Endowment and
Investment Policy
Statement of Purpose
The
guidelines in this policy are to be followed in the receipt, investment and
distribution of financial gifts, bequests, and contributions to Christ Church,
United Methodist. The primary objective for the management of these gifts is to
provide resources to further the mission of the Church, now and in the future.
It is the intention of this policy that these gifts will be handled with care
and prudence.
As
used in this statement of policy, endowment and restricted funds are funds
whose principal is intended to be preserved indefinitely (the endowment fund),
or until the occurrence of a specific event (restricted funds). The guidelines
and instructions herein are intended to give flexibility to donors and to the
custodian in establishing spending policies and in defining intended uses. By
establishing a multiple endowment and restricted fund strategy, the custodian
and donors may establish an endowment fund with more flexible spending
policies, and restricted funds with clear restrictions on spending. They may
establish funds that will have no spending for a period of years, and funds
that may be spent to exhaustion upon the occurrence of a specific event. Within
the confines of this policy, there is flexibility for establishing a variety of
uses for donated funds.
WHEREAS,
it is the desire and intention of this congregation to provide resources for
future generations.
WHEREAS,
the purpose of the Endowment Fund and Restricted Funds is to enhance the funds
available for the programs, building maintenance, and mission of the Church,
etc.
BE IT
RESOLVED, the following statements and policies shall govern the investment of
existing funds and any new funds received or solicited by the Permanent
Investment Committee of Christ Church, United Methodist.
I. Investment
Goals And Objectives For The Endowment and Restricted Funds
Restricted
Funds may be pooled for investment purposes. However, assets of other funds
accepted by the Investment Committee and which are required by a donor’s
written instructions to be invested in separate investments will be invested
accordingly by the Committee. The investments of these other funds may be
included in the Endowment Funds for investment purposes but separately
identified with the donor names and their designated purposes.
The Investment
Goals and Objectives for the Endowment and Restricted Funds shall be:
• To invest the Funds so
that investment return may be used to maximize the goals and purposes of the
Endowment Fund, and Restricted Funds as specified by the donor.
• To invest the pool so
that the funds are maintained in real dollars (the original gift plus an
allowance for inflation). The overall financial objective of the Endowment and
Restricted Funds is to provide a level of support for church programs as
determined by the spending policy summarized below and to be consistent with
maintaining or modestly increasing the purchasing power of the fund.
• The primary objective of
investment is to provide a satisfactory return on investment for the support of
the Church. Specifically, the investment target of the Endowment and Restricted
Funds is to attain an average annual real total return (net of investment
management fees) of at least 8% over the long term. Nominal rate of return is
the sum of capital appreciation (or loss) and current income (dividends and
interest). Real total return is the nominal rate of return less the rate of
inflation as measured by the consumer Price Index (CPI).
II. Spending Policy
The
investment policy should be based on the assumption that annual spending over
the long term will average 5% of the market value of the Endowment Fund for the
previous 20 trailing calendar quarters.
• Annually: Spending from the Endowment Fund
shall be on the Total Return basis. Each year, as part of the budget preparation
process, the market value of the total portfolio (including the annual yield)
for the preceding five (5) years (20 quarters) shall be averaged. This five (5)
year average is then multiplied by 5% to determine the total maximum
distribution from the Endowment Fund for the coming year. The valuation date
shall be September 30.
• Long-Term: Capital expenditures requiring financing from the
Endowment Fund will require a two-thirds vote from a Charge Conference.
• Emergency: the Board of Trustees is granted
the authority to spend up to 7% of the total value of the Endowment Fund for
emergencies of the Church that require immediate response. Such extra
expenditures shall be reported to the Church Council at their next regular
meeting.
• No
more than 50% of Endowment income can be spent on the operating budget. The
remainder to be spent on broadly defined outreach and Mission programs, and projects as defined by the
Administrative Council.
• There will be no spending during the first
three years unless directed by a charge conference; then the 5% guide will be
based on an average of the first 12 trailing quarters (3 years), 16 trailing
quarters (4 years), then 20 quarters (5 years), and beyond.
III. Portfolio Guidelines
Guidelines:
To
achieve its investment objective, the Endowment and Restricted Funds will be
managed in a manner consistent with prudent investing for such funds. The goal
for portfolio mixture in a normal investment environment will be about a 70/30
ratio of equity to fixed income investments. Further, the Endowment Fund shall
be managed on the Total Return Basis (see attached explanation), and in
accordance with the Annotated laws of Massachusetts, Title XXII, Chapter 180A,
Uniform Management of Institutional Funds. The Restricted Funds may be managed
to maintain more liquid assets.
The
Endowment and Restricted Funds shall emphasize social justice and social
usefulness.
Approximately
50 to 70% of the Endowment Fund may be allocated to equities and 50 to 30% to
fixed income investments. It is recognized that the equity portion of the pool
entails the assumption of greater market variability and risk.
The
Endowment and Restricted Funds will be diversified both by asset class
(equities, bonds, cash equivalents) and within asset classes (within equities
by economic sector, industry, quality, and size) to have reasonable assurance
that no single security or class of securities will have a disproportionate
impact on the total Funds. Investments in any one security will be limited at
the time of purchase to 10% of the market value of the equities of the
Endowment Fund when the security is purchased. No single major industry shall
represent more than 10% of the market value of the Funds.