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140.015 Investment Policy for Retirement, Disability and Death Benefit 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; Amended Bd. Min. 9-28-17; Amended Bd. Min. 11-19-20; Bd. Min. 4-21-22.

  1. 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.
  2. Responsibilities and Authorities – See CRR 140.010 “Policy for Management and Oversight of Selected University Investment Pools.”
  3. 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 three principal sources; the total investment return on Trust assets and the amount of University and employee contributions.

    Trust assets should be managed in a manner that maximizes returns while attempting to minimize losses during adverse economic and market events, with an overall appetite for risk governed by the Plan’s liability structure and the need to make promised benefit payments to members over time. This will be accomplished through a more ‘risk-balanced’ portfolio that seeks meaningful diversification of assets, which necessarily means less equity risk and more long-term bond exposure relative to peers. To offset potentially lower returns from a more risk-balanced portfolio, a key component of this strategy includes a less common, yet prudent, program of return enhancement commonly referred to in the investment industry as portable alpha. These investment objectives seek to prioritize the long-term structural needs of our Retirement Plan over short-term performance comparisons of the investment portfolio relative to peers.

  4. 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” and CRR 140.017, “Allowable Investments,” in the following asset classes:
    Asset Class Asset Class Target Allowable Range




    Inflation-Linked Bonds



    Private Debt



    Private Equity



    Public Equity



    Real Estate / Infrastructure



    Risk Balanced






    Cash and Cash Equivalents



    Total Portfolio


  5. Portfolio Rebalancing
    Asset allocations shall be monitored on an ongoing basis as changes in market behavior may cause 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 rebalance portfolio exposures consistent with targets and allowable ranges established by this policy. In those instances, conventional derivative instruments commonly accepted by other institutional investors, such as futures, swaps, options, forward contracts and reverse repurchase agreements may be utilized.

    Actual asset classes 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.

  6. 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 class 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.
  7. Portable Alpha Program
    Synthetic market exposures across asset classes including equities, sovereign bonds, inflation-linked bonds and commodities may be obtained through derivative instruments commonly accepted by other institutional investors, such as futures, swaps, options, forward contracts and reverse repurchase agreements. These derivative instruments shall be managed by external investment firms with appropriate expertise, experience and depth of resources.

    When synthetic market exposures are obtained through derivative instruments, a portion of the resulting cash and cash equivalent balances may be invested by active alpha managers seeking to add returns over the benchmark. These alpha managers will possess broadly diverse strategies/styles and, in the aggregate, are expected to produce returns that show little or no relationship to the economic environment being experienced at any given time.  Furthermore, this portfolio of managers will be constructed with a goal of low/no correlation to the synthetic market exposures obtained through the derivative instruments.  The risk drivers within the portable alpha portfolio should generally be well-known, empirically-tested, sources of return that can be systematically harvested through dynamic long/short strategies. They can be thought of either as returns that underlie “classic” hedge fund strategies (hedge fund risk premia), such as arbitrage and macro or the returns from “classic” styles (style premia), such as value, momentum, carry, defensive and low volatility.

    Legal account structures will be in the form of one or a combination of separate accounts, institutional commingled funds and/or limited partnerships or other similar forms.

    The allowable range of the portable alpha portfolio shall be 0-27% of the total Retirement Plan.

    Management of liquidity risk is a critical component of the portable alpha program.  If not managed appropriately, there is a risk that synthetic market exposures may need to be unwound at undesirable points in time in order to meet margin calls during volatile markets.  To help mitigate this risk, prudent balances of cash and cash equivalents shall be maintained as part of the program and monitored daily. 

    The following table outlines the minimum cash requirements with associated replenishing guidelines:

      Cash Margin* Replenishing Guidelines
    Target 30% n/a
    Range 1 29.9% to 20% Develop action plan to replenish to Target within 12 months
    Range 2 19.9% to 10% Develop action plan to replenish to Range 1 within 60 days, with subsequent plan to replenish to Target within 12 months
    Range 3 9.9% or less Take immediate action to replenish to Range 2 as quickly as possible.  Follow with plan to replenish to Range 1 within 60 days, and subsequent plan to replenish to Target within 12 months

    * Cash Margin is defined as Portable Alpha Program cash and cash equivalents divided by the total of synthetic market exposures outstanding across all asset classes with the program.

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