INVESTMENT POLICY
Adopted
Reviewed June 7, 2008
The
California Society of Professional Engineers (CSPE) is a mutual benefit
corporation exempt from income taxes under section 501(c)(6)
of the Internal Revenue Code. By the nature of CSPE's exemption,
CSPE is not subject to taxation on most investment income. With this in mind,
investments that rely on tax advantages to make the yield attractive may not be
appropriate for this account.
The
purpose of this statement is to communicate to the Treasurer and CEO, working
under the direction of the Treasurer of CSPE in these matters, a clear
understanding of the investment policies and objectives of the Board of
Directors (Board of Directors) of CSPE. This statement will outline an overall
philosophy that is specific enough for the Treasurer to know and understand
CSPE's expectations, but sufficiently flexible to allow the Treasurer to
appropriately respond to changing markets and economic conditions related to
the classes of investments selected so as to meet or exceed the long-term investment
goals enumerated in this policy.
The
investment policies and restrictions presented in this statement serve as a
framework to provide assistance and guidance to the Treasurer in achieving the
investment objectives of CSPE at a risk level deemed acceptable by the Board of
Directors of CSPE. These policies and restrictions are designed to minimize
interference with the Treasurer's ability to attain overall objectives and to
minimize excluding the Treasurer from appropriate investment opportunities.
This policy allows the Treasurer discretion in asset allocation and
diversification for the express purpose of increasing the overall yield while
avoiding undue risk. Within specific guidelines, the Treasurer has been
delegated and has assumed the broad responsibility to shift assets among asset classes industry sectors and individual securities to pursue
opportunities presented by long-term secular changes within the capital
markets. The Board of Directors of CSPE reserves the right to amend or
terminate these investment policies at any time.
The
Treasurer will manage the funds for the purpose of preserving the principal
while providing a reasonable return on invested assets as defined below under
the column "Measurement Index" for each asset class. The return will
be calculated based on net investment income.
Asset Class |
Minimum
Weight |
Target
Weight |
Maximum
Weight |
Measurement
Index |
|
*Cash
& Cash Equivalents |
50% |
70% |
80% |
90
day Treasuries |
|
Equities |
20% |
30% |
50% |
S&P
500 |
*Breakdown
of Cash & Cash Equivalents
|
Asset
Class |
Minimum
Weight |
Target
Weight |
Maximum
Weight |
Measurement
Index |
|
Insured
or Gov. Securities |
50% |
75% |
100% |
90
day Treasuries |
|
Uninsured |
0% |
25% |
50% |
90
day Treasuries |
Decisions
on purchase and sales of Cash and Cash Equivalent and Mutual Funds shall be
within the duties and authority of the Treasurer of CSPE. In the absence of the
Treasurer, such decisions and actions will be within the purview of the
President of CSPE. The Treasurer or President may consult with outside
consultants relative to any such decisions, either informally or through a
formal meeting. If when consulted, the Treasurer deems it appropriate, the
Treasurer may submit the matter to the CSPE Board of Directors for
consideration.
The
objectives of the CSPE investment policy decision should be pursued as a long-term
goal designed to maximize the return while minimizing risk,
both return and risk measured against the appropriate measurement index for the
applicable asset class. The Treasurer and Board of Directors of CSPE understand
that fluctuations will occur in market interest rates, dividend rates values
and return on equities and that this is a normal characteristic of the
securities markets. The Treasurer’s greatest concern should be the constant
existence of significant cash assets as a liquid fund for potential immediate
needs of CSPE, the long term return on the assets as a whole, and consistency
of total portfolio return. Recognizing that short-term market fluctuations may
cause variations in the account performance, the achievement of the investment objectives,
including the portfolio performance and the performance of the various asset
classes, will be measured over a five-year moving time period. CSPE investment
policy decisions should avoid any attempts to time a market particularly in the
Equities asset class. CSPE officers will be constantly vigilant of the
portfolio performance, and the Treasurer will review the portfolio and its
performance at least quarterly and the CSPE Board of Directors will review the
portfolio and its performance at least annually.
The
Treasurer may select Mutual Funds only from the New York, American, Regional
and the NASDAQ markets, that have portfolios that follow the same guidelines as
the over all CSPE equity investment policy and have a four or five star rating
from Morningstar or an equivalent rating from an equally recognized source. The
Treasurer is prohibited from committing assets to the following types of equity
securities:
·
Individual stocks and bonds
· Private
placements
· Letter
stocks
· Options
· Securities
of Foreign Companies, unless they are less than 20% of a mutual fund
· Short
sales
· Securities
of issuers having filed a petition for bankruptcy
The
objectives of the investments in the Equities asset class will be to equal or
exceed the return of the S&P 500. Within the above guidelines, the
Treasurer has full responsibility for selection and diversification of
equity securities. The Treasurer may not
invest any more than 50% of the total equity investment in any one holding. The Treasurer will have full discretion
over asset turnover and allocation of holdings among selected securities,
industry groups and sectors, within the limits described above.
The
Treasurer may invest in commercial paper, repurchase agreements, Treasury Bills,
certificates of deposit and money market funds to provide income, liquidity for
expense payments and preservation of the accounts principal. Investments in
cash and cash equivalents must meet the following criteria:
· Commercial paper must be rated Al or P1 by
Standard & Poor's and Moody's respectively and have a maturity of one year
or less.
· A minimum of 20% of the Cash and Cash Equivalents
assets class account shall be invested in U.S. Government Money Market or Mutual
Funds limited to U.S. Government and Agencies securities.
· No more than the greater
of 20% of the total market value of the Cash and Cash Equivalents or $100,000
may be invested in the obligations of a single issuer.
·
Ml money
market funds must be limited to U.S. Government and Agency securities and
commercial paper rated Al and P1 by Standard & Poor's and Moody's,
respectively.
The
Treasurer will not purchase assets other than those mentioned above without
prior approval by the Board of Directors of CSPE.
At
the request of the Treasurer, the funds may be managed in total or in part by a
professional Investment Manager under the direction of CSPE's Treasurer. It
shall be the duty and within the discretion of the Board of Directors of CSPE
to engage and disengage the services of the professional Investment Manager.
The Investment Manager will manage the funds based on the guidelines and
mandates contained within this CSPE Investment Policy. The Treasurer will
interview and recommend an Investment Manager. The Treasurer will then place
the Investment Manager's name before the Board of Directors of CSPE for
approval or disapproval. The Investment Manager will report to the Treasurer
with monthly, quarterly and annual reports, suitable to determine asset classes
and total portfolio's performance and value. The reports are to indicate the
percentage of each asset class to determine that the portfolio is following the
CSPE investment policy. The Treasurer, if required, shall instruct the
Investment Manager to make adjustments as necessary to bring the portfolio into
compliance. The Investment Manager serves at the will of the Board of Directors
of CSPE, and may be removed at any time for any reason.
The
Board of Directors of CSPE at its meeting this 21st day of June, 2003, has
reviewed and approved the investment policies, restrictions, guidelines and
philosophies included in this document. These investment policies,
restrictions, guidelines and philosophies represent a prudent investment policy
that provides for growth in assets while limiting the risk CSPE accepts.
This policy must be reviewed at least annually by
the Board of Directors for the express purpose of assuring that this policy
meets the current needs of CSPE.