University Rules

1. Endowment fund "A"
   
   
   1. Goal

      The university endowment investment policy's goal shall be to produce real growth in assets, net of administrative and investment fees, by generating a total endowment rate of return which is greater than, or equal to, the spending rate established by the university's endowment spending policy plus the long term fund raising fee, plus the rate of inflation.
      
      

   2. Guidelines

      Investments in endowment fund "A" shall be made in accordance with the following guidelines:
      
      

      1. The asset mix of the general investment fund "A" pool may range from eighty-five per cent variable investments and fifteen per cent fixed income investments to fifteen per cent variable investments and eighty-five per cent fixed income investments, at any one time, at the discretion of the administrative investments committee. Qualified equity and fixed income investments shall consist of the following:
         
         
         1. Variable investments
            
            
            1. Common stocks (publicly traded, domestic or international)
               
               
            2. Preferred stocks (publicly traded, domestic or international)
               
               
            3. Private equity; venture capital; funds engaged in hedged strategies; and energy or natural resources. Such investments shall not be subject to the conditions in paragraphs (A)(2)(b), (A)(2)(c), and (A)(2)(d) of this rule.
               
               
            4. Public and private equity real estate, including real estate investment trusts and limited partnerships; and direct real estate holdings where a market rate of return can be expected.
               
               
            5. Securities lending as an enhancement of current investment strategies may be utilized for endowment fund "A" investments, if conducted in a manner consistent with prudent collateralization, counterparty risk, and other industry risk protection practices.
               
               
         2. U.S. dollar denominated fixed income investments
            
            
            1. U.S. and foreign government and agency obligations
               
               
            2. U.S. and foreign corporate debt obligations
               
               
            3. U.S. and foreign convertible bonds
               
               
            4. Collateralized mortgage-backed obligations
               
               
            5. Loans with reasonably structured repayment terms, bearing a market rate of return, and having strategic value to the university campus. Such investments shall be supported by a written statement of justification and shall be approved by the chair of the finance and administration committee and the president of the university, after notification to the full board of trustees. The total of such investments shall not exceed the greater of sixty per cent of the fixed income allocation of the general investment fund “A” pool, or seventy-five million dollars, at the time of investment. Such investments shall not be subject to the conditions in paragraphs (A)(2)(b), (A)(2)(c), and (A)(2)(d) of this rule.
               
               
      2. Bonds purchased must be limited to those in the first four grades of any rating system; convertible bonds purchased must be limited to those in the first five grades. Investment managers specifically authorized to invest in high yield bonds shall not be subject to these rating grade limitations. The weighted average of the maturities in the portfolio should not exceed twenty years and an attempt should be made to diversify the maturities.
         
         
      3. At the time of purchase no more than five per cent of each manager's allocated portion of fund "A" may be invested in any one issuer or investment, except U.S. federal government securities or its agencies or government sponsored enterprises or government sponsored private corporations and with the exception of indirect real estate and participating mortgages.
         
         
      4. Investments shall be diversified consistent with prudent investment management practices. Such diversification shall be in accordance with an asset allocation policy developed and administered by the administrative investments committee and reviewed, at least annually, with the board of finance and administration committee.
         
         
   3. Spending policy

      The income distribution for endowment spending in a fiscal year shall be five per cent times the previous twelve-quarter moving average of market value. This formula shall be applied to the twelve quarters ending on December thirty-first prior to the fiscal year in question, so that final budget guidance on available income can be issued. For fiscal years 2007, 2008, and 2009, the spending policy will be temporarily increased to six per cent times the previous twelve-quarter moving average of unit market value.
      
      

2. Strategic community investments

   Additional endowment funds may be invested in loans, direct real estate or other investments not yielding a market rate of return, that are judged to be of a long term strategic importance to the university. Such investments shall be held separately from the endowment fund “A” and must be approved by the chair of the finance and administratin committee and the president of the university, after notification to the full board of trustees. The total of such investments shall not exceed twenty-five million dollars at any time.
   
   

3. Temporary investment pool

   The investment administrators, consisting of the vice president for finance, the associate vice president for financial services, the treasurer, and the associate treasurer, who shall constitute an investment committee in accordance with the provisions of section 3345.05 of the Ohio Revised Code, or an outside investment manager hired and actively supervised by such committee, shall each be authorized to select, buy, and sell money market securities needed to invest temporarily idle funds.The investment committee and any outside investment manager shall discharge their duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Such securities should be limited to those issued by the U.S. government and federal agencies, government sponsored enterprises and government sponsored private corporations, plus prime commercial paper, certificates of deposit and other money market securities as outlined in the temporary investment policy that follows:
   
   

   1. The investment administrators are authorized to invest the university's accumulated cash balances in the following investment vehicles:

      U.S. treasury notes, bills and bonds
      Any federal agency notes, bills, and bonds
      World bank bonds
      Inter American development bank notes
      Asian development bank notes
      Private export funding corporation notes
      Bank certificates of deposit
      Bank repurchase agreements
      Banker's acceptances
      Bank and corporate commercial paper
      Corporate notes and bonds
      Money market funds
      Collateralized mortgage obligations
      Any government sponsored enterprise notes, bills, and bonds
      Any government sponsored private corporation notes, bills and bonds
      Investment pools created by the state of Ohio for the purpose of holding assets of political subdivisions
      Investment agreements, including guaranteed investment contracts
      Securities lending as an enhancement of current investment strategies, if conducted in a manner consistent with prudent collateralization, counterparty risk, and other industry risk protection practices.
      
      

   2. The temporary investment funds should be invested for diversification of risk and yield, with the following recommended limits for each type of investment.
      
      
      1. Commercial paper, corporate notes and bonds
         
         
         1. Investments may be made in the commercial paper issued by banks or bank holding companies headquartered or branched in Ohio and in those national companies rated "PI" by "Moody's Investor Service" or "A-1" by "Standard and Poors".
            
            
         2. Investments may be made in corporate notes and/or bonds issued by national companies rated "A" or better by "Moody's Investor Service" or "A" or better by "Standard and Poors".
            
            
         3. Total investments in corporate commercial paper, notes and bonds should be limited to no more than fifty per cent of the total investments in the temporary investment pool, and to no more than five per cent of the total investments in the corporate obligations of any one company at any time, with the exception that significant inflows or outflows of cash may temporarily cause sweep accounts to be invested such that ten per cent of the total fund is in one company's obligations.
            
            
      2. Bankers acceptances

         Investments may be made in readily tradeable bankers acceptances up to a maximum of fifteen per cent of the temporary investment pool investments at any one time. These bankers acceptances are to be limited to those issued through banks headquartered or branched in Ohio and to those issued by the top one hundred banking companies in the United States.
         
         

      3. Bank certificates of deposit

         Limited to banks headquartered or branched in Ohio, and to those issued by the top one hundred banking companies in the United States. There is no dollar limit, and certificates of deposit are to be collateralized for all amounts beyond government insurance.
         
         

      4. Repurchase agreements

         There is no dollar limit and the agreements shall be collateralized by U.S. government obligations.
         
         

      5. Government securities

         The portion of funds to be invested in U.S. government, U.S. government agency, U.S. government sponsored enterprises, or U.S. government sponsored private corporations are not limited as to amount or type. It is expected that these monies will be diversified among the approved investments available.
         
         

      6. Collateralized mortgage obligations

         Investments may be made in collateralized mortgage obligations rated "AAA" by "Standard and Poors" and secured by mortgage-backed certificates issued by governmental national mortgage association, federal home loan mortgage corporation or federal national mortgage association. Total investment in collateralized mortgage obligations is limited to no more than ten per cent of the total investments in the temporary investment pool.
         
         

      7. Money market funds

         Investments may be made in money market funds organized in accordance with the requirements of the securities and exchange commission and managed by a registered investment advisor.
         
         

      8. State of Ohio investment pools

         Investments may be made in investment pools created by the state of Ohio for the purpose of holding assets of political subdivisions.
         
         

      9. Maturities
         
         The weighted average life of the pool shall be no longer than five years and may be spread to take care of cash flow needs.
         
         
      10. Investment agreements, including guaranteed investment contracts
          
          It is preferred that such investments should be fully collateralized with the collateral held by a third party and marked to market at least quarterly. The underlying collateral should be rated in one of the two highest rating categories assigned by a nationally recognized rating agency for that category of financial instrument.
          
          If the contract is not collateralized, it should be with an entity that is rated by a nationally recognized rating agency whose rating is in one of the two highest rating categories assigned by such rating agency.
          
          
   3. At least twenty-five percent of the invested funds shall at all times be maintained in securities of the United States government or of its agencies or instrumentalities, the treasurer of the state’s pooled investment program, obligations of this state or any political subdivision of this state, certificates of deposit of any national bank located in this state, written repurchase agreements with any eligible Ohio financial institution that is a member of the federal reserve system or federal home loan bank, money market funds, or bankers acceptances maturing in two hundred seventy days or less which are eligible for purchase by the federal reserve system as a reserve.
      
      
   4. The temporary investment pool investment administrators shall meet at least quarterly. They shall review and recommend
      revisions to the board’s investment policy for the temporary investment pool and shall advise the board on its investments in
      the pool. The committee shall be authorized to retain the services of an investment advisor who meets both of the following
      qualifications:
      
      
      1. The advisor shall be either licensed by the division of securities under section 1707.141 of the Ohio Revised
         Code or registered with the securities and exchange commission;
         
         
      2. The advisor either has experience in the management of investments of public funds, especially in the investment of
         state government investment portfolios or is an eligible institution referenced in section 135.03 of the Ohio Revised
         Code.
         
         
4. Donor directed investments

   On occasion the university accepts an endowed gift where the donor places restrictions as to the investment held, yield target or type of investment. If the donor's directions are not unduly onerous, then the administrative investments committee shall accept the gift but shall attempt to influence the donor to permit pooling of the assets, either immediately or at some future date.