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Investment Policy

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Thank You for Considering a Donation to the SSA Foundation!

(Adoped October 20, 2012.)

(As amended December 8, 2016. This is the document of record.)

I. Introduction

The Soaring Society of America Foundation (hereafter referred to as the “Foundation”) was created to provide perpetual financial support to the Soaring Society of America (the “Institution”). The purpose of this Investment Policy Statement is to establish guidelines for the Foundation’s investment portfolio (the “Portfolio”). The Trustees of the Foundation act for and on behalf of the Foundation and its members.

The statement also incorporates accountability standards that will be used for monitoring the progress of the Portfolio’s investment program and for evaluating the contributions of the manager(s) hired on behalf of the Foundation and its beneficiaries.

II. Role of the Foundation

The Foundation is acting in a fiduciary capacity with respect to the Portfolio, and is accountable to the Soaring Society of America and to its Executive Committee for overseeing the investment of all assets owned by, or held in trust for, the Portfolio.

A. This Investment Policy Statement sets forth the investment objectives, and investment guidelines that govern the activities of the Foundation and any other parties to whom the Foundation has delegated investment management responsibility for Portfolio assets.

B. The investment policies for the Foundation contained herein have been formulated in a manner consistent with the Institution’s anticipated financial needs and in consideration of the Institution’s tolerance for assuming investment and financial risk, as reflected in the majority opinion of the Foundation.

C. Policies contained in this statement are intended to provide guidelines, where necessary, for ensuring that the Portfolio’s investments are managed in a manner consistent with the short-term and long term financial goals of the Foundation. At the same time, they are intended to provide for sufficient investment flexibility in the face of changes in capital market conditions and in the financial circumstances of the Institution.

D. The Foundation will review this Investment Policy Statement at least once per year. Changes to this Investment Policy Statement can be made only in accordance with the rules and bylaws of the Foundation, and written confirmation of the changes will be provided to all Foundation members and to any other parties hired on behalf of the Portfolio as soon thereafter as is practical.

III. Investment Objective and Spending Policy

A. The Foundation is to be invested with the objective of preserving the longterm, real purchasing power of assets while providing a relatively predictable and growing stream of annual distributions in support of the Institution.

B. For the purpose of making distributions, the Foundation shall make use of a total-return-based spending policy, meaning that it will fund distributions from net investment income, net realized capital gains, and proceeds from the sale of investments.

C. The distribution of Foundation assets will be permitted to the extent possible that such distributions do not exceed a level that would erode the Foundation’s real assets over time. The Foundation will seek to reduce the variability of annual Foundation distributions by factoring past spending and Portfolio asset values into its current spending decisions. The Foundation will review its spending assumptions annually for the purpose of deciding whether any changes therein necessitate amending the Foundation’s spending policy, its target asset allocation, or both. The Foundation will promptly advise its investment manager of any estimated cash required for planned distributions and the manager will raise the required cash as soon as practical after notification and will be segregated until distributed. Cash held pending distribution will be not be considered as part of the Foundation’s portfolio for the purposes of determining asset allocation.

D. Periodic cash flow, either into or out of the Portfolio, will be used to better align the investment portfolio to the target asset allocation outlined in the asset allocation policy at Section IV. A. herein.

IV. Portfolio Investment Policies

A. Asset Allocation Policy

1. The Foundation recognizes that the strategic allocation of Portfolio assets across broadly defined financial asset and subasset categories with varying degrees of risk, return, and return correlation will be the most significant determinant of long-term investment returns and Portfolio asset value stability.

2. The Foundation expects that actual returns and return volatility may vary from expectations and return objectives across short periods of time. While the Foundation wishes to retain flexibility with respect to making periodic changes to the Portfolio’s asset allocation, it expects to do so only in the event of material changes to the Foundation, to the assumptions underlying Foundation spending policies, and/or to the capital markets and asset classes in which the Portfolio invests.

3. Foundation assets will be managed as a balanced portfolio composed of two major components: an equity portion and a fixed income portion. The expected role of Foundation equity investments will be to maximize the long-term real growth of Portfolio assets, while the role of fixed income investments will be to generate current income, provide for more stable periodic returns, and provide some protection against a prolonged decline in the market value of Portfolio equity investments.

4. Cash investments will, under normal circumstances, only be considered as temporary Portfolio holdings, and will be used for Foundation liquidity needs or to facilitate a planned program of dollar cost averaging into investments in either or both of the equity and fixed income asset classes.

5. Outlined below are the long-term strategic asset allocation guidelines, determined by the Foundation to be the most appropriate, given the Foundation’s long-term objectives and short-term constraints. Portfolio assets will, under normal circumstances, be allocated across broad asset and subasset classes in accordance with the following guidelines:

Asset Class Subasset Class Target Allocation
Equity   60%
  U.S. 42% (70% of equity allocation)
  Non-U.S. 18% (30% of equity allocation)
Fixed Income   40%
  US Investment Grade 28% * see note
  Non-US Investment Grade 12%
Cash   0%

 

 

 

 

 

 

 

 

Note: Fixed income mutual funds may hold a minimal amount of non investment
grade debt provided the average quality rating is investment grade.

6. No venture capital, hedge funds, or real estate investments (these assets will be treated collectively as alternative investments) will be considered eligible for investment by the Foundation.

B. Diversification Policy

1. Diversification across and within asset classes is the primary means by which the Foundation expects the Portfolio to avoid undue risk of large losses over long time periods. To protect the Portfolio against unfavorable outcomes within an asset class due to the assumption of large risks, the Foundation will take reasonable precautions to avoid excessive investment concentrations. Specifically, the following guidelines will be in place:

a) With the exception of fixed income investments explicitly guaranteed by the U.S. government, no single investment security shall represent more than 5% of total Portfolio assets.

b) With the exception of passively managed investment vehicles seeking to match the returns on a broadly diversified market index, no single investment pool or investment company (mutual funds) shall comprise more than 20% of total Portfolio assets.

c) With respect to fixed income investments, for individual bonds, the minimum average credit quality of these investments shall be investment grade (Standard & Poor’s BBB or Moody’s Baa or higher).

d) Cash held pending distributions per section III C will be invested in an investment grade money market mutual fund or FDIC insured bank deposit.

C. Rebalancing

It is expected that the Portfolio’s actual asset allocation will vary from its target asset allocation as a result of the varying periodic returns earned on its investments in different asset and subasset classes. The Portfolio will be rebalanced to its target normal asset allocation under the following procedures:

1. The investment manager will use incoming cash flow (contributions) or outgoing money movements (disbursements) of the Portfolio to realign the current weightings closer to the target weightings for the Portfolio.

2. The investment manager will review the Portfolio quarterly (on a calendar basis) to determine the deviation from target weightings. During each quarterly review, the following parameters will be applied:

a) If any asset class (equity or fixed income) within the Portfolio is +/– 5 percentage points from its target weighting, the Portfolio will be rebalanced.

b) If any Foundation within the Portfolio has increased or decreased by greater than 20% of its target weighting, the Foundation will be rebalanced.

3. The investment manager may provide a rebalancing recommendation at any time.

4. The investment manager shall act within a reasonable period of time to evaluate deviation from these ranges.

D. Other Investment Policies

1.Unless expressly authorized by the Foundation, the Portfolio and its investment managers are prohibited from:

a. Purchasing securities on margin or executing short sales.

b. Pledging or hypothecating securities.

c. Purchasing or selling derivative securities for speculation or leverage.

d. Engaging in investment strategies that have the potential to amplify or distort the risk of loss beyond a level that is reasonably expected, given the objectives of their Portfolio.

2. The Foundation and its Trustees acknowledge that their actions as fiduciaries are subject to the Prudent Investor Rule under the statues of the State of New Mexico.

3. The Foundation and its Trustees acknowledge a duty to monitor and minimize investment related costs.

4. The Foundation and Trustees will engage a professional asset manager acting as a fiduciary to manage the portfolio.

V. Monitoring Portfolio Investments and Performance

The Foundation’s Trustees will monitor the Portfolio’s investment performance against the Portfolio’s stated investment objectives. At a frequency to be decided by the Foundation, it will formally assess the Portfolio and the performance of its underlying investments as follows:

A. The Portfolio’s composite investment performance (net of fees) will be judged against the following standards:

1. The Portfolio’s absolute long-term real return objective.

2. A composite benchmark consisting of the following unmanaged market indexes weighted according to the expected target asset allocations stipulated by the Portfolio’s investment guidelines.

a) U.S. Equity: CRSP US Total Market Index

b) Non-U.S. Equity: FTSE Global All Cap ex-U.S.

c) Investment Grade Fixed Income:

i) Barclays Capital U.S. Aggregate Float Adjusted Bond Index

ii) Barclays Global Aggregate ex. USD Float Adjusted RIC capped index (USD Hedged)

d) Cash: Citigroup 3-Month T-Bill Index

B. The performance of professional investment managers hired on behalf of the Portfolio will be judged against the following standards:

1. A market-based index appropriately selected or tailored to the manager’s agreed-upon investment objective and the normal investment characteristics of the manager’s portfolio.

2. The performance of other investment managers having similar investment objectives.

C. In keeping with the Portfolio’s overall long-term financial objective, the Foundation will evaluate Portfolio and manager performance over a suitably longterm investment horizon, generally across full market cycles or, at a minimum, on a rolling five-year basis.

D. Investment reports shall be provided by the investment manager(s) on a (calendar) quarterly basis or as more frequently requested by the Foundation. Each investment manager is expected to be available to meet with the Foundation’s Trustees or delegates identified by the Trustees once per year to review portfolio structure, strategy, and investment performance.

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Posted: 10/8/2013