Introduction. The purpose of this statement is to
establish guidelines for the prudent investment of the Foundation's
assets. In the process of identifying the investment strategies to be
used, these guidelines provide stability in the management of the
portfolio. This policy driven approach reduces the Board's and
investment manager's propensity to act impulsively during volatile
markets. The policy furthermore provides parameters for the portfolio
by providing guidelines for selecting appropriate investments and
classes of assets. It is recognized that from time to time the Board
of Directors' attitudes, expectations and objectives may
change. Therefore, this policy statement is intended to be used as a
guideline rather than a rigid statement of policy from which there can
be no deviation.
Board Objectives and Position. The key Board
objectives and positions relevant to this statement are:
- the Foundation seeks to do the greatest expected good
- the Foundation seeks to have completed its work on or before the
time the founder reaches age 70, ie. by the year 2036
- the Foundation does not have or perceive the need to provide
ongoing funding to any organization or endeavor
As a result, the Foundation has a desire for high returns and a high
risk tolerance for low returns.
Investment Philosophy. The Board's investment
philosophy is to exercise ordinary business care and prudence in its
investment of Foundation assets considering the long and short-term
needs of the Foundation in carrying out its charitable purposes, its
present and anticipated financial requirements, expected total return
on its investments, price level trends, and general economic
conditions. The Board recognizes that the uncertainty of future
events, volatility of investment assets, and the potential loss in
purchasing power are present to some degree with all types of
investments. While unnecessary levels of risk are to be avoided, the
assumption of a reasonable level of risk is warranted and encouraged
in order to allow the opportunity to achieve satisfactory results
consistent with the objectives and investment philosophy of the
Foundation. Modern Portfolio Theory will form the basis of the
investment philosophy.
Investment Objectives. The Foundation will invest its
assets prudently so as to meet the Board Objectives and Position.
Investment Goals. The Foundation desires a portfolio
of investments having an expected arithmetic mean return, excluding
that on cash equivalents held to meet the reasonable operating needs
of the foundation, of no less than 70% of the returns on the S&P
500 with dividends reinvested, and a relative volatility of no more
than twice the index. This is the expected return and volatility
level, realized values may differ. These return and volatility levels
are chosen with regard given to the Foundation's objectives for doing
the greatest "expected" good, not planning to be around indefinitely,
and not needing to provide ongoing financial support. The Foundation
recognizes these goals may at times result in the value of the
Foundation's assets dropping by 60% or more in a single year.
Financial Guidelines. In order to meet the Investment
Goals, investments should be made according to the following asset
allocation and guidelines:
- Equities - up to 100%. The market does not reward diversifiable
risk; therefore it is important that the Foundation directly or
indirectly hold a large basket of securities. This is most easily
achievable using mutual funds and exchange traded funds. Such funds
may target one or more asset classes (based on firm size and growth
vs. value) and geographies (U.S. domestic vs. international).
- Fixed Income - up to 50%. Fixed income securities may be held to
reduce the volatility of the portfolio. Inflation protected securities
can also serve to help protect the purchasing power of the portfolio.
- Cash Equivalents - no more than is needed to meet the reasonable
operating needs of the Foundation.
Prohibited transactions:
- options and futures contracts
- trading on margin and selling short
- investing in illiquid assets
Exceptions to these policies are permitted:
- for investments that are made with the aim of pursuing the
Foundation's social objectives e.g. purchasing a bond that funds a
micro-finance scheme
- for assets donated to the foundation
- on account of assets that have increased or decreased in value
- on written advice from legal counsel
- on written advice from a qualified financial advisor stating the
investment will provide for the Board Objectives and Position