The purpose of these Investment Guidelines is to outline the philosophy and goals of Rose Foundation’s Board of Directors in order to guide the investment decisions of the Foundation’s portfolio manager(s). These guidelines also express the specific criteria which will be used to evaluate the market performance of portfolio manager(s), and to outline their reporting requirements to the Foundation Board of Directors.
The Foundation’s overall investment goal is to protect the corpus of its endowments and provide income to support grants to the community. Growth over time is a secondary objective. Generally, this means that endowments shall be anchored in fixed income investments to provide an income stream for annual grants, while having some equity component that offers the potential for growth over time. Overall, the Foundation’s endowments must generate returns which match those of the broad market indices and specific benchmarks, while the weight of the corpus supports the overall mission of Rose Foundation for Communities and the Environment.
Therefore, the investment goals are to:
- Preserve the integrity of the principal in order to discharge the obligations to pay out funds as specified in specific Deeds of Gift or similar instruments.
- Achieve a high rate of return (measured by market standards).
- Consider the Foundation’s investments as an extension of its grant making and internal programs and, therefore, employ various processes to ensure that funds are invested in accordance with the Foundation’s mission.
All funds entrusted to Rose Foundation shall be managed in accordance with high standards of financial prudence and all applicable state and federal law, plus consideration of the Foundation’s environmental mission to nurture positive interactions between the environment and the economy. All Foundation programs, including stewardship of resources held in trust, emphasize community involvement in environmental stewardship; communication and cooperation between businesses and their neighbors; individual responsibility for the environmental consequences of our own actions; and environmentally sustainable job creation. Therefore, in addition to asset preservation, reliable earnings and growth potential, Rose requires its investments to meet environmental and social criteria.
For example, it is the Foundation’s policy to place at least a portion of its cash reserves with FDIC-insured community development institutions. Fixed income funds shall generally be anchored in high-quality issues such as US Treasury issues or the securities of institutions backed by governmental guarantees, as well as high-quality corporate bonds issued by firms that also meet social and environmental criteria. In its equity investments, in addition to growth potential and sound financial fundamentals, the Foundation encourages a high level of environmental and financial performance by having a policy of generally voting its proxies in favor of proposals designed to improve corporate governance and environmental performance. All voting authority is delegated to the Executive Director and the investment manager is directed to timely forward, or cause to be forwarded, all such proxies to the Foundation. Equities will generally be selected by using a financial and environmental screening process, and a “best in class” investment philosophy, achieving broad diversity while recognizing and supporting corporate environmental leadership across different industry sectors. From time to time, the Foundation may also elect to hold shares in a company which does not meet its environmental criteria, if the Foundation believes that becoming a shareholder may afford the opportunity to better encourage improved performance.
Investment Criteria & Management
All portfolio holdings must be of high quality, chosen with prevailing standards for care, skill, fiduciary prudence and diligence, and may include holdings in mutual funds. Portfolio holdings must also be generally consistent with the Foundation’s investment philosophy, as described above.
Bonds or other fixed income securities must be rated “A” or better by Standard & Poor or Moody’s at the time of purchase. The holding of junk bonds (i.e. bonds rated below “BBB” by S&P or Moody’s), or purchase of private placements of any kind, options, futures, warrants, margin purchases, short sales and/or real estate is prohibited. Investment in derivatives or commodities, especially those related to food or energy, is discouraged. Holdings in any one company or issuer shall not exceed 10% of the total value of the portfolio. No more than 25% of the portfolio shall be invested in any single economic sector. However, unrated US Treasury and other US government securities are eligible for inclusion in the portfolio, and holdings of US government securities may exceed 10% of the total value of the portfolio.
Market Criteria & Benchmarks
- The equity portion should keep pace with the S&P 500. Any international equities should keep pace with an appropriate international equity index.
- The income portion of the Endowment(s) may include bonds and money market instruments. The income portion should keep pace with the Barclay’s Aggregate Bond Index.
The Board of Directors is charged with the overall responsibility to manage Foundation assets and shall discharge their duties with appropriate care, skill, prudence and diligence. The Board has delegated oversight of the operations of the endowments to a sub-committee of the Board. The Board may change the composition of the oversight committee from time to time at it sees fit. The committee has, in turn, delegated active supervision of the day to day activities of the endowment(s) to the Executive Director, who supervises the professional investment manager(s).
The investment manager shall submit quarterly reports to the Executive Director showing securities held, cost, current market value, transactions of the portfolio, income received, projected 12 month income, and performance reports comparing the portfolio and its components to the objectives and indexes listed herein.
- The investment manager shall meet annually with the oversight committee to discuss the market and social performance of the portfolio.
- The Executive Director and the oversight committee shall report to the Board on the performance of all endowments and other assets on an annual basis. The Board may, of course, request interim reports at any time throughout the year.