Investment Policy Statement

Pasco Education Foundation


I. Purposes of this Statement.

The principal purpose of this investment-policy statement is to establish guidelines for the prudent investment of PEF assets, to serve the following purposes:

1.   To provide a specific, policy-driven approach for strategic planning, consistency, and stability in managing the PEF investment portfolio.  This is intended to assist the PEF Board with:

•      developing a suitable asset allocation;

•      selecting appropriate investment managers or mutual funds within the framework of that asset allocation; and

•    prudently monitoring and evaluating the performance of such managers or mutual funds.

2.   To serve as a communication tool for informing current and prospective contributors about PEF investment policies and practices.

3.   To reduce propensity for impulsive financial actions.

Amendments to this policy statement may be made as stated in the Pasco Education Foundation by-laws.  Deviations from this policy may be made as warranted by future circumstances.  Such deviations, however, must be supported by a two-thirds vote of the Board membership, must be described in written form, and must be specifically included with the official Board minutes.


II. Investment Philosophy.

The Board’s investment philosophy is to exercise extraordinary business care and prudence in its investment of PEF assets, considering the long and short-term needs of the Foundation in carrying out its charitable purposes, its present and anticipated financial requirements, expected total return on its investments, price level trends, and general economic conditions. The Board recognizes that the uncertainty of future events, volatility of investment assets, and the potential loss in purchasing power are present to some degree with all types of investments. While high levels of risk are to be avoided, the assumption of a moderate risk is warranted and encouraged in order to allow the opportunity to achieve satisfactory results consistent with the objectives and investment philosophy of the Foundation.

Modern Portfolio Theory will form the basis of the investment philosophy. Correlation of asset classes will be applied to reduce risk when possible and remain consistent with the portfolio’s investment goal. Future variations may occur as new asset classes become available or as the investment advisor makes moderate adjustments.


III. Investment Objectives.

The investment objectives of the Foundation are to provide a long-term increase in value of the endowment through dividends, interest and capital growth to offset the potential risk of long-term inflation.

For the benefit of its beneficiaries, the Foundation seeks to deliver a rate of return after adjustment for inflation. Risk of loss of purchasing power due to inflation is a primary concern and some short-term reasonable volatility must be incorporated to offset this risk. A reasonable rate of return on an annualized basis is acceptable over the time horizon state for the portfolio. The portfolio will therefore take appropriate risk commensurate with achieving this goal. Assets of the Foundation shall be invested in a manner consistent with the exercise of ordinary care and prudence under the facts and circumstances prevailing at the time of the investment action or decision. In particular:

•          All transactions must be undertaken for the sole interest of the Foundation’s portfolio and its beneficiaries.

•          The assets must be invested with the safeguards to which a prudent person would adhere.

•          Investments shall be diversified so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so.


IV.  Policy

The Directors will select an investment advisor who will seek to achieve the stated investment objectives and to control risk.  The investment advisor will be responsible for the selection of the asset allocation. The investment advisor will seek to control risk through portfolio diversification and take into account the above-stated objectives, in conjunction with the current scholarship and community grant levels.  The investment advisor will determine the appropriate asset allocation levels as based upon the Foundation’s objectives. The investment advisor will provide, at least quarterly, a performance and asset allocation report.

Consistent with the above, the Directors will review the asset allocation and portfolio performance annually.


V.  Asset Allocation and Disposition

The PEF portfolio will be considered subdivided into two distinct categories:  Those moneys associated with endowment funds and those that are not.  Treatment of these individual fund categories is described as follows:

A.  Endowment Funds.

1.       Statement of Intent.  The assets of the endowment funds are to be used for scholarships unless otherwise specified in individual endowment agreements.  In addition, and at the discretion of the Board, up to two percent of the preceding year endowment value may be applied for PEF operating expenses.

2.       Investment Strategy.  Funds from PEF endowments will be placed under the care of an investment advisor (fiduciary), with the intent that evaluation and performance measures of the associated investments will be set to a 6 to 10 year period that is necessary to encompass at least one full market cycle.  The advisor will be instructed to follow a balanced portfolio with moderate risk.  For record-keeping purposes, PEF will track individual endowments separately and report results to the Board of Directors annually.

To assure a prudent degree of diversification and avoid excessive risk, no more than 5% of the investment account total assets shall be invested in the securities of any one issuer. (Note: this requirement is exclusive of mutual funds) Furthermore, no equity investment manager and no mutual fund in which the Endowment invests shall have an investment policy that promotes or substantially engages in the following:

•         Short sales, unless part of a market-neutral strategy, specifically approved by the Directors.

  • Options unless covered options
  • Futures contracts.
  • Commodities

•         Restricted stock or letter stock.

  • Non-marketable securities except securities subject to Rule 144A: and

•         Margin transactions.

3.       Asset Allocation: The strategic target asset allocation for PEF endowment funds will be as follows:

Overall Asset Allocation Limits                                 Max                      Min

Equity and Alternative Total                                       40%                      80%
Fixed Income and Cash Total                                      20%                      60%

Equity and Alternative Allocation Limits

US Equities                                                                      10%                      75%
International Equities                                                     5%                       65%
REITs and Alternatives                                                   0%                       20%


Distribution Policy: Scholarships shall be taken from the annual incomes of the individual endowments, and shall be granted in $1000. increments to recipients selected by the Board.  Endowment income moneys not applied to scholarships or operating expenses in a given year will be added to the values of the individual endowments.

B.  Non-Endowment funds.

Because the majority of funds in this category consist of annual contributions and other short-term moneys, these funds will be invested in money market accounts as deemed advisable by current interest rates and maturity times.  Disposition of these funds and their associated earnings will be at the Board’s discretion and in accordance with the PEF by-laws.