Chapter 140: Investments
140.015 Investment Policy for Retirement, Disability and Death Plan
Bd. Min. 6-26-12, Revised Bd. Min. 6-14-13, Revised Bd. Min. 9-12-13, Revised 6-25-15, Revised 2-4-16; Revised 4-14-16.
- Introduction -- The University's Retirement, Disability and Death Benefit Plan (“Plan”) was established to provide retirement income and other stipulated benefits to qualified employees in amounts and under the conditions described in the plan. A Trust was established in 1958 and is being funded to provide the financial security of those benefits.
- Responsibilities and Authorities – See CRR 140.010 “Policy for Management and Oversight of Selected University Investment Pools.”
- Investment objectives -- The primary objective to be achieved in the active management of Trust assets is to provide for the full and timely payment of retirement, disability and death benefits to qualified employees. In order to fulfill this objective the University must maintain a prudent actuarially sound funding of the Plan's liabilities. This funding requirement is derived from two principal sources; the total investment return on Trust assets and the amount of University contributions. In order to minimize the University's required contributions it is imperative that total investment returns be maximized.
- Authorized Investments – The Plan shall be invested in externally managed funds, consistent with the guidelines established in CRR 140.011, “Policy for Investment Manager Selection, Monitoring and Retention,” in the following asset sectors:
Target Asset Mix
27% - 47%
6% - 15%
Global fixed income
2% - 8%
0% - 20%
Emerging markets debt
4% - 9%
9% - 15%
4% - 9%
7% - 14%
Real estate / infrastructure
4% - 10%
2% - 7%
0% - 6%
Cash and cash equivalents
0% - 10%
- Portfolio Rebalancing
Sector allocations shall be monitored on an ongoing basis as changes in market behavior may result in variations from the target asset mix. Rebalancing of the portfolio shall be considered at least quarterly, and more often if necessary to maintain allocations within the allowable ranges. The need to rebalance shall take into account any logistical issues associated with fully funding a particular asset sector, as well as any tactical decisions to overweight or underweight a particular asset sector based on current market conditions. The University may utilize external managers to synthetically rebalance portfolio exposures consistent with targets and allowable ranges established by this policy. Synthetic market exposures can be obtained through the use of conventional derivative instruments commonly accepted by other institutional investors, such as futures contracts and swap agreements.
Actual sector allocations shall not fall outside of the allowable ranges, with the exception of violations caused solely by periods of extreme market distress, when it may not be possible or advisable to immediately bring such allocations back to within the allowable ranges.
- Currency Risk Management
In the context of a global investment portfolio, currency risk exists to the extent that investments contain exposures to foreign currencies. The desirability of this currency exposure is not necessarily aligned dollar for dollar with the desired exposure to assets denominated in foreign currencies. As such, external managers in any asset sector may implement currency strategies to alter the currency exposure of the portfolio when deemed prudent to do so in the context of the particular investment mandate. In addition, the University may utilize external managers to implement currency strategies to alter exposures in an active or passive manner as part of a portfolio or asset class overlay when deemed prudent to do so.
- Global Equity Portable Alpha Program
Within the global equity sector, market exposures may be obtained through the use of passive investment vehicles, traditional long-only active management, active long/short strategies and conventional derivative instruments commonly accepted by other institutional investors, such as futures contracts and swap agreements. Equity market exposure obtained through active long/short strategies and derivative instruments shall not exceed 15% and 35% of the total global equity allocation, respectively.
To the extent that equity market exposure is obtained using derivative instruments, a portion of the underlying cash and cash equivalent balances may be managed in an active fashion by external managers as an additional tool to add excess returns above the global equity benchmark. To maximize the probability of consistently positive returns within the portable alpha portfolio, appropriate alpha strategies should exhibit low correlations to one another, and manage effective equity market beta to target levels. The allowable range of the portable alpha portfolio shall be 0-10% of the total Retirement Fund.
The Global Equity Portable Alpha Program shall be managed in accordance with prudent risk management practices established by the Treasurer, Vice President for Finance, and Investment Consultant. Such risk management practices shall include a requirement to maintain appropriate levels of margin collateral. Derivative instruments and associated cash and cash equivalent balances shall be managed by an external investment firm with appropriate expertise, experience and depth of resources.
- Other – The Board of Curators delegates to the President of the University the following responsibilities with respect to the Plan:
- Recommend contributions to the Plan.
- Recommend annuity, mortality and other tables as may be useful in actuarial determination.
- Recommend actuarial valuations made by experts retained for that purpose.
- Maintain data necessary for actuarial valuations of the assets of the Plan.
- Maintain accurate records for the Plan.
Previous Rule: 140.014 Investment Policy for Fixed Income Pool