Association Investment Policy

Association Investment Policy

1. Board of Directors

1.1. Fiduciary Capacity – All funds of the American Association of Collegiate Registrars and Admissions Officers (“AACRAO”) are held by its Board of Directors (“Board”) as a fiduciary.  Therefore, all restricted and unrestricted funds of the organization are held by the Association as a steward for the sake of carrying out AACRAO’s mission and objectives. The following instructions are to be understood and employed with that sense of stewardship in mind.

1.2. Prudent Investor - The basic investment standards shall be those of a prudent investor as articulated in laws of the District of Columbia.  This standard requires that the Board invest and manage AACRAO’s funds as a prudent investor would, in light of the purposes, terms, distribution requirements, and other circumstances of the funds.  This standard requires that the Board exercise reasonable care, skill, and caution, and is to be applied to investments not in isolation but in the context of the overall investment portfolio and as a part of an overall investment strategy, which should incorporate risk and return objectives reasonably suitable to the portfolio.  In making and implementing investment decisions, the Board has a duty to diversify the investments of the portfolio unless, under the circumstances, it is prudent not to do so.  In addition, Board members must conform to fundamental fiduciary duties of loyalty and impartiality; act with prudence in deciding whether and how to delegate authority and in the selection and supervision of agents; and, incur only costs that are reasonable in amount and appropriate to the investment responsibilities of those agents.

1.3. The Board of Directors will

1.3.1. approve the selection, hiring, and termination of all outside Investment Consultants and other outside investment professionals; and

1.3.2. establish investment guidelines and policies that direct the investment of the Association’s portfolio including asset allocation, risk tolerance, and investment time horizon.

1.4. Conflicts of Interest – The Board will notknowingly invest AACRAO funds with any firm or in any vehicle that may monetarily benefit a member of the Board or the AACRAO staff as a result of the transaction.

1.5. Amendment – The Board reserves unto itself the exclusive right to amend or revise this policy.

2. Finance, Investments and Audit Committee

2.1. Purpose - The purpose of the Finance, Investments and Audit Committee is to assist the Board in reviewing investment policies, strategies, transactions, and the performance of the Association’s investment portfolio(s). Additionally, the committee makes recommendations relating to the integrity of the accounting and financial reporting; financial controls; compliance with legal and regulatory requirements, including the filing of IRS form 990; and the qualifications, independence, and performance of the outside auditor.   

2.2. Responsibilities – With regard to investment policy, The Finance, Investments and Audit Committee shall

2.2.1. supervise the overall implementation of AACRAO’s investment policies by the Executive Director and outside investment professionals; and

2.2.2. recommend the selection, hiring, and termination of all outside investment consultants and other outside investment professionals to the Board  for its approval; and

2.2.3. recommend the establishment of investment guidelines and policies to the Board  for its approval; and

2.2.4. review and evaluate the performance of the investment portfolio and investment consultants and other outside investment professionals at least once per fiscal year to assure adherence to policy guidelines, and monitor progress toward achieving investment objectives, and report the results of such reviews and evaluations to the Board; and

2.2.5. provide overall supervision to the Executive Director to whom the committee delegates specific duties related to AACRAO investments; and

2.2.6. act in accord with this investment policy and all applicable laws and state and federal regulations that apply to nonprofit agencies including, but not limited to, the Uniform Prudent Investors Act and the Uniform Prudent Management of Institutional Funds Act; and

2.2.7. perform other duties as delegated by the Board from time to time.

4.3.4. select, monitor, and evaluate investment managers and/or investment entities; and

4.3.5. provide and review quarterly and annual performance measurement reports and assist the Finance, Investments and Audit Committee in interpreting the results; and

The Board maintains a managed, long-term investment portfolio.  It is expected that the Association will spend prudently from these funds in order to ensure their perpetual existence.   The portfolio may be used for the following purposes:

6.1. Purpose - AACRAO will maintain a Long-Term Reserve Fund designed to provide long-term sustainability to the organization as well as meeting existing debt covenants.

6.2. Target Value – The Long-Term Reserve Fund should maintain a target value of 66% (8 months) of the current fiscal year budgeted operating expenses.

6.3. Minimum Value - The Long-Term Reserve Fund should maintain a minimum value of 50% (6 months) of the current fiscal year budget. Additionally, on an annual basis, any existing debt covenants should be reviewed to ensure adequate reserves are being maintained to meet such debt covenants. 

6.4. Spending Policy – Reserves in excess of the target value will be available each year for strategic spending. In any given fiscal year, the staff may propose that up to 25% of excess reserves be added to the following year’s budget.  

6.5. Strategic Spending – The Board may use excess reserves (according to the spending policy noted in 6.4) to fund equipment and hardware upgrades, software acquisition and development, office repairs, develop new programs or replace outdated ones, expand the Association’s interests and services, or invest in new revenue-producing opportunities. The Strategic Spending Policy provides further guidance on the parameters around strategic spending. 

6.6. Contributions – Contributions to the Long-Term Reserve Fund must be approved by the Board and will normally comprise net surpluses generated in any fiscal year. The Long-Term Reserve Fund shall be funded only if the Operating Reserve Fund is fully funded. 

7.1. Investment Purpose - The investment purpose of the long-term reserve funds is to provide financial stability and operating revenue in support of the Association mission. Income and gains from all these funds, in addition to spending guidelines of each fund as listed above, may be spent to support the prescribed functions of the respective fund.

7.2. Investment Primary Objective - The primary investment objective of the long-term investment funds is to achieve a rate of return, net of fees, which meets or exceeds CPI + 4% over a complete market cycle of rolling five-year periods.  

7.3. Investment Long-Term Objective - The long-term objective of the total portfolio (all Funds combined together) is to pursue income and growth with equal emphasis on principal preservation and maintaining purchasing power over time.  Whereas it is understood that fluctuating rates of return are characteristic of the securities markets, the greatest concern is long-term maintenance of purchasing power and consistency of total portfolio return over time. Objectives will be measured by results achieved over a three-year rolling period.

7.5. Asset Allocation – The long-term reserve fund will have a specific asset allocation in order to serve its purpose effectively.   From time to time and with the advice of the Investment Consultant(s), the Finance, Investments and Audit Committee may amend the asset allocations without Board approval as long as it stays within ranges below.  However, the mix of assets in any of the long-term investment funds should fall within the following tactical ranges:

7.5.1. Cash: 0-10%

7.5.2. Equities: 40-85%

7.5.3. Fixed Income: 15-60%

7.5.4. Alternative Investments: 0-30%

7.6. Rebalancing Procedures - It is understood that market movements and tactical adjustments may cause the actual allocation of assets to vary from the policy allocations listed in section 7.5.  Therefore, it will be necessary to rebalance the portfolios to those tactical allocations periodically.  Gains and losses will be recognized during the implementation of rebalancing whether the total portfolio return is positive or negative during such rebalancing periods.  The ranges set forth in section 7.5 above are thresholds that should be reviewed quarterly by AACRAO after receipt of quarterly investment reports from the Investment Consultant(s), who will regularly monitor the portfolio for any variations from the policy allocations.  

If the actual allocation in any of the four major asset classes (Equities, Fixed Income Alternatives, and Cash) varies from the policy allocation by at least 10% in absolute terms, it will call for rebalancing of the portfolio back to the tactical amounts as soon as is practicable.

7.9.3.4. Repurchase agreements with U.S. Treasury securities and agencies of the U.S. Government as collateral.