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CELEBRATING 200 YEARS OF PRUDENT INVESTING

 
INVESTMENT POLICY STATEMENT

I.     Description

This Investment Policy Statement (IPS) details the oversight and management of the investment portfolio of the Diocesan Investment Trust assets, which provide the Episcopal Diocese of Massachusetts, Diocesan parishes and affiliated organizations with a professionally managed investment vehicle for “trust” and “agency” account assets . Three investment options are available to participant organizations:  an Income Fund, a Stock Fund, and a Fossil Fuel Free Fund (collectively, “the Funds”).

The Funds’ investment objective is to preserve its purchasing power (after expenses, spending, and inflation) while providing a continuing and stable funding source to support the current and future mission of Diocesan parishes and affiliated organizations.    It is the intention that all total return (interest income, dividends, and realized gains) above and beyond the amount approved for expenditure or distribution will be reinvested in the Funds. 


II.    Investment Liquidity

Although The Funds have a long-term investment horizon and a prudent spending policy, member parishes and affiliated organizations control their investment in the Funds and may withdraw their investment as needed.  For this reason, the majority, if not all, assets will be invested in investment vehicles that offer timely liquidity without restrictions or lock-up periods.  To ensure adequate liquidity for distributions and to facilitate rebalancing, the Investment Committee will conduct a periodic review of total Fund liquidity.


III.   Spending and Distribution Policy

The investment objective of the Funds is to earn a 4% return after expenses and inflation.  The spending policy detailed below is consistent with that objective.
 

The current spending policy calls for 4% of a 36 month rolling average of investment value to be distributed to those investors with assets in the Funds.  However, when a trust fund’s market value dips beneath its inception value, only accrued income (dividends and interest) is distributed.  The spending policy applies to those investors that hold their assets in trust accounts as opposed to agency accounts.
 

Furthermore, in recognition of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), spending shall comply with the evolving “prudent spending” guidelines of UPMIFA.
 

This policy will be reviewed annually as part of the budgeting process.  Investment managers should be given ample notice of the required withdrawal schedule.  Appropriate liquidity should be maintained to fund these withdrawals without impairing the investment process. 


IV.  Asset Allocation
               

In an effort to achieve its investment objective, the Funds will allocate across asset classes consistent with its investment objective and risk tolerance.  The following asset allocation policy has been established.
 

Asset Class

Policy Target

Policy Range

Global Public Equity

65%

50%-80%

Global Fixed Income

35%

20%-50%

Cash

0%

 0%-30%


V.   Rebalancing

The Investment Committee, Staff, and Investment Consultant (if retained) will review the Funds’ asset allocation periodically.  Any deviations from asset class policy targets outside of the allowable ranges will be addressed through rebalancing or acknowledgment of a valid reason for remaining outside of stated policy ranges (such as liquidity or short-term transitions between managers).
 

Cash receipts shall be invested as soon as practical according to the current asset allocation policy, unless otherwise approved. 


VI.  Performance Evaluation Benchmarks

Benchmarks are useful to gauge the performance of the Funds, but they are best viewed over longer periods, generally three to five years.  The Funds, separately as well as in aggregate, will be compared to their Actual Index, which represents the “Actual Portfolio” selected by the Investment Committee.  The Actual Index is defined as the sum total of all the actual segment weights for each of the asset classes multiplied by the returns of their respective benchmarks.  Significant performance deviations from the Actual Index will be explained and appropriate actions taken if necessary.  Benchmarks for each of the broad asset classes are established and reviewed by the Investment Committee with the assistance of the Investment Consultant.  In addition to the Funds and asset class benchmarking, all managers within each asset class will be compared to their own relevant style index benchmarks.
 

The benchmarks shown below are examples, and actual benchmarks may vary based on specific asset allocation or managers used.
 

Asset Class

Policy Target

Global Public Equity

MSCI AC World Index, S&P 500

 

Russell 3000, Russell 1000 Growth

 

Russell 1000 Value, MSCI EAFE

Fixed Income

Barclays Capital Aggregate

 

 


VII.   Use of Derivatives and Leverage

Trustees will not invest directly in derivatives or in leveraged funds, but the portfolio may have exposure through certain investment managers.  Portfolio management agreements or manager guidelines must explicitly authorize the use of derivatives or clearly state when their use is permitted.


VIII.  Manager Selection and Monitoring

The Investment Committee will select and monitor external managers to invest the assets of the Funds.  The Investment Committee may delegate certain selection and monitoring functions to the Investment Consultant.  The Investment Committee will report on the status and performance results of the Fund to the Board no less than annually.


 IX.     Restrictions

Certain industries are restricted from investment because they may conflict with the mission and beliefs of the Episcopal Diocese of Massachusetts, Diocesan parishes and affiliated organizations.  In both the Stock and Income Funds, investments will be avoided in those companies that are primarily engaged in the production of tobacco products, gambling, and the mining of coal.  It is understood that these restrictions are more difficult when investing in a commingled fund; however, efforts will be made to avoid these areas of the investable market.

The Fossil Fuel Free Fund will be managed with more stringent guidelines as it pertains to companies investing in the extraction of fossil fuels.  The investment policy of the Diocesan Fossil Fuel Free Fund is established by the Financial Advisory Committee and approved by Diocesan Council.


X.      Conflict of Interest

The Trustees of Donations shall take appropriate steps to avoid conflicts of interest in providing oversight for DIT assets. If any member of the Investment Committee, Staff, or the Investment Consultant has, or appears to have, a conflict of interest that impairs or appears to impair the respective member’s ability to exercise independent and unbiased judgment in the good faith discharge of his or her duties, he or she shall disclose such conflicts prior to meaningful discussion, and may be required on occasion to recuse him or herself from decision making as directed by the TOD Executive Committee. All parties must also comply with any other conflicts of interest policies adopted by the Trustees of Donations.


XI.     Investment Policy Statement Review

The Investment Committee will review the Investment Policy Statement periodically and submit any changes to the Board for ratification.

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