1. Investment philosophy
The board of directors of Fairfield County’s Community Foundation (the Community Foundation) oversees the assets of the Community Foundation’s permanent and spendable funds. The objective is to generate income to respond to current charitable needs and to support the long-term growth of the Community Foundation’s endowment.
The board of directors works through its investment committee to implement the Community Foundation’s investment goals:
- Earn real returns that support the Community Foundation’s long-range spending policy to support grantmaking programs and initiatives.
- Maintain a diverse asset allocation including equity, debt, and alternative investments, balancing growth, income and liquidity.
2. Investment policy
- The primary objective of the Community Foundation’s investment program is to achieve a long term real return (after inflation) of 5% per year.
- The investment program is diversified among asset classes in order to improve performance and lessen investment risk.
- The liquidity needs of the Community Foundation’s funds are reviewed at least annually.
3. Investment responsibility
- The board has delegated to the investment committee the establishment and recommendation of investment policy for all assets, subject to board approval.
- The investment committee determines the broad asset allocation among various asset classes, designs the investment structure for each asset class, recommends retention or termination of investment consultants and other professionals, and monitors investment results.
- The investment committee reports to the board quarterly on all Community Foundation investment programs, and makes recommendations on the Community Foundation’s investment and spending policies.
4. Investment strategies
- The investment committee periodically recommends to the board an allocation of the portfolio among equities, fixed income/cash, and alternative investment opportunities. With the help of an independent consultant, the investment committee deploys an asset allocation program which seeks strong returns while limiting volatility.
- The Community Foundation invests within these asset class ranges:
- Equities 40-60%
- Alternative Investments 30-50%
- Fixed Income/Cash 5-25%
- Actual allocations will vary within this range, based on market conditions.
- Investments are diversified within each asset class to minimize the adverse effects of any individual investment.
- Contributions are converted to cash as soon as practical for reinvestment.
5. Performance standards
The total investment program, its component sectors and the investment manager are judged against appropriate industry and peer benchmarks:
- The total program is judged against one-, three-, and five-year benchmarks using the actual allocation for the period being measured compared to industry asset class and sub asset class benchmarks.
- The Community Foundation’s investment program is also compared to peer groups of community foundations and other nonprofit endowment funds.
- Over the long term, the program is measured against the 59% real return objective, with the recognition that in the near term, these benchmarks may not be achieved.
- The performance of individual strategies and managers is evaluated regularly using quantitative and qualitative information, with the assistance of the Community Foundation’s investment consultant.
6. Investment guidelines
- Use of cash equivalents: While the portfolio is fully invested, managers are authorized to hold cash equivalents for the operations of the Community Foundation and market conditions.
- Use of foreign securities: No more than 25% of the entire portfolio may be invested in international securities.
- Security trading: The Community Foundation expects managers to emphasize best execution that yields the highest proceeds with the lowest transaction costs.
- Commingled funds: Use of commingled funds must be approved in advance by the investment committee. Master Trustee/Master Custodian commingled short term investment funds and related institutional money market mutual funds are permitted.
Fixed income investments
- No more than 10% of the entire portfolio at market may be invested in securities of any single issuer other than the U.S. government and its agencies.
- The portfolio shall be actively managed on a total return market value basis without consideration as to tax consequences.
- Issues purchased directly in the portfolio shall generally be “investment grade” U.S. pay debt issues including securities rated Baa/BBB or better as rated by Moody’s and Standard & Poor’s or its equivalent.
- All fixed income securities must be liquid and readily marketable. Private placements or other “restricted” securities shall not be purchased.
- Brokerage firms are expected to complete trades on a best execution basis.
- With the exception of the U.S. government and its agencies, no one sector allocation should exceed 50% of the portfolio on a market value basis.
- Exceptions to these guidelines shall be reported in writing by the manager to the chairman of the investment committee.
- The Community Foundation invests in alternative asset classes to diversify returns and to reduce correlations to equity and bond investments. Alternatives investments may include fund of funds or direct hedge funds, private equity or real estate, real assets or commodities.
- Investments will be evaluated and chosen with assistance from the Community Foundation’s investment consultant.
7. Proxy voting
Managers are to vote proxies in the best interests of the Community Foundation. If appropriate, the managers may seek guidance from the investment committee.
The investment committee reviews the investment policy with the investment consultant annually and recommends revisions to the board when appropriate. Manager performance and performance data are monitored and distributed quarterly.