Printed on: 07/22/2017. Please go to http://policy.umn.edu for the most current version of the Policy or related document.

ADMINISTRATIVE POLICY

Participating in a University Investment

Responsible University Officer(s):

  • Senior Vice President for Finance and Operations

Policy Owner(s):

  • Chief Investment Officer

Policy contact(s):

Date Revised:

March 2017

Effective Date:

March 2017

POLICY STATEMENT

The University has adopted a systematic approach to the investment management of all University funds in order to achieve the following objectives:

  • maintain access to funds in order to meet current financial obligations
  • preserve and improve the value of the University’s financial assets in order to provide support for the mission of the University in perpetuity
  • maximize earnings within acceptable levels of risk while meeting liquidity requirements
  • ensure compliance with all statutory, legislative, and financial reporting requirements

University assets are consolidated in investment pools in order to achieve specific investment objectives. The four investment pools are:

  • Temporary Investment Pool (TIP)
  • Group Income Pool (GIP)
  • Consolidated Endowment Fund (CEF)
  • Separately Invested Funds (SIF)

Colleges/departments are designated custodians of University funds allocated to their unit.  Colleges/departments may invest excess resources into an investment pool of their choosing (see Administrative Procedure: Selecting an Investment Option for University Funds), subject to the following restrictions:

  • No endowments may be invested in TIP or GIP
  • All True endowments, their associated Quasi-restricted endowments, Term, and Life Income funds must be invested in CEF
  • Participation in GIP requires a $25,000 minimum and all non-sponsored accounts must have positive aggregate balances. If the balance falls below the minimum, the balance must be brought up to $25,000 in two months or participation ceases
  • Quasi-restricted or Quasi-unrestricted endowments will not be established for amounts under $25,000, except to reinvest income from a True endowment

Colleges/departments may not invest the following funds in any investment pool:

  • General Operations and Maintenance Funds
  • State Special Funds

REASON FOR POLICY

University monies are pooled for collective investment to support the University’s mission. Aggregating funds into pools provides for the execution of asset allocation strategies that provide for greater diversification of asset classes while maximizing total return (dividends, interest income, and capital appreciation) on assets consistent with specific pool objectives.

PROCEDURES

FORMS/INSTRUCTIONS

APPENDICES

FREQUENTLY ASKED QUESTIONS

CONTACTS

SubjectContactPhoneFax/Email
Primary Contact(s) Stacy Hebdon 612-624-5858 s-hebd@umn.edu
Account Set Up Accounting Services Katia Wieber 612-625-2012 ewieber@umn.edu
Investment Options & Reporting Office of Investments and Banking 612-624-5558 oib@umn.edu

DEFINITIONS

Administrative Fee
A fee charged to Non-PUF endowments. The fee provides partial support for funding of capital campaigns and is determined by the President and the Board of Regents.

An annual fee of 1% is charged to GIP accounts. The fee provides support to Central Reserves in order to fund university-wide initiatives.

Asset Allocation
A diversification strategy that focuses on balancing investment risk and return through use of various asset classes such as stocks, fixed income, cash, commodities, real estate, etc.
  • Temporary Investment Pool (TIP)
    Short-term operating reserves primarily invested in high-quality, short-term, fixed income securities. TIP is the daily working capital for the University. Investment of TIP reserves is governed by the Board of Regents investment policy: Investment of Reserves
  • Group Income Pool (GIP)
    Long-term reserves invested primarily in domestic and international fixed income related securities. Investment of GIP reserves is governed by the Board of Regents investment policy: Investment of Reserves
  • Consolidated Endowment Fund (CEF)
    True endowment and quasi-endowment funds of the University that target a high percentage of equity and equity alternatives, and less exposure to fixed income securities. The asset allocation strategy is implemented through a diversified group of external investment managers. Investment of CEF is governed by the Board of Regents policy: Endowment Fund
Authorized Signer
University department personnel with the authority to approve additions, withdrawals or make changes to an income distribution allocation. For CEF endowments the departmental preparer serves as the authorized signer. For GIP participants, the Dean (or equivalent administrative officer) or Chancellor, the University CFO/Treasurer, and the University CIO serve as the authorized signers.
Endowments
Accounts established from gifts or institutional funds by administrative decision. Types of endowments are:
  • True
    Must remain permanently intact; principal may not be spent.
  • Quasi-restricted
    Principal and income distribution must be spent for designated purpose.
  • Quasi-unrestricted
    Principal and income distribution may be spent any purpose. Typical funding sources include royalties or unrestricted gifts.
  • Term
    Remains an endowment for a certain period of time.
  • Life Income Fund
    Principal may never be spent. Income distribution is paid to the donor or donor designee, or combination thereof, for the life of the donor or for a fixed period of time. Thereafter, becomes a True endowment.
Investment Objectives
The investment guidelines used by various investment pools to meet the goals of the investors and donors.
  • TIP - Maximize short-term income while protecting principal and maintaining liquidity.
  • GIP - Maximize current income. Principal appreciation is a secondary objective of the pool.
  • CEF - Maintain the inflation-adjusted value of the fund and maximize total return (income plus capital appreciation).
  • SIF - Each separately invested fund has its own investment objective specified by the terms of the gift or by administrative decision.
Investment Pools
  • Temporary Investment Pool (TIP)
    The working capital funds of the institution are invested in the Temporary Investment Pool. Funds in this pool come from appropriations, tuition receipts, federal grants, student loan funds, plant funds, gifts for current use, unexpended endowment distributions, and other funds derived from University operations, such as external sales. The pool funds the University's day-to-day financial obligations. The funds are generally not exposed to significant market risk. The accounting for TIP is on a book value basis, i.e. there is no risk of loss of principal to a University department.
  • Group Income Pool (GIP)
    Long- term operating reserves of the University created from departmental reserves. The funds support various capital infrastructure needs and programs. Funds should be invested in GIP when current income is the main goal and the dollars will not be expended for at least three years. GIP is accounted for on a per-share market value basis. The value of shares changes monthly depending on market fluctuations.
  • Consolidated Endowment Fund (CEF)
    The fund represents the pooling of individual endowment funds from both public and private sources. Essentially permanent funds, endowments have the longest investment time horizon. Funds should be invested in CEF when principal appreciation is the main goal, over a long-time horizon due to market volatility. The accounting for CEF is done on a per-share market value basis. The share value is adjusted monthly as the overall value of CEF assets change due to market fluctuations.
  • Separately Invested Funds (SIF)
    Separately invested funds are primarily shares of stock in University start-up companies or gifts of securities which by virtue of the terms of the gift, administrative decision, or practical expediency cannot be liquidated or combined with other investment pools.
Permanent University Fund (PUF)
PUF is a term applied to public endowments derived from sources such as state iron ore taxes, royalties, and federal land grants. By legislative mandate, PUF assets are used to match private contributions with the goal of providing substantial financial support for endowed chairs and professorships throughout the University. All PUF endowments are True endowments and as such the original principal may not be spent. All PUF endowments are invested in CEF and subject to the same policies.

RESPONSIBILITIES

Authorized Signer
GIP: Approves participation in GIP. Also approves all deposit and withdrawal requests. Completes and forwards form UM 1638 as directed. Authorized signers are the Dean (or equivalent administrative officer) or Chancellor, the University CFO/Treasurer and the University CIO.
CEF: Submits deposit, withdrawal and income distribution allocation requests, via the financial system. Authorized signer is the departmental preparer. Establishment of a new endowment requires completion of form UM___. Authorized signers are the Provost and University CFO/Treasurer.
Board of Regents
Ownership of all invested assets shall at all times be vested with the Board of Regents.
Investment Advisory Committee
A group of external investment professionals, who serve in an advisory capacity to the President and the Office of Investments and Banking. The committee meets quarterly to evaluate investment performance, asset allocation strategies, manager selection, and spending policy. The committee is chaired by the Chair of the Board of Regents’ Finance Sub-Committee.
Office of Investment and Banking
Day-to-day management of the investment activities (TIP, GIP, CEF, PUF,SIF, and RUMINCO) investment pools.
University Chief Financial Officer and Treasurer (CFO/Treasurer)
The Treasurer is responsible for the financial assets of the University. Authority for the day-to-day management of investment activities is delegated by the Treasurer to the personnel in Office of Investments and Banking.
Approves all GIP requests and approves requests to establish new endowments.
Accounting Services
Processes Forms UM 1638 and UM 1831 to verify that appropriate approvals have been granted for GIP and CEF requests. Approves all GIP and CEF transactions entered into the financial system. Maintains TIP Tables. Initiates quarterly income distribution and provides financial reporting.
University Chief Investment Officer (CIO)
Oversees all investment management activities on behalf of the University. Approves all GIP requests.
University Department
Chooses an investment pool option. Initiates requests to establish, deposit, or withdraw funds from investment accounts. Initiates income distribution allocation changes to investment accounts. Monitors investment account activity and reports. Adheres to Board of Regents policy, Administrative policy, and donor's instructions when spending funds.

RELATED INFORMATION

HISTORY

Effective:
March 2017 - New Policy, Combines Administrative Policies: Selecting Investment Options for University Funds, and Participating in the Group Income Pool. Incorporates language from the Selecting Investment Options for University Funds policy into a procedure associated with this policy. Provides better clarity around the different investment options of each investment pool.
Supercedes:
Selecting Investment Options for University Funds, and Participating in the Group Income Pool.
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