Endowment Fund Investment Policy

Policy #022

  • Adopted: April 23, 2001
  • Revised: January 20, 2003

The primary goals of the Kalamazoo Public Library Endowment Fund are to:

  1. provide funds to support projects as designated by the donor or as identified by the Library Board; and
  2. to insure the continuing availability and growth of such funds in the future.

Investment Objective

Fund investment is intended to preserve principal while investing in a manner that a prudent individual would construe to be appropriate for long-term growth through managed allocation. Fund performance will be evaluated annually based on a rolling five (5) year evaluation period.

Allowable Investments

Fixed Income Investments

  • Direct U.S. Government debt issues
  • Direct U.S. Agency or Instrumentality debt issues
  • Corporate debt issues
  • Credit rating of A or better at the time of purchase by either Moody’s or Standard & Poors
  • No more than 50% of fixed income portfolio as valued on a quarterly basis
  • Certificates of deposits not to exceed $100,000 FDIC insurance
  • Money market funds investing in government and agency debt, repurchase agreements and commercial paper rated A1/P1

Fixed Income Investments Not Permitted

  • Securities denominated in currency other than the U.S. dollar
  • Derivatives

Equity Investments

  •  Securities traded on major U.S. exchanges

Asset Allocation

Equities

  • Allowable Range 0%-60%
  • Normal Range 40%-60%

Fixed Income

  • Allowable Range 0%-100%
  • Normal Range 40%-60%

Performance Benchmarks

  • Equities: S&P 500 Index
  • Fixed Income: Merrill Lynch 1–10 year Government / Corporate Index
  • Total Portfolio: 50% S&P 500 50% Merrill Lynch 1–10 year Government / Corporate Index

Evaluation of Manager

The investment manager will be evaluated based on their performance and a five (5) year rolling average comparison to the designated benchmark prior to assessment of fees (i.e., gross return). Until five (5) years of history are available, the actual time of the account evaluation will be the contract period to date.

The Endowment Committee must approve any change in the benchmarks utilized for manager evaluation in advance. The Endowment Committee is also charged with the responsibility of monitoring the performance of the investment manager and recommending any changes regarding the investment manager to the board.

Distribution

The Library, whenever possible, will provide the investment manager written notice of projected cash flow requirements from the portfolio for the next twelve (12) months.

Communications

At any time, should a fixed income investment held in this portfolio drop below what is considered investment grade, the investment manager will notify the library of this change within 2 business days of the investment’s change in status.

The investment manager will provide quarterly evaluations, comparing performance to the established benchmarks.

The investment manager shall be available to meet at least quarterly with the Endowment Committee.