AGC EDUCATION AND RESEARCH FOUNDATION Investment Policy Statement September 2016 SECTION I - PURPOSE AND SCOPE This Investment Policy Statement of AGC Education & Research Foundation as approved by the Board of Directors was established to facilitate a clear understanding of the investment policy guidelines and objectives with regards to the Endowed Funds and other investable assets. SECTION II - ROLES AND RESPONSIBILITIES AGCERF Board of Directors The Board of Directors will have final approval of all revisions to this Investment Policy Statement, spending decisions other than those set out in the approved spending policy and Investment Advisor/Manager selection. AGCERF Investment Committee The Investment Committee is the named fiduciary and is responsible for directing and monitoring the investment management of AGCERF's Endowed Funds and other assets utilizing the Prudent Investor Standard. The Prudent Investor Standard shall mean the investments are to be made consistent with the safeguards and diversity to which a prudent investor would adhere, i.e. exercising judgment and care, under the circumstances prevailing, which individuals of ordinary prudence would employ in the management of their own affairs. The Investment Committee is authorized to delegate certain responsibilities to professional experts in various fields, such as the Investment Advisor, Investment Manager and Custodian. The specific responsibilities of the Committee relating to the investment management of AGCERF's Endowed Funds and other assets include: 1. Adhering to the guidelines as defined in applicable regulations. 2. Projecting the AGCERF's financial needs, including the estimates of expected net cash flow and communicating such needs to the Investment Manager on a timely basis. 3. Determining AGCERF's risk tolerance and investment time horizon and communicating these to the appropriate parties. 4. Establishing reasonable and consistent investment objectives, policies and guidelines, which will direct the investment of AGCERF's assets.
5. Prudently and diligently selecting qualified investment professionals, including Investment Advisor, Manager and Custodian and regularly evaluating the performance of these professionals to assure adherence to policy guidelines and monitor investment objective progress. Review procedures should be followed as outlined in the sections below. Investment Advisor The Investment Advisor will provide advice on investment allocation, portfolio risk management and Investment Manager selection. The Investment Advisor may also be called upon to provide feedback to the Investment Committee on the investment policy, asset allocation, guidelines, and constraints. Investment Manager The Investment Manager has the responsibility of selecting investments within the asset class or category prescribed by the Investment Advisor. The Investment Manager will have full discretion to make all investment decisions for the assets placed under its Management, while observing and operating within all policies, guidelines, constraints, and philosophies as outlined in this statement and as defined in a prospectus or any other document governing their management of investments. The Investment Manager must abide by the General Investment Principles as outlined in the Investment Parameters section. Custodian The Custodian will physically (or through agreement with the sub-custodian) maintain possession of securities owned by the Investment Portfolio, collect dividend and interest payments, redeem maturing securities, and effect receipt and delivery following purchases and sales. The Custodian may also perform regular accounting of all assets owned, purchased, or sold, as well as movement of assets into and out of Investment Portfolio accounts. The duties of the Investment Advisor, Investment Manager and Custodian may be performed by the same entity. SECTION Ill - INVESTMENT PARAMETERS Investment Time Horizon The time horizon for the AGCERF assets is long term and the goal of the fund is to last in perpetuity. 2
The portfolio risk tolerance is defined as one of a Moderately Aggressive, Growth Oriented portfolio. Investments should not take on an undue level of risk given the risk tolerance and investment goals of the AGCERF's Endowed Funds and other assets. Spending Policy AGCERF anticipates spending up to 4% of the market value of the permanently restricted endowment portfolio plus any amounts in excess of required minimum balances for temporarily restricted funds on an annual basis. The spending rate will be "smoothed" - the market value on which this spending rate will apply shall be calculated over a 3 year period (an average of the Foundation's assets as of June 30 for the previous 3 years). The central financial objective of the spending policy is to preserve the purchasing power of the foundation assets while simultaneously providing program support that keeps up with inflation. The AGCERF Board will determine annually the actual spending rate for the year at its Fall board meeting. Gifted Securities All securities gifted to AGCERF shall, as expeditiously as possible, be deposited in one of AGCERF accounts under management of an investment advisor. The investment advisor will be notified of the gift and will be responsible for the decision to either hold or sell the gifted security. Investment Allocation The investment allocation parameters are outlined in Appendix 1. These parameters are based on the definitions below: Return-Seeking Assets: This asset category will be comprised of assets that are expected to generate more growth but also more volatility than cash or bonds. This category may include, but not be limited to, exposure to US, developed international, emerging markets and frontier markets stocks; large-cap, mid-cap and small-cap stocks; and high yield bonds (US, non-us, corporate, Treasury and sovereign). Risk-Mitigating Assets: This asset category will be comprised of assets that are expected to provide stability and income, serving to counterbalance the higher volatility of return-seeking assets. This category may include, but not be limited to, exposure to high credit quality, short and intermediate duration bonds (US, non-us, corporate, Treasury, sovereign and inflationprotected). Diversifying Assets: This asset category will be comprised of assets that are expected to provide diversification against both return-seeking and risk-mitigating assets. This category may include, but not be limited to, exposure to Real Assets (real estate investment trusts, commodity futures and stocks of commodity-producing companies) and diversified hedge funds, including funds of funds. 3
General Investment Principals The allocation of the Endowed Funds and other assets will diversify among different types of investments, geographies and styles to attain AGCERF's objectives. Rebalancing: Inevitably, the investment portfolio will drift from the long-term strategic targets through the normal and imperfectly correlated returns of the various asset categories and classes. This will be remedied in accordance with the internal rebalancing rules of the selected investment advisor, which may result in portfolio exposure to an asset category that may be above or below the above stated maximum/minimum target range. Furthermore, cash-flows (contributions, withdrawals) generally should be used to revert toward the target asset allocation, whenever possible. Exceptions to periodic rebalancing may be appropriate or necessary for assets that either are intended to be held as part of a buy-and-hold strategy or are otherwise subject to structural constraints on liquidity, e.g., annual withdrawal or redemption rights, etc. Commingled Vehicles: Investments in mutual funds (including AllianceBernstein proprietary funds), hedge funds and other alternative investments, and other commingled investment vehicles are permitted, although it is understood that assets invested in such commingled vehicles will be managed solely in accordance with the investment policies, procedures and guidelines set forth in the prospectus or other relevant document for such commingled vehicle, notwithstanding anything to the contrary set forth in this Statement of Investment Policy. Overlay Portfolio (aka Dynamic Asset Allocation (DAA)): Within the investments described in Appendix I under "Long-Term Strategic Asset Allocation Targets", investments are permitted in an account-by-account basis in overlay portfolios, which may be regulated mutual funds (the "Overlay Portfolios") to complement the long-term strategic asset allocation. Portfolio overlay strategies are designed to manage short-term portfolio risk and mitigate the effect of extreme outcomes by varying the asset allocation of a portfolio through investment in the Overlay Portfolios. The investments in the Overlay Portfolios may cause the Fund's overall exposure to returnseeking, risk-mitigating, and diversifying asset categories and classes to vary significantly from the target allocations specified above. Another effect of investing in the Overlay Portfolios is that the Fund may gain exposure to asset classes, through the holdings of the Overlay Portfolios, other than those contemplated above. The holdings of the Overlay Portfolios are limited only as provided in the prospectus then in effect for the Overlay Portfolios. SECTION IV - REVIEW AND REPORTING The Investment Advisor will report in a format mutually agreed (in person or by conference call) at least semi-annually. A website version of current detailed performance information will also be available for review. The Committee will review, at least on an annual basis, evaluations of performance against the investment policies and benchmarks. The Committee or its designee shall meet (in person or 4
via conference call) with the Investment Advisor at least semi-annually or as requested to review investments and the current investment environment. At meetings, the written and oral presentations shall cover the following: 1. Discussion of AGCERF needs, goals and objectives, if different from previous quarter. 2. Discussion of the rationale for performance results by relating them specifically to investment strategy and tactical decisions implemented during the current review period. 3. A performance and asset allocation report, an annual fee disclosure, and a portfolio cross-check against the investment policy guidelines. 4. A review of the Advisor's views of the market and current research on investment recommendations and research. Investment Manager Performance Review and Evaluation The Committee's selection of Investment Advisor{s) must be based on prudent due diligence procedures. A qualifying investment manager must be a registered investment advisor under the Investment Advisors Act of 1940, or a bank or insurance company. Investment Advisors shall be reviewed periodically regarding the performance, personnel, strategy, research capabilities, organizational and business matters, and other qualitative factors that may impact their ability to achieve the desired investment results. Consideration shall be given to the extent to which the investment results are consistent with the investment objectives, goals, and guidelines as set forth in this statement. The Committee intends to evaluate the portfolio over at least a three year period. The Committee is required to review performance against proposals from similar firms at intervals of no less than five years. SECTION V-ACCEPTANCE AND ADOPTION The Board of Directors have reviewed, approved and adopted this Investment Policy Statement for AGC Education & Research Foundation Endowed Funds and other assets. The Board of Directors reserve the right to make any changes to this Investment Policy Statement as deemed necessary. All such changes will be made in writing and the Investment Advisor(s), Managers and Custodian will be duly informed. Signature ~ b er-"t" h., io~ ~ y t"c:s. Name and Title 9--"-l-l(o Date 5
Appendix 1 Long-Term Strategic Asset Allocation Targets Asset Catezorv Target Asset Allocation Exnosure* Allowable Range Return-Seeking Assets 58% 46%-70% Risk-Mitiaatina Assets 25% 14%-36% Diversifvinz Assets 17% 10%-24% Total 100% *includes use of Dynamic Asset Allocation 6