Fund Investment Program
The Truman Heartland Community Foundation maintains a well-diversified portfolio to provide competitive investment performance results.
The Foundation takes seriously its stewardship responsibility as a manager of many different donor funds. It recognizes that each donation, no matter the size, reflects an implicit trust in the Community Foundation's ability to invest resources wisely and use the income produced, and in some cases the fund's principal, in accordance with each donor's charitable wishes.
Responsibility for managing the Foundation's investment portfolio is vested in the Board of Directors through its Finance and Investment Committee. This committee works closely with professional staff and the Foundation's investment advisors to set policy, establish performance benchmarks and continually monitor the performance of the Foundation's portfolio against these policies and benchmarks.
The Foundation's investment philosophy reflects three fiscal objectives:
- Preserve capital
- Earn competitive total returns within the risk tolerances established by the Foundation
- Preserve purchasing power by striving for long-term returns which either match or exceed the annual grant distribution requirement, fees and inflation
To achieve these objectives, the Foundation's investment portfolio consists of three diversified investment pools: the Money Market Pool, the Fixed Income Pool and the Equity Pool. Each pool may reflect a variety of investment management styles.
Fund Asset Allocation
In fulfilling its fiduciary responsibilities, the Foundation seeks to obtain competitive total returns over the long-term within established risk tolerances. This is accomplished through a strategic allocation of fund assets among stocks, bonds and short-term investments.
The Foundation recommends assets be invested with 70% in the Equity Pool and 30% in the Fixed Income Pool.
The Foundation will follow this investment allocation for most individual funds unless a donor recommends an alternative investment allocation strategy that will more appropriately match their fund's investment mix with its grant making objectives. Each fund's investment mix will be reviewed and rebalanced to the appropriate percentage allocations on a monthly basis.
Money Market Pool
The Money Market Pool is a portfolio of high-quality, liquid (less than 180 days) money market instruments, which are managed to keep their share price stable. The Money Market Pool is designed to provide available liquid assets to meet annual cash requirements.
It also provides a vehicle for more conservative donors who would like their contributions to earn income at current money market rates while ensuring the preservation of principal. The rate of income will vary, generally reflecting short-term interest rates. Net interest income is credited to a donor's fund on a monthly basis.
Fixed Income Pool
The objective of the Fixed Income Pool is to seek yields that are more durable and usually higher than those available from the Money Market Pool. It is suited for funds that can accept the market-value volatility (unrealized gains or losses) associated with fluctuation in interest rates in order to earn a higher level of income over time than is generally available in money market securities.
Investments are made in a diversified portfolio consisting of fixed income securities of varying maturities with an average portfolio duration of up to ten years. The Fixed Income Pool may invest up to 40% of its assets in corporate securities. The Fixed Income Pool may invest no more than 10% of the portfolio in any one issuer, except Government issues.
The Fixed Income Pool will maintain an overall dollar-weighted average quality of at least A by Moody's or S&P. Currently, the average quality of the portfolio is greater than AA.
Net interest income and any realized/ unrealized gains or losses generated by these investments will be credited or charged to participating funds monthly.
The Fixed Income Pool is managed on a total return basis (combined interest income, plus/minus appreciation/depreciation and less investment management fees) to produce a competitive total return utilizing fixed income investments while remaining within the Foundation's investment guidelines. Capital preservation is a primary objective. The Fixed Income Pool consists of multiple managers which may include mutual funds and/or actively managed accounts.
Equity Pool
The Equity Pool seeks long-term capital growth by investing in securities, principally common stock. Equity securities have a history of long-term growth and generally have shown greater performance over time as compared with fixed income and money market instruments. Investments are made into common stocks of domestic and foreign issuers of all sizes.
The Equity Pool consists of multiple equity security managers which may include mutual funds and/or actively managed accounts. A portion of the Equity Pool is invested in an S&P 500 Index portfolio while the remaining assets may be invested in common stocks of large, mid and small capitalized domestic companies and in international equity securities.
The long-term nature of these investment options makes it particularly appropriate for endowments and other funds seeking long-term capital growth.
Dividend income and realized/unrealized gains and losses generated by these investments will be credited or charged to participating funds monthly.
The Equity Pool is managed on a total return basis (combined dividend income, plus/minus appreciation/depreciation and less investment management fees) to produce a competitive total return utilizing equity investments while remaining within the Foundation's investment guidelines.
It is important to note here that capital preservation continues to be the cornerstone of the Foundation's investment policy. However, the long-term nature of equity investments makes them susceptible to normal market risks. Equity security prices fluctuate based on changes in a company's financial condition and on overall market and economic conditions.
Alternative Investment Allocation Percentages
Alternative investment allocation percentage recommendations can be made to the Finance and Investment Committee for approval by returning a completed Investment Recommendation Form. Subsequent changes may be made by completing a revised Investment Recommendation Form.
Reallocations will be made within 30 days of approval. Donors may choose one pool or apportion the Fund's investment allocation among any combination of pools.
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