BSC has no plans to liquidate the investment except for meeting the goals of the Scholarship Fund.
:2. Risk Tolerance: Because the BSC has no plan to liquate the investment except for meeting the goals of the Scholarship Fund, the BSC’s tolerance for risk and volatility is high. Short-term volatility will be tolerated as long as it is consistent with the volatility of a relevant market index.
:3. Average Annual Rate of Return over a 3-year Period:  Investments shall be selected based on a targeted annual rate of return sufficient to meet current scholarship award goals (4%).
 
''Asset Allocation Plan''
 
:1. Equities  45%
:2. Fixed Income  55%
:3. Cash & Equivalents 0%
:4. Commodities  0%
 
 
'''Operating Reserve Account'''
 
The purpose of the BSC Operating Reserve account is to provide for operating shortfalls caused by economic conditions, unplanned liabilities (such as lawsuits), or management error. The BSC’s goal is to accumulate from annual net operating income a six-month operating reserve (excluding certain discretionary expenditures), an amount which is currently estimated to be $4,000,000 but which will change as the BSC’s operating expenses increase.
''Investment Objectives''
 
:1. Time Horizon:  Approximately $500,000 should be available from the immediate term to 3 months for unplanned expenses, such as uninsured liabilities and legal defense costs.  The balance should be available on a time horizon of between 3 to 12 months for other unplanned liabilities and expenses.
 
:2. Risk Tolerance: Because of the BSC’s inability to anticipate and plan for the need to draw on the operating reserves, the risk tolerance for the Operating Reserve account is low.
 
:3. Average Annual Rate of Return over a 3-year Period: Based on the low risk tolerance and short time horizon, a rate of return of between 2% and 3% is targeted for the Operating Reserve account.
 
''Asset Allocation''
:1. Equities  0%
:2. Fixed Income  75%
:3. Cash & Equivalents 25%
:4. Commodities  0%
 
'''Capital Improvements Account'''
 
The BSC’s Capital Improvements account has been created to fund board-approved capital improvement projects that will completed in the next five years, including seismic renovations, improvements for disabled access, energy conservation improvements, and IT upgrades. The BSC plans on allocating 1% net book value annually specifically for seismic and disabled access, which is estimated to be approximately $300,000 in FY 2011-2012.  The BSC dedicates a CARE utilities discount equal to approximately $100,000 annually to this account for energy efficiency capital improvements.  The BSC also solicits alumni donations for purposes of seismic renovations, disabled access, energy improvements, and IT upgrades. 
 
''Investment Objectives''
:1. Time Horizon: Because of the Board approved plans for capital improvements, the time horizon for this account is one to four years
:2. Risk tolerance: BSC is committed to using these funds for specific capital improvements planned for the next five years, so risk tolerance is low.
:3. Average Annual Rate of Return over a 3-year Period: Given the low risk tolerance and short to mid-term time horizon for the use of these funds, the targeted rate of return is 1 to 2%.
 
 
''Asset Allocation''
:1. Equities  0%
:2. Fixed Income  25%
:3. Cash & Equivalents 75%
:4. Commodities  0%
 
 
'''Growth Fund Account'''
The funds invested in the Growth Fund account are intended to empower the BSC to pursue opportunities for expansion.  The BSC aims to make an annual contribution to this account of $200,000-$250,000, with a target balance of $2 million by the end of FY 2014-2015.
 
''Investment Objectives''
 
:1. Time Horizon: The target date for accessing these funds is unknown because to some extent the use of the Growth Fund is driven by opportunity in the competitive real estate market of student housing near the UC campus.  On a short-term basis, the BSC needs enough liquidity to make a good faith deposit while it arranges other financing or evaluates how to liquidate other investments.
:2. Risk Tolerance: Because the BSC intends the funds to be used for expansion and not to meet a basic organizational need, the risk tolerance is high.
:3. Average Annual Rate of Return over a 3-year Period: 5%
 
 
''Asset Allocation''
 
:1. Equities  30%
:2. Fixed Income  60%
:3. Cash & Equivalents 10%
:4. Commodities  0%
 
 
'''BSC Alumni Association Membership Dues'''
 
The BSC is the custodian for the Alumni Association’s membership dues account.  The Alumni Association controls the investment of these funds and directs the BSC in writing on the investment objectives and the asset allocation plan that is appropriate for the account.

Revision as of 19:22, 14 September 2021

Mission Statement

The BSC Investment Management Committee (IMC) will assist the BSC Board of Directors, including its Financial Affairs Committee, in fulfilling its oversight responsibility for the investment of BSC assets. The IMC is responsible for monitoring the BSC’s investments for compliance with BSC investment policies.

Organization

1. The Investment Management Committee shall consist of:
a. The Executive Director
b. The Vice President of Financial Affairs
c. A Board Representative who sits on the Financial Affairs Committee
d. A Board Representative or Cabinet Member approved by the Board
e. The Accountant or other professional staff member as determined by the Executive Director
f. Up to five Advisors recommended by the Executive Director and approved by the Financial Affairs Committee who are neither employed by the BSC nor a current member of the BSC. Advisors serve at the pleasure of the IMC and Board of Directors.
2. The Chair of the IMC shall be the Executive Director. The IMC may elect an alternative chair by majority vote.
3. The IMC shall meet once in the Fall semester and once in the Spring semester.
4. Either the Executive Director or any four members of the IMC may call a special meeting of the IMC.
5. A majority of the IMC shall constitute a quorum for the transaction of business at any meeting thereof, and the act of a majority of the members of the IMC present at any meeting at which a quorum is present shall be the act of the IMC.
6. Representatives of the custodian of BSC funds may attend meetings at the pleasure of the IMC, but shall not have voting rights.


Roles and Responsibilities

1. Disclose any affiliations with a proposed investment, fund, or manager by a IMC member.
2. Provide high level of input on investment strategy to Chair.
3. Oversee investment of the funds of the BSC, monitor the risk and potential reward of specific investments and consider new investments.
4. Recommend whether the BSC should retain a professional investment advisor, subject to approval by the Board of Directors and Finance Committee. If a professional investment advisor is retained, the IMC shall evaluate performance.
5. Evaluate investment performance based on a comparison of actual returns with the BSC’s return objective and other appropriate benchmarks.
6. Prepare instructions for the custodian of BSC accounts.
7. Periodically review and assess the adequacy of this charter and recommend any changes to the Board of Directors.
8. Attend to such other matters as the Board of Directors, Financial Affairs Committee or Chair may from time to time determine.
9. Maintain minutes of IMC meetings and report regularly to the Financial Affairs Committee.


Investment Policy

The purpose of this Investment Policy is to support the mission of the BSC by providing guidelines for the BSC, its Board of Directors, and IMC to effectively invest the BSC’s non-real property assets.

1. The objective of the BSC’s investment strategy is to maximize returns within prudent levels of risk.
2. The BSC shall take into account the cost of the investment transaction (including any professional fees) in evaluating investment returns.
3. In general, investments shall be made so as to minimize the risk of large losses from a single cause, unless under the circumstances it is not prudent to do so.
4. The investments for each investment fund account shall be selected with the care, skill, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use with respect to an investment fund with similar aims and constraints.

[Last revised 5/7/2013]

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