Investment Policy and Guidelines
Background: It is understood that the NAACCR Board of Directors has the final responsibility for NAACCR’s investments and management. The Board’s approach to the Association’s investment policy is to engage the professional services of an investment firm to manage NAACCR’s investment portfolio within the parameters of this policy outlined below. The Board of Directors understands that the services of an Investment Consultant have fees associated with various services. The Board of Directors will evaluate the relationship with the investment firm at a minimum of every five years.
The NAACCR Board of Directors believes that a conservative, balanced approach to portfolio management is required to preserve capital, minimize volatility and maximize total return for the long term. Total return is defined to be the result of capital gains, realized and unrealized, plus income derived from interest and dividends. It is recognized that economic and security market conditions are not constant, but ever changing, and as a result, continuous portfolio adjustments will be required in order to maintain asset productivity.
1. Preservation of Capital
It is expected that the Investment Consultant will work with the NAACCR Executive Director and Chief Operating Officer to manage the portfolio to achieve these three objectives at all times. The Board of Directors does not desire a high risk, high-volatility approach, which produces large gains as well as large losses. Rather, the Association seeks a more consistent approach to the portfolio. Investment income may be utilized to further enhance the programs provided through NAACCR.
The Investment Consultant will make investment recommendations to the Board of Directors in accordance with the Statement of Investment Policy and Guidelines. These guidelines are subject to review at the Board’s discretion. The NAACCR Executive Director, Chief Operating Officer, and Investment Consultant should feel free to recommend appropriate changes to the Board of Directors for their further consideration. Based on the advice of the Investment Consultant, NAACCR’s target asset allocation for its investment accounts is: 60% Equity and 40% Fixed Income. Based upon market conditions, these allocations may be increased or decreased by 15%, so that the allowed equity range is 45-75% and the allowed Fixed Income range is 25-55%.
The Board of Directors prefers mutual funds and exchange-traded funds (ETFs) and wishes to avoid such techniques as individual stock investments, short selling, options, etc. However, the Investment Consultant is encouraged to discuss any alternatives that are worthy of consideration.
In addition to the above guidelines, the Board of Directors has set forth the following restrictions:
- no investment in tobacco-related industries
- no direct investment in gold or other commodities
- no direct investment in real estate or oil and gas properties
- no direct short sales, trading on margin, or securities lending
- no direct options including puts or calls
- the Board may enumerate other specific restrictions, but all of them, including the above, are subject to review at the Board of Directors’ request
Communication and Performance
There must be an open line of communication between the Board of Directors and the Investment Consultant.
The Investment Consultant is expected to regularly review the portfolio. He or she will provide quarterly review statements detailing all asset information and performance results and present the report to the board at least semi-annually.
The Board of Directors expects the Investment Consultant to produce competitive investment results, which will be evaluated and compared against appropriate benchmarks outlined in the quarterly reports and based on current investments.
Date Passed: 8/17/2011