LWVUS/LWVEF Investment Policy

Financial Policies US-EF 04-01

LWVUS/LWVEF Revised February 2017

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Introduction

All funds of the League of Women Voters of the United States (LWVUS) and the League of Women Voters Education Fund (LWVEF) are held by the LWVUS/LWVEF Board of Directors/Trustees as a fiduciary. Both legally unrestricted and restricted funds are held for the purpose of carrying out each organization’s mission: The League of Women Voters of the United States, a nonpartisan political organization, encourages the informed and active participation in government, works to increase understanding of major public policy issues, and influences public policy through education and advocacy. The League of Women Voters Education Fund works to encourage the active and informed participation in government and to increase understanding of major public policy issues. The following investment objectives and directions are to be judged and understood in light of this overall sense of stewardship. These policies are to be applied separately to the funds of the LWVUS and the funds of the LWVEF.

Delegation

The LWVUS/LWVEF Board of Directors/Trustees will appoint a Finance Committee, responsible for reporting regularly on investments to the full Board. In carrying out its responsibilities, the Board and its agents shall act in accordance with these investment policies and all applicable laws and regulations. The Board reserves to itself the exclusive right to revise these policies.

The Board and its Finance Committee are authorized to retain one or more investment counselors to assume the management of funds and assets owned and administered by the organization. The Board may also grant exceptions to these investment policies when appropriate. In discharging this authority, the Finance Committee may execute the Board’s decisions and may receive reports from, pay compensation to, and enter into agreements with such counselors.

Objectives

The primary investment objectives of each organization are to preserve, protect and increase its assets by earning a total return for each fund (e.g., cash accounts, short-term reserves, long-term reserves, and pooled income fund) appropriate to each fund's goal, time horizon, liquidity needs, and risk tolerance.

A. Operating Reserve

1. Investment Goals The primary investment objectives are capital preservation and liquidity.

2. Purpose The purpose of the Operating Reserve is to ensure the stability of the mission, programs, employment, and ongoing operations of the organization. The Operating Reserve is intended to provide an internal source of funds for situations such as a sudden increase in expenses, one-time unbudgeted expenses, or unanticipated loss in funding. The Operating Reserve is not intended to replace a permanent loss of funds or eliminate an ongoing budget gap. It is the intention of the League of Women Voters for the Operating Reserve to be used and replenished within a reasonably short period of time.

3. Management Practices

a) The Operating Reserve includes the balance held in both the Operating Reserve account with the investment manager and amounts held in bank accounts. The operating account should keep a balance of at least 3 months’ worth of operating expenses.

b) The Operating Reserve will be funded and available in unrestricted cash, cash equivalent funds and other low-risk investments.

c) The League will establish separate Operating Reserve accounts for both LWVUS and LWVEF as the stated mandate of the Operating Reserve is for capital preservation and liquidity.

d) These funds should be managed on a 3-month to 5-year basis and should remain within the ranges shown in Exhibit A.

e) Estimated interest to be earned on the cash accounts may be included as income in the operating budgets.

f) The Board shall annually budget any amounts to be withdrawn or transferred from Operating Reserve held with investment manager.

4. Manager The Chief Operating Officer of the organization oversees management of these investments. The Chief Operating Officer shall provide the Chief Executive Officer and the Finance Committee with a quarterly accounting of the amounts and types of investments in the fund. The investment counselor is authorized to have full discretion, subject to these policies, in managing the investments of the Operating Reserve.

Exhibit A

Acceptable Ranges of Investments for the Operating Reserve

Asset Classes

Cash and Equivalents

Bank Accounts, Money Markets, Certificates of Deposit (CDs), US Treasuries, US Agencies, and investment grade corporate debt. All securities must mature within 2 years.

100%

 

B. Long-Term Reserves

1. Composition The Long-Term Reserves consist of unrestricted and temporarily restricted assets not anticipated to be needed for at least five years and donor designated permanently-restricted funds.

2. Investment Goal The primary investment objective is capital appreciation with returns equal to or exceeding the benchmark for the portfolio over a full market cycle. The portfolio will be benchmarked against the Target Allocation in Exhibit B. Therefore, the portfolio benchmark is:

65% MSCI World Index, 33% Barclays Capital Global Aggregate Bond Index, 2% Citigroup 3 Month T-Bill

3. Purposes

a) Unrestricted Assets. The primary purpose is to provide funds to meet future operational needs.

b) Temporarily Restricted Assets. The primary purpose is to provide funds for designated activities that are restricted, as specified by the donors/grantors

c) Donor Designated Permanently Restricted Assets. The primary purpose is to preserve the corpus upon which earnings are generated and designated as temporarily restricted assets to fund designated activities.

4. Management Practices

a) Unrestricted Assets. Amounts to be transferred to/from the long-term reserve funds shall be determined at minimum annually by the Board.

b) The League will establish separate long-term reserve accounts for Unrestricted and temporarily/permanently restricted funds, for both LWVUS and LWVEF.

c) Temporarily Restricted Assets. Assets will be allocated for the purposes for which they were restricted.

d) These funds are to be managed on a long-term basis and should remain within the ranges shown in Exhibit B.

e) Income and gains on the Long-Term Reserves should remain within their respective funds unless designated by the Board to transfer to the operating accounts.

5. Manager The investment counselor is authorized to have full discretion, subject to these policies, in managing the long-term reserve fund.

Exhibit B

Acceptable Ranges of Investments for Long-Term Reserves

Asset Classes

Asset Class	Minimum Weight	Target Allocation	Maximum Weight
Fixed Income Investments	25.00%	33.00%	45.00%
Equity Investments	55.00%	65.00%	70.00%
Cash and Equivalents	0.00%	2.00%	5.00%

 

C. Responsibilities of the Chief Operating Officer

The Chief Operating Officer shall maintain financial records showing allocations of income and capital gains/losses (realized and unrealized) among any donor designated restricted funds and unrestricted assets. At least annually income should be allocated among the unrestricted and restricted accounts based on the ending account balances. If necessary in the case of losses, projected allocations to donor-established funds should be revised so that the balance does not fall below the total of all contributions made to that fund. The Chief Operating Officer shall provide the Board and Chief Executive Officer with a quarterly written statement containing information on the contributions to, and the balances in, each donor designated fund and operating and long term reserve accounts.

Investment Counselor Reporting Requirements

1. Monthly: The counselor shall provide the Board President, Board Treasurer, the Chief Executive Officer, the Chief Operating Officer and Finance Committee with a monthly statement listing the current worth of each security and containing all pertinent transaction details for each of the reserve accounts for the preceding month, including the name and quantity of each security purchased or sold, with the price and transaction date.
2. Quarterly: The counselor shall provide the Board President, Board Treasurer, the Chief Executive Officer, Chief Operating Officer and Finance Committee with an analysis for the entire portfolio of the current asset allocation by investment category (equities, fixed-income securities, and cash equivalents).
3. Annually: The counselor shall report in person to the Board, the Chief Executive Officer and the Chief Operating Officer with detailed information about asset allocation, asset diversification, investment performance, and future investment strategies.

Asset Liquidity and Risk Management

1. Common stocks: 80% of the dollar value of the equity portfolio should have a market capitalization of $2 billion or greater in value. The investment counselor should also regularly and rigorously review and rebalance the accounts in light of the aggregate, sector and overall market environment.
2. 80% of the value of the fixed income allocation should be deemed investment grade by either Moody’s or Standard & Poor’s. This leaves some flexibility among the investment counselor to allocate a portion of the fixed income allocation to other fixed and alternative investments such as high-yield bonds and preferred stock.
3. Cash equivalents: The quality rating of commercial paper must be A-1, as rated by Standard & Poor's, P-1 as rated by Moody's, or better. The assets of any money market mutual funds must comply with the quality provisions for fixed-income securities.

Asset Allocation

The ranges outlined in Exhibit B can be modified from time to time by the Finance Committee with approval by the Board. The actual investment targets shall be set within those limits by the counselor in conjunction with the Finance Committee.

Asset Diversification

As a general policy, the investment counselor will maintain reasonable diversification at all times. The counselor may not allow the investments in the equity securities of any one company to exceed 10 percent of each fund’s portfolio, nor the total securities position (debt and equity) in any one company to exceed 12 percent of that portfolio. The counselor should also maintain reasonable industry allocations and diversification when investing in individual equities. In that regard, no more than 15 percent of a fund’s portfolio may be invested in the securities of any one industry, using generally accepted industry definitions as determined by the investment counselor. If these percentages are exceeded due to the performance of one or more equities, the counselor shall consult with the Finance Committee and take steps to restore diversification in a manner and over a period of time as agreed upon by the Finance Committee.

Transactions

All purchases of securities will be for cash, and there will be no margin transactions, short-selling, or commodity transaction.

Investment Criteria Based on Mission or Social Responsibility

The organization desires to invest in companies whose business conduct is consistent with the organization's principles, priorities, and mission. Therefore, the counselor will use his/her best efforts to avoid investing directly in the securities of any company known to participate in businesses that the Board has designated inappropriate.

Fund Transfers

The investment counselor will be responsible for transferring all funds from the sale of donated equities to the Operating Reserve. Each donated security should be sold immediately upon receipt.

The Chief Executive Officer and Chief Operating Officer will be responsible for determining the need for transferring funds between or among the reserves, and for advising the counselor in a timely manner of the organization's cash distribution needs. The counselor is responsible for providing adequate liquidity to meet each organization's cash flow requirements.

The Finance Committee shall, annually recommend, and the Board will vote on, any amounts to be transferred to/from the Long-Term Reserves. Additionally, the Finance Committee shall approve transfers that are not included in the budgets or that occur in time frames different from those projected.

D. Relationship to Other Policies

This policy will be implemented in concert with the Unrestricted Net Asset Policy and with any Planned Giving Policies and Planned Giving Investment Policy that may be adopted, and is intended to support the goals and strategies in these related policies.