Purpose and Scope
St. Philip’s Episcopal Church is a non-profit that receives money from donations from parishioners and receives other money from fund raising activities. Some of the money received is used for operating expenses, and outreach donations to people and other organizations. Other money received is for future expenses; e.g., capital expenses, outreach and the endowment. The purpose of this investment policy is to provide guidelines for investing monies until they will be required.
Roles and Duties
St. Philip’s Vestry is the governing body of the church and has ultimate fiscal responsibility for church finances.
The Finance & Facilities Board is responsible for the oversight of the financial procedures and operations of the parish. As part of their financial responsibility, the Finance & Facilities Board is responsible for the investment of money, decisions regarding investment vehicles to be used, review of investment performance, and, if so decided, selection of an outside investment firm.
The Finance & Facilities Board can consult others, including an outside investment firm, for recommendations about investment options and to implement investment actions that the Finance & Facilities Board decides and approves.
Investment Objective
Money is to be invested with the objective of preserving the long-term real purchasing value of the assets while providing a relatively predictable and growing stream of income for the church.
The expected return on invested funds is the percentage rate of the annual draw plus the rate of inflation; e.g., 5% draw, 2% inflation, the target would be 7% or greater. Annually in November, the Investment Committee will determine the amount of money it will draw from the fund in the succeeding year. This draw will be a percentage of a rolling 12 preceding quarters of the value of the fund. In no case shall the draw exceed 5%, but may be less at the discretion of the Investment Committee.
Asset Allocation
The strategic allocation of portfolio assets across broadly defined asset categories with varying degrees of risk and return is the most significant determinant of long-term investment returns and portfolio asset value stability. Diversification across and within asset classes is the primary means by which the portfolio avoids undue risks over the long term.
Fund assets will be managed as a balanced portfolio composed of an equity portion and a fixed income portion. The role of the equity side is to maximize long term real growth and the role of fixed income portion is to generate current income and provide for more stable periodic returns and provide some protection against a long term equity decline. The maximum equity component of the portfolio is 60%.
Investment vehicles should have a Morningstar risk rating of four or higher.
Mutual funds, money market funds and certificates of deposit are a preferred investment vehicles.
Individual stocks should not be included in the portfolio.
Equity and fixed income investments can have US and foreign components. No more than 15% of the total portfolio should be invested in foreign investments.
Fund Availability
Liquidity of the portfolio is important. All securities should have 100% liquidity.
Investment Fees
Investment fees and expenses vary by firm. Firms with lower fees and expenses should be considered as part of maximizing the total return.
Dividends & Interest
Dividends and interest that are not withdrawn and used are to be reinvested.
Monitoring Performance
At least quarterly, the Finance & Facilities Board will monitor the performance of the portfolio, as well as the performance of the outside investment firm if used.
An assessment will be made to determine if the portfolio’s performance is in line with short-term long-term objectives.
The performance and risks of the vehicles in the portfolio should be compared to industry indexes, the rate of inflation and other investment vehicles to determine if there are better options available.
If used, the performance and cost of the outside investment firm should be compared to other outside investment firms to determine if better options are available.
