91ɬÂþ Seal (for official use only)
 

POLICY #10.12 
SUBJECT: University Investment Policy

I. PURPOSE

The purpose of this Policy is to establish policies and guidelines related to the Investment of Public Funds and the reporting of such Investments in accordance with applicable statutes or rules.

II. REFERENCES

  1. Southern Utah University Policy 5.7 Conflicts of Interest
  2. Utah Administrative Code R628 Rules of the State Money Management Council
  3. Utah Code
  4. Utah Code
  5. Utah System of Higher Education

III. DEFINITIONS

  1. State Funds: Public money raised by operation of law for the support and operation of the state government, such as from legislative appropriations for the support and operation of the University.
  2. Donated Funds: Funds acquired by gift, devise or bequest to the University.
  3. Investments: As used in this policy, Investments refer to all funds held by the University under provisions of the State Money Management Act or UPMIFA.
  4. Public Funds: State Funds and all other money, funds, and accounts, regardless of the source, which are owned, held or administered by the University.
  5. Public Treasurer: A University employee who has been designated by the Board of Trustees as the University’s Public Treasurer as defined in the State Money Management Act, and who has the responsibility for the safekeeping and Investment of any Public Funds.

IV. POLICY

  1. Scope: This policy applies to all funds owned, held, or administered by the University regardless of the source from which these funds are derived.
  2. General Provisions
    1. The investment of Public Funds by the University shall comply with applicable statutory
      provisions, including the State Money Management Act (the Act), the rules of the Money
      Management Council (the Rules), the Uniform Prudent Management of Institutional Funds Act (UPMIFA), and with the policies of the Utah Board of Higher Education (UBHE) and the Southern Utah University Board of Trustees (the Board).
    2. University Objectives: The University shall manage its cash flow in a manner that will maximize cash available for investment. Available funds shall be invested in accordance with the following objectives:
      1. Protection and safety of the principal;
      2. Liquidity and term of Investment which will provide funds for anticipated expenditures in a timely manner;
      3. Investment of funds recognizing the needs of both operating accounts and
        endowed funds;
      4. Conformity with state law, pertinent bond resolutions or indentures, or other
        pertinent legal restrictions; and maximize the rate of return consistent with the foregoing objectives.
    3. Delegation of Responsibility
      1. The Utah Board of Higher Education
        1. The UBHE has delegated to each institutional Board of Trustees full responsibility to manage and report institutional Investments in compliance with UBHE Policy R541.
      2. Board of Trustees
        1. The Board has Investment oversight responsibilities and shall approve the
          Investment policy and designate a Public Treasurer.
        2. The Board shall review and approve monthly Investment reports and quarterly reports of the institution’s endowment portfolio.
        3. The Board shall require institutional compliance with the State Money
          Management Act Rules of the Money Management Council and UPMIFA.
        4. The Board shall approve external professional Investment advisor(s) and manager(s) for the University.
        5. The Board shall designate one member as Chair of the Investment Advisory
          Committee.
      3. President of the University
        1. Recommend University Investment policies, including changes or modifications, to the Board for approval.
        2. Review and evaluate the University’s Investment performance through approval of monthly Investment reports and quarterly endowment portfolio reports.
        3. Make recommendations to the Board regarding external professional Investment advisors and/or managers for the University.
        4. Recommend to the Board an employee to serve as Public Treasurer.
        5. Appoint up to four (4) individuals to serve on the Investment Advisory Committee at least one (1) of which shall be a qualified Investment management professional.
      4. Public Treasurer
        1. The Public Treasurer is appointed by the Board. If a specific appointment of a Public Treasurer by the Board has not been made, the CFO & Vice President of Finance is considered appointed.
        2. The Public Treasurer shall have:
          1. Demonstrated Investment knowledge and experience through professional
            endeavors and/or through obtaining financial certifications;
          2. Integrity and strong moral character;
          3. The ability to build relationships with Investment, banking, and other personnel; and
          4. Possess financial acumen with proven ability to educate others on
            Investments.
        3. The Public Treasurer, in accordance with advice from the Investment Advisory Committee shall:
          1. Develop and submit Investment policies, guidelines, operating procedures, and asset allocation changes to the Investment Advisory Committee for review;
          2. Recommend Investment policies, including changes or modifications, to the
            President for approval by the Board;
          3. Invest and reinvest the proceeds of the Investment portfolio(s);
          4. Review and evaluate the University’s Investment performance by reviewing and approving monthly Investment reports and quarterly endowment portfolio
            reports as prescribed for the Board;
          5. Approve the distribution of Investment earnings;
          6. Contract with independent professional Investment advisors and/or managers
            for the University;
          7. Approve and/or ratify University Investment actions;
          8. Sign Public Treasurer assertion on reports;
          9. Supervise the daily Investment program operation;
          10. Approve University Investments except as delegated to external investment managers;
          11. Meet quarterly, or as needed, with the Board to review Investment performance.
        4. Investment Advisory Committee shall include the following members as appointed by the Board and President:
          1. The Public Treasurer;
          2. The Vice President for Finance and Administration (if not appointed as Public
            Treasurer);
          3. One (1) Board of Trustees member appointee, who serves as Chair;
          4. Up to four (4) additional Presidential appointees, of which at least one (1) appointee shall be a qualified Investment management professional.
          5. The Investment Advisory Committee shall:
            1. Monitor performance of internal and independent Investment advisors and/or managers;
            2. Review the University’s current Investment portfolio and Investment performance;
            3. Review the University’s current Investment strategy and recommend
              Investment strategy to be employed for the future;
            4. Recommend appropriate revisions to Investment policies and guidelines;
            5. Recommend to the Public Treasurer the engagement, termination or continuation of independent Investment advisors and/or managers;
            6. Forward committee recommendations for Investment actions to the Public
              Treasurer;
            7. Consider all other items referred to the committee by the Public Treasurer;
            8. Meet at least quarterly or as often as may be necessary to fulfill its function.
          6. Institutional Investment and/or accounting personnel shall assist the Public Treasurer in managing the operational activities of the Investment portfolio(s), including recording, reporting, the execution of Investment strategies, and due diligence oversight. These individuals are generally not members of the Investment Advisory Committee but may attend meetings as needed as support staff.
  3. Authority and Approval
    1. Authority to Manage Public Funds: The authority to manage the University’s Public Funds, subject to limitations required by Section IV.B.3., is delegated to the Public Treasurer or designee. If specifically approved by the Public Treasurer, the authority to invest Public Funds may also be delegated to independent Investment advisors and/or managers, but in no way reduces the role of the Public Treasurer’s responsibility for full compliance with the Money Management Act or rules of the Money Management Council (see Rule 19.5.2 of the Rules of the Money Management Council).
    2. Approval of Investment Decisions: Entering into repurchase agreements, the purchase of securities, redemption of securities (other than routine maturities), and the sale of securities donated to the University, must be approved by one (1) of the following University officials:
      1. President of the University;
      2. Chair of the Investment Advisory Committee;
      3. Public Treasurer;
      4. CFO/Vice President of Finance (if not designated as Public Treasurer);
      5. Assistant Vice President for Budget and Accounting Services.
    3. All other Investment purchases must be approved by two (2) of the above listed University officials. No person may engage in Investment transactions on behalf of the University except as provided under the terms of this Policy.
    4. Independent Investment Advisors
      1. The University may use the services of qualified independent Investment advisors to conduct Investment transactions on behalf of the Public Treasurer as permitted by the State Money Management Act, Rules of the Money Management Council, and University Policy. Due diligence in the selection of any Investment advisor and monitoring compliance with these statutes, rules, and policies, and the performance of Investment advisors is the responsibility of the Public Treasurer.
      2. Independent Investment Advisors shall:
        1. Act in accordance with fiduciary responsibilities and applicable statutes, rules and policies;
        2. Comply with guidelines and procedures established by the Board of Trustees and/or the Investment Advisory Committee regarding the prudent Investment of Public Funds under the University’s jurisdiction;
        3. Provide guidance to the Investment Advisory Committee on matters pertaining to the Investment of assets;
        4. Communicate promptly with the Public Treasurer and/or designated internal
          Investment personnel regarding all significant matters, including but not limited to operational, financial, regulatory, and legal matters, or modifications to the existing Investment advisory agreement;
        5. Recommend appropriate changes to the Investment policies, guidelines, and
          objectives;
        6. Monitor and communicate capital market trends, asset mix and allocation strategies, and strategic rebalancing;
        7. Execute timely reallocation of assets, as necessary;
        8. Measure, evaluate, and report on the performance of Investments and Investment managers;
        9. Deliver securities to the University’s custodial bank(s) on a delivered versus payment methodology; and
        10. Provide additional recommendations, support, and advice as required.
  4. Investment Pools
    1. Ordinarily, funds will be pooled for Investment purposes either in the Cash Management or the Endowment pool. Additional Investment pools may be established as needed to:
      1. Ensure compliance with specific provisions of the State Money Management Act and rules of the State Money Management Council or UPMIFA.
      2. Ensure compliance with any legal restrictions, such as bond covenants or trust
        agreements.
      3. Ensure compliance with donor instruments relating to gifts or bequests.
      4. Meet Investment objectives of groups of similar accounts.
      5. Provide liquidity to meet operating needs of the University.
    2. Investment pools may be established only upon approval of the Public Treasurer after
      consultation with the Investment Advisory Committee.
      1. Guidelines for the operation and management of each Investment pool will periodically be reviewed by the Investment Advisory Committee.
  5. Investment Groupings and Guidelines
    1. Cash Management Investment Pool
      1. Consists of available cash in excess of estimated daily operating requirements from all University and fiduciary funds.
      2. Funds in this pool may only be invested in qualified depositories and Investment instruments that meet the criteria of the Act and the Rules.
      3. Net earnings (realized gains/losses, dividends, and interest [net of expenses]) will
        be distributed to the fund groups, sub-fund groups, and to specific restricted fund
        accounts (when required by contractual agreement), or reserve accounts as approved by the CFO/Vice-President of Finance and Administration or Public Treasurer that participate in the Investment pool. Investment income attributable to other types of accounts shall be credited to the President’s discretionary earnings account. The method of allocation will be based on the average daily cash balance.
      4. The following Investment Strategies, Guidelines and Restrictions should be followed:
        1. No more than 5% of all funds may be invested in the securities of any one corporate issuer;
        2. Investment in fixed income securities issued by agencies of the United States and United States government-sponsored organizations are exempt from the above 5% rule.
    2. Endowment Pool
      1. The endowment pool (Pool) consists of endowment funds that are not restricted by donors as to the type of Investment.
      2. Investment of the Pool funds are conducted under the total return concept of in allocating endowment income. The Pool has a long-term Investment horizon in excess of ten years and essentially in perpetuity with the primary objective of growth of principal over time. Principal growth should ensure that the real purchasing power of the Pool is maintained after inflation, costs, and spending are considered. A long-term average annual return of 8%, as measured by the Consumer Price Index (CPI) is reasonable. Hence, the Pool will provide a stable source of financial support for the needs of the University.
      3. In order to meet the long-term Investment goals of the Pool, it is recognized by the
        Board that risk is necessary, returns will fluctuate, and market volatility is evident. As such, the Pool will be managed in a manner consistent with the stated objectives over the long-term. Asset allocation will be a major determinant of Investment performance. Risk will be minimized through diversification of assets. Historical performance is not a guarantee of future performance.
      4. Spending Allocation Methodology and Rates:
        1. Investment income from the endowment pool will be distributed to all eligible accounts that provide funds for distribution. Eligible accounts include endowment or funds functioning as endowments.
        2. Spending rates will be recommended by the Public Treasurer and approved by the Investment Advisory Committee on an annual basis.
        3. Spending formula: The spending rate will be applied each fiscal year to the rolling
          average of the previous 12 quarters’ ending-period endowment value amount (or shorter period where there is not 12 previous quarters) to determine the annual appropriation.
        4. The Board of Trustees will approve, with proper notice, any special appropriation or decision not to spend the amount indicated by the spending formula.
      5. These Operating Guidelines will designate how the Pool shall be managed. Once approved by the Board, the Public Treasurer shall have the authority to manage the Pool within these Guidelines without further authorization from the Board.
        1. Asset Allocation: The Public Treasurer shall invest the Pool using an asset allocation that is designed to meet the Pool’s long-term goals based on the stated objectives of the Pool. Decisions are based upon the current economic and market environment as well as historical performance of asset classes.
        2. Illiquid Investments: Alternative Investment strategies are to be executed with
          professional Investment manager funds. Strategies outside of these criteria shall be analyzed and discussed by the Investment Advisory Committee separately for approval.
        3. Targets and Ranges: Target allocations and ranges for each Investment strategy will be set forth by the Investment Advisory Committee. Deviations from target allocations will occur due to market fluctuations, as well as the necessity for extended period of time to fully implement the asset allocation plan.
        4. Rebalancing: To ensure the Pool does not incur undue risks from deviations from the policy portfolio, an asset class analysis will occur on a quarterly basis. As such, asset classes with greater than a 5 percent deviation from the target allocation will be adjusted.
      6. Standard of Conduct: In managing and investing the Pool, the University shall:
        1. Act as a prudent investor would, by considering the purposes, terms, intent of a donor expressed in a gift instrument, distribution requirements, and other circumstances of the endowment. In satisfying this standard, the University shall exercise reasonable care, skill, and caution;
        2. Investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the endowment portfolio as a whole and as a part of an overall Investment strategy having risk and return objectives reasonably suited to the endowment;
        3. Consideration of the following factors, if relevant, should be followed:
          1. The purposes of the University and the Investment;
          2. General economic conditions;
          3. The possible effect of inflation or deflation;
          4. The role that each Investment or course of action plays within the overall portfolio;
          5. The expected total return from income and the appreciation of capital;
          6. The duration and preservation of the Pool;
          7. Needs for liquidity, regularity of income, and preservation or appreciation of
            capital;
          8. University’s Investment policy; and
          9. An asset’s special relationship or special value, if any, to the purposes of the
            endowment or to one or more of the beneficiaries.
        4. Make a reasonable effort to verify facts relevant to the management and Investment of the Pool; and
        5. Incur only costs that are reasonable and appropriate in relation to the assets, the
          University purposes, and the skills available to the University.
      7. The following Investment Strategies, Guidelines and Restrictions should be followed:
        1. The Pool will be diversified by asset class and within asset classes to mitigate the disproportionate impact that one security or asset class can have on overall
          performance. For instance, concentration of holdings in individual issues, corporations, or industries will be limited. The Pool will be invested in accordance with the following target asset allocation ranges:
          • Cash and Cash Equivalents – 1 to 10%
          • Fixed Income – 5 to 40%
          • Equity Investment – 20 to 65%
          • Alternative Investments – 10 to 65%
        2. As a general rule, not more than 5 percent of the outstanding shares of any one security may be held. Fixed income securities, excluding U.S. Treasury and federal agency debt will not exceed 5 percent of the total bond portfolio, while not more than 10 percent of the total stock portfolio may be invested in stock of a single issuer. Investments in individual pooled funds will be limited to 15 percent. Quarterly balancing will occur, as necessary.
        3. Equity Securities: This asset class includes domestic and international common stock, American Depository Receipts (ADRs), preferred stock, and convertible stock which meet the total return objectives of the Pool. Their purpose is to provide capital appreciation, growth of income, and current income. Equity holdings shall be restricted to quality, readily marketable securities of actively traded corporations on the major U.S. and International exchanges. For the purpose of reporting, balanced funds, real estate Investment trusts (REITs), and pooled or commingled Investment funds without a clear primary purpose are also categorized as equity Investments.
        4. Fixed Income Securities: This asset class includes, but is not limited to, U.S. Treasury, federal agencies, U.S. government guaranteed obligations, non-U.S. dollar denominated securities, public and private corporate debt, mortgages and asset-backed securities, and non-investment grade debt. Also included are money market instruments such as commercial paper, certificates of deposit, time deposits, bankers’ acceptances, repurchase agreements, and U.S. Treasury and agency obligations. Fixed income Investments shall be quality, readily marketable securities where credit quality, sector, duration and issuer concentrations are considered. Their purpose is to provide a current income stream, reduce overall Pool volatility, and provide appropriate hedges for deflation or inflation, as needed. Active management of fixed income securities is preferred to capitalize on opportunities arriving from mergers or acquisitions, credit rating changes, interest rate volatility, spread changes, or other abnormalities.
        5. Cash and Equivalents: This asset class includes high quality commercial paper (A-1, P-1 or higher, maturing in 360 days or less), repurchase agreements, U.S. Treasury Bills, certificates of deposit, and money market funds. Their purpose is to act as a depository for income distributions, temporary hold funds for further Investment, spending or expense needs, and preserve the Pool’s principal value. Cash reserves will be kept at a minimum.
        6. Alternative Investments: This asset class consists of the below permitted Investments for the Pool, subject to the Guidelines set forth in each section:
          1. Marketable Alternative Strategies: Investments may include, but not limited to domestic and international equity-oriented or market-neutral hedge funds.
          2. Private Capital: Investment allocations may include venture capital, private equity and international private capital Investments. Such Investments are typically held in the form of professionally managed pooled limited partnerships and must be purchased through professional Investment manager funds.
          3. Energy & Natural Resources: Investments may include oil, gas, commodity-based, and timber Investments. Such Investments are typically held in the form of professionally managed pooled limited partnerships and must be purchased through professional Investment manager funds.
          4. Private Equity Real Estate: Investments may include income producing commercial and residential property exclusive of professionally managed pooled real estate Investment funds (REITs).
          5. Distressed Debt: Investments may include the debt securities of companies
            undergoing bankruptcy or reorganization. Such Investments must be purchased through professionally managed funds.
          6. Derivatives and Derivative Securities: Derivatives are contracts or securities whose market value is related to the value of another security, index, or financial instrument. Investments in derivatives include, but are not limited to futures, forwards, options, options of futures, warrants, and interest-only and principal-only strips. Derivative Investment strategies are appropriate for hedging market, interest rate, or currency risk, adjusting duration, as well as maintaining or gaining cost-effective exposure to a desired asset class. Counterparty risk, Investment manager(s) experience, applicable internal controls, and the strategy and nature of the Investment are important considerations. Speculative derivative Investments are not permissible.
          7. Lending: Loans of funds functioning as endowments may be executed with approval from the Investment Advisory Committee, as a method to provide capital inflows for institutional purposes as the fund continues to generate income. These loans are not included in the existing spending policy. Loan documentation is required, as well as applicable revenues to ensure payback within a reasonable timeframe. Loans are executed at prevailing market interest rates in a fixed and/or variable fashion. Securities lending is also a permissible form of generating income for the Pool. A separate written agreement and appropriate custody of assets is required.
          8. Investment Restrictions: The Investment Advisory Committee may modify or waive any of the restrictions or guidelines as a result of a comprehensive review of an Investment manager(s) or strategy. As such, an addendum which supports these actions and reporting to the Board of Trustees at the next scheduled meeting is required.
      8. Fund Manager Selection: The Public Treasurer, or external advisor(s) as delegated,
        shall conduct a due-diligence process for selection of fund managers which includes both a qualitative and quantitative evaluation. This process ensures that the recommended fund manager(s) performance and Investment style aligns with the University’s Investment objectives and risk profile as outlined.
        1. Qualitative Evaluation: These factors include, but are not limited to:
          1. Investment management process, including theory and implementation;
          2. Operational capabilities, including personnel, scalability, communication,
            service, and compliance;
          3. Education and professional designations;
          4. Industry experience, technical knowledge, and application;
          5. Organizational stability and integrity;
          6. Investment vehicle structure including inception date, total assets, and expense ratios or fees;
          7. Investment research capability, including economic factors;
          8. Audited performance measures;
          9. Conflicts of interest.
        2. Quantitative Evaluation: Performance will be measured on a short-term (1- 3 years) and longer-term basis (full market cycle) considering positive and negative market cycles.
      9. Fund Manager Removal: Evaluation of managers occurs on a periodic basis.
        Managers failing to meet the following factors are subject to additional review (Watch Status), with the potential removal from the portfolio:
        1. Portfolio manager turnover;
        2. Significant asset size changes, including large inflows and outflows;
        3. Performance issues, which may include and are not limited to the following:
          1. Underperforming their specific index on a cumulative total rate of return basis;
          2. Lagging performance on a 3-year and 5-year basis in comparison to their
            respective index (benchmark);
          3. Falling below top-quartile performance over a full market cycle.
          4. Investment philosophy and/or style deviations from the original selection criteria; and
          5. Significant organizational changes, including but not limited to management changes, ownership changes, and legal issues.
      10. Proxy Voting: Proxies shall be voted on for the exclusive benefit of the participants and beneficiaries of the Pool. Unless specific direction is provided from the Public Treasurer and/or Investment Advisory Committee, then Investment advisor(s) and manager(s) shall vote proxies in accordance with this Guideline.
      11. Security Trade Execution: Purchase and sale of securities should be done in a manner designed to receive the combination of best price and execution, regardless of whether the trade is placed by the Public Treasurer or a designated external advisor(s).
      12. Liquidity: The Pool shall be managed to maintain at least 40% of its assets in highly
        marketable securities that can be liquidated at market prices if needed.
    3. Separately Invested Funds
      1. These are separate Investments (non-pooled) generally consisting of donor restricted Investments, Investments under annuity agreements with donors, Investments of fiduciary funds, endowment and other trusts, or other separate Investments recommended by the Investment Advisory Committee. Dividends, interest, realized gains or losses, and any associated expenses are recorded directly upon receipt of payment to the individual fund.
    4. Trust Funds
      1. These funds are separate Investments consisting of monies managed by an external
        trustee as part of a specific funding agreement. Investments are made pursuant to the funding agreement. Investments of Trust Funds are reviewed and discussed by the external trustee and the Public Treasurer to assure the maximum possible earnings are attained.
  6. Reporting Requirements
    1. The Public Treasurer shall submit monthly Investments reports of all Investment pools, funds managed by external managers, funds separately invested, endowment trusts, and bond reserve funds to the Board of Trustees.
    2. All reports shall include the Public Treasurer’s assertion that, to the best of the Public
      Treasurer’s knowledge, the institution is in compliance with the Utah State Money
      Management Act and the rules of the Money Management Council and UPMIFA.
    3. The Public Treasurer shall submit a monthly Investment performance report to the Secretary of the Board of Trustees within 45 days of the end of each month for inclusion in the agenda of the next Board of Trustees’ meeting. Within 30 days of Board of Trustees approval, the University shall submit to the Board of Higher Education, a copy of the reports submitted to the Board of Trustees.
    4. The Public Treasurer shall submit quarterly reports of the endowment portfolio to the Secretary of the Board of Trustees within 45 days of the end of the quarter for inclusion in the agenda of the next Board of Trustees meeting.
    5. Semiannually, the University shall submit to the Money Management Council, in form provided by the Council, a written report of Investments held at June 30 and December 31 on or before July 31 and January 31 of each year, respectively.
    6. Annually, the University shall submit, on forms provided by the Office of the Commissioner of Higher Education, a summary report of all Investments under its jurisdiction.
    7. The University, through its internal auditors or independent auditors, shall annually audit its institutional Investments and shall send the completed audit report to the Board of Higher Education Audit Manager by January 15 of each year. These audits shall be conducted using generally accepted auditing standards.
    8. The Board of Trustees shall submit an annual report to the Governor and the
      Legislature summarizing all Investments under the University’s jurisdiction.
  7. Internal Controls
    1. The University shall establish a system of internal controls which shall be evaluated by
      University internal auditors and independent external auditors annually. The controls include but are not limited to the segregation of the investing and recording duties, investing and reporting responsibilities, as well as compliance review, and shall be designed to prevent losses of Public Funds arising from fraud, employee error, and misrepresentation by third parties, or imprudent actions by University employees and officers.
  8. Ethics and Conflicts of Interest
    1. The Public Treasurer, University officials, Investment Advisory Committee members, and independent Investment advisors and/or managers involved in the Investment process shall refrain from personal business activity that could conflict with proper execution of the Investment program, or which might impair their ability to make impartial Investment decisions. Investment officials shall disclose confidentially to the University President and to University Counsel, any material financial interests in financial institutions that conduct business with the University, and any large personal financial/Investment positions that may affect performance of Investment duties or the performance of the University’s portfolio.
  1.  

V. RELEVANT FORMS/LINKS

N/A

VI. QUESTIONS/RESPONSIBLE OFFICE

The responsible office for this Policy is the Vice President for Finance.

VII. POLICY ADOPTION AND AMENDMENT DATES

Date Approved: July 27, 1990

Amended: July 26, 2006; November 29, 2007; May 4, 2012; March 25, 2020; October 11, 2024