Policy Handbook Collegiate Presbyterian Church Endowment Committee

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Frederick Atkins
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1 Policy Handbook Collegiate Presbyterian Church Endowment Committee Purpose This Policy Handbook guides the CPC Endowment Committee in making investment decisions consistent with the objectives for its investments and in establishing guidelines for distributions from Endowment Funds. CPC has established four endowment funds General Endowment Fund Building Endowment Fund Program Endowment Fund Campus Ministry Endowment Fund The primary investment objective of each the Endowment Funds is to provide a real rate of return over inflation so that distributions from the funds may be available in the current budget year in the designated area and purchasing power of the endowment funds is preserved. The goal for each portfolio is to achieve an average return of 7.0% per year over the long term. An average 7.0% return would permit up to a 5% distribution after subtracting the Consumer Price Index for all Urban Consumers (CPI_U). By monitoring real rates of return, purchasing power of the endowment funds will be ensured. Investment Choices Investment of endowment monies is a function of the choice made by a church member when a contribution is made. Currently, three broad choices are available Endow Iowa Funds 1. Endow Iowa Funds 2. Corpus restricted gift to the Presbyterian Foundation 3. Corpus unrestricted gift made to Collegiate Presbyterian Church Endow Iowa Funds are managed by the Community Foundation of Greater Des Moines (CFGDM). Donors receive a 25% Iowa tax credit when gifts are made via the CFGDM. Three choices are available for investment of Endow Iowa Funds; they are: Long-Term Growth Portfolio, Indexed Growth Portfolio, and Defensive Growth Portfolio. The Long-Term Growth Portfolio is the fund recommended for permanent endowment funds. Guidelines set by the Community Foundation of Greater Des Moines are that only one of the above funds can be used for a specific endowment fund. Currently, the four CPC Endow Iowa funds are invested in the Long-Term Growth Portfolio. 1

2 Corpus restricted funds Corpus restricted funds are invested by the Presbyterian Foundation. These funds are invested by the Foundation to preserve principal and maintain purchasing power; no changes in how the principal is invested can be made by the CPC Endowment Committee. The amount of the distribution is determined by the Presbyterian Foundation and is paid quarterly to CPC. Corpus unrestricted funds Monies held in one of the corpus unrestricted endowment funds will be invested through either: 1. the respective General Fund, Building Fund, Program Fund, or Campus Ministry Fund invested through a brokerage firm (currently TD Ameritrade) or 2. the respective General Fund, Building Fund, Program Fund, or Campus Ministry Fund invested through the Presbyterian Foundation. Mutual funds selected in the brokerage accounts will be one or more of the socially responsible funds available with no transaction fees. Funds selected must have at least a five-year history, better rates of return than their peer group at 3 and 5 year periods, Morningstar ratings above 3, and reasonable expense ratios and management fees. Monies invested through the Presbyterian Foundation will be in one of the four mutual funds available: the New Covenant Growth Fund, the New Covenant Balanced Growth Fund; the New Covenant Balanced Income Fund, and the New Covenant Income Fund. One of these funds will be selected based on rates of return when compared with the other three funds and the equity/bond ratio of investments. Named Funds Named funds within any of the four major funds must be at least $20,000 when established. Investment Principles Collegiate Presbyterian Church seeks to invest primarily in socially-responsible investments. The primary means of accomplishing this goal will be by investing in socially-responsible mutual funds available via the brokerage firm or by investing in mutual funds offered by the Presbyterian Foundation. The investment guidelines for these funds are quoted below. Socially responsible funds. Mutual funds will be selected that adopt an investment strategy that seeks to consider both financial return and social good. As such, these funds seek investments that promote environmental stewardship, consumer protection, human rights, and diversity. New Covenant Funds The New Covenant Funds make investment decisions consistent with the social-witness principles approved by the General Assembly of the Presbyterian Church (U.S.A.). The funds do not invest in those companies involved in the military and tobacco industries that are prohibited 2

3 for investment in accordance with the policies that are set by the General Assembly of the Presbyterian Church (U.S.A.) as brought forth by the Mission Responsibility through Investment Committee Guidelines. The funds also do not invest in certain other companies that have derived 25% or more of the company s revenues from alcohol, gambling and tobacco, and do not invest in certain companies in the weapons industry. Target Asset Allocation The asset allocation of Endow Iowa Funds and the Presbyterian Foundation Funds restricted funds are controlled by the manager of the respective fund. Because the majority of the CPC Endowment Funds are invested with these managers, the Endowment Committee will seek to maximum investment returns for CPC Endowment Funds that are unrestricted while assuming prudent risk. Investment choices for the CPC unrestricted funds will be from the socially responsible funds with no transaction fees available through the brokerage firm or from the four Presbyterian Foundation Funds. Calculating Distributions Worksheets will be maintained that show twelve quarters of the ending values of the following funds: Endow Iowa Funds (General, Building, Program and Campus Ministry) Unrestricted Presbyterian Foundation Funds (General, Building, Program and Campus Ministry) Value of funds will be recorded on March 31, June 30, September 30, and December 31. Endow Iowa Funds: Five percent of the average of the preceding 12 quarters will be calculated as of September 30. This amount will be used for budgeting purposes for the next fiscal year. Endow Iowa permits up to 5% of the December 31 value to be withdrawn in late February/early March of the next fiscal year. The December 31 st amount will be withdrawn when available. If the December 31 st amount is greater than the September 30 th amount, the amount calculated from the September 30 th value will be spent. The difference between the September 30 th and December 31 st values will be invested in the comparable unrestricted endowment fund. If the December 31 st value is less than the September 30 th value, the December 31 st value will be withdrawn in late February/early March and will be available to spend in the current fiscal year. Corpus Unrestricted Funds: Five percent of the average of the preceding 12 quarters will be calculated on September 30. This amount will be used for budgeting purposes for the next fiscal year. No more than this amount may be withdrawn in the next fiscal year. Dates for recording will be March 31, June 30, September 30, and December 31. If rates of return do not support a 5% withdrawal, the rate will be reduced. Corpus Restricted Funds: Money distributed quarterly from the corpus restricted endowment funds will be withdrawn quarterly and deposited into the respective restricted endowment fund of the consolidated report and will be available for spending in the current fiscal year. 3

4 Evaluating Performance Three-year returns will be calculated quarterly for each of the corpus unrestricted funds. Should performance show signs of weakening, fund choices will be evaluated in the context of the current economy. Alternative investment choices will be made should conditions warrant. Monitoring Donor Intent Each February, the Endowment Committee will verify that distributions from each of the four major funds (General, Building, Program, and Campus Ministry) have been spent in accordance with the intent of the fund. Specifically, the Committee will verify that distributions each fund have spent for a purpose in accordance with the designated purpose of the fund. Investment of Endowment Donations Monies contributed directly to CPC for one of the corpus unrestricted Endowment Funds will be invested in the respective fund. Donations will be sent to the appropriate fund upon receipt. Revisions The Investment Policy Handbook will be reviewed annually. Original approved by Session: January 22, 2013 Revision approved by Session: April 22,

5 Calendar Jan/Feb May: August: October: Review quarterly balance sheets for CPC Endowment Funds Funds as well as quarterly three-year rates of return Verify that distributions from funds in the prior year have been spent in accord with the purpose of the fund. Withdraw monies from Endow Iowa Funds Withdraw monies from corpus unrestricted funds. Determine date for annual donor thank you event. Set dates for Endowment reports to Westgater and select the committee member to write. Propose dates for oral Endowment reports to congregation during Minute for Mission; select committee member for report. Funds as well as quarterly three-year rates of return. Propose name of church member for Endowment Committee to Nominating Committee. Funds as well as three-year rates of return. Funds as well as one-year rates of return. Calculate amounts from unrestricted endowment funds and Endow Iowa fund available for next fiscal year based on September 30 th values. Validate investment choices for the four unrestricted endowment funds; reallocate investments within unrestricted endowment funds as necessary. Elect Committee Chair and Secretary for upcoming year. Select a committee member to maintain endowment worksheets for the upcoming year. Select a committee member to write thank you letters to donors for the following year. Select a committee member to review and propose revisions to the Policy Handbook. 5

North Presbyterian Church Investment Policies. Introduction

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