Financial Management for Nonprofit Organizations, 3rd Edition

APPENDIX 12DSAMPLE OF INVESTMENT POLICY STATEMENT FOR THE ABC FOUNDATION'S LONG-TERM ENDOWMENT POOL

The purpose of the ABC Foundation's endowment is to support the educational mission of the ABC University by providing a reliable source of funds for current and future use. Investment of the endowment is the responsibility of the Investment Committee. The Committee establishes investment objectives, defines policies, sets asset allocation, selects managers, and monitors the implementation and performance of the Foundation's investment program. The Committee is supported by the office of the Vice President–Finance, which analyzes investment policies and management strategies, makes recommendations to the Investment Committee, and supervises day-to-day operations and investment activities.

STATEMENT OF INVESTMENT OBJECTIVES

The endowment will seek to maximize long-term total returns consistent with prudent levels of risk. Investment returns are expected to preserve or enhance the real value of the endowment to provide adequate funds to sufficiently support designated University activities. The endowment's portfolio is expected to generate a total annualized rate of return, net of fees, 5 percent greater than the rate of inflation over a rolling 5-year period.

The Foundation's spending policy governs the rate at which funds are released to fund-holders for their current spending. The Foundation's spending policy will be based on a target rate set as a percentage of market value. ...