Wayne State University

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1.8 Investments - Long Term

DESCRIPTION

The Board of Governors has authorized the establishment of a single common trust fund to provide a fuller employment of long-term capital, a diversification of investments, and stability of income for endowment funds. Separate managers are used for each specific fund type identified by distinctly unique objectives.

POLICY

The following investment policy has been adopted by the Board of Governors:

  1. The day-to-day management of the various investment funds is to be entrusted to a manager or managers specifically appointed by the Board of Governors for each fund. A manager may purchase, sell, or exchange investments in the name of Wayne State University. The university shall be notified within 10 days after each transaction, and the university shall direct that these transactions be placed through a security dealer of its choice.

  2. Investments shall be made with a view towards a diversified portfolio of high grade securities, and shall be consistent with the objectives of the particular fund.

  3. Each manager's performance shall be reviewed by an independent agency. This review is to be based on the manager's specific performance as related to the performance of other managers accepting similar risks for a comparable sized portfolio.

  4. An annual manager's report and performance review shall be given to the Budget and Finance Committee of the Board of Governors.

Types of Various Fiduciary Accounting Funds Admissible for Participation in the Long-Term Investment Funds-Long-Term Investment Funds

  1. Regular Endowments. Gifts specifying that the principal sum is to remain inviolate and only the income used for the purposes specified by the donor.

  2. Fund Functioning as Functioning as Endowments. Gifts which specify that the income is to be used for the purposes specified by the donor and that principal may be used to augment income if needed. Such funds may be created by the donor or by a specific action of the Board of Governors.

  3. Living Trusts. Gifts specifying that the principal remain inviolate at least during the life of the donor, with the provision that income shall be paid to the donor during the donor's lifetime. Upon the death of the donor, the principal is to be reclassified as Regular Endowment if the donor had specified that the income only shall be used for a specific purpose. If the gift specifies that the Board of Governors shall determine the use of both principal and income, the action of the Board shall determine the reclassification of the account.

  4. Term Endowments. Gifts where the principal must be kept intact until a specified event occurs. The gift is then reclassified in accordance with the donor's instructions or as may be otherwise determined by the Board of Governors in the absence of such instructions.

Admission of Various Fiduciary Funds as Participants

Approved fiduciary funds may become participants in the Long-Term Investment Funds only at the beginning of a quarter and upon authorization of the Treasurer or designee. A principal value of at least $10,000 is required for admission. Lesser amounts will be placed in the University's Current Fund until future contributions are received that raise the total above this minimum. The minimum level is a generally-accepted amount to warrant the administrative expense of Fund management.

Occasionally an approved fund is of sufficient importance to warrant an exception to the admission date stipulation. At the request of the donor, the Treasurer may authorize the admission of such a fund at the beginning of any month and request from the custodian, a special investment review for such a purpose.

Withdrawal of Funds by Participants

Funds may be withdrawn from the Long-Term Investment Funds only at the close of a quarter and under the following conditions:

  1. A written request must have been filed with the Treasurer at least 60 days before the close of the quarter.

  2. If the withdrawal is from a fund functioning as an endowment, the request must be signed by the individual authorized by the donor to make the determination of the use of principal. If the donor specifies the Board of Governors, the Secretary of the Board shall sign the request and cite the action of the Board. If the individual so authorized is not a Vice President or a Dean, the cognizant Vice President or Dean with supervisory responsibility for the individual must countersign the request.

Nature of Participation

Each fiduciary fund admitted to the Long-Term Investment Funds will receive units of participation. Each unit will be equal in value to every other unit already in the fund. The number of units to be withdrawn at the close of any quarter will be determined by the amount requested and the value of the units at the time of withdrawal. A single unit value determined by the market value of the portfolio of the Long-Term Investment Funds at the time of withdrawal will be used.

Distribution of Income

Semi-annually the manager provides the Treasurer with a statement of the accrued interest on bonds and dividends declared but unpaid on common stocks. On the basis of these reports, income will be determined and distributed equitably to all participants. The amount of income to be distributed for the purposes specified by the donor shall not exceed 5% annualized rate of the market value of the fund's participating units. Any income in excess of this amount shall be used to increase the participating fund's principal unless an exception is specifically approved by the Treasurer.

Capital Gain and Loss Account and Investment of Excess Income of the Long-Term Investment Funds

As changes are made in securities held in the Long-Term Investment Funds, the sale price may exceed or be less than the acquisition price or book value. These differences are recorded in a "Capital Gain and Loss" account which constitutes equity belonging to all participants and thus will be distributed as an increase or decrease in their principal amounts at the close of each fiscal year. Income amounts earned in excess of the income actually distributed shall be invested and used to increase the participating fund's principal at the end of each fiscal year.