Aspen Santa Fe Ballet Endowment Fund and Operating Reserve Investment Policy Statement
Article I Investment Philosophy
Section 1 Endowment Fund Origin, Definition, Authority & Uses
The Aspen Santa Fe Ballet (ASFB) Endowment Fund holds the original principle of donor gifts plus interest (accrued or paid), dividends, appreciation or depreciation on the investments of these assets. It is the ASFB Board’s understanding that, unless expressly stated in a donor’s gift, the historical value of the gift is not required to be maintained at its original nominal value. It is further understood that it is the responsibility of the ASFB Board to determine, in its sole discretion, the best strategy to use the Endowment Fund’s assets to support the operating needs of the ASFB Organization consistent with the goal of maintaining a corpus at an adequate size to allow growth and support for the life of the ASFB Organization.
Section 2 Operating Reserve Origin, Definition, Authority & Uses
The ASFB has established an Operating Reserve account that holds any and all capital surplus generated from its operations or any of its annual distributions from the Endowment Fund or any other source the ASFB board determines, in its sole discretion, to be appropriate. It is the responsibility of the ASFB Board to determine, in its sole discretion, the best strategy to use the assets in the Operating Reserve account to support the operating needs of the ASFB Organization.
Section 3 Endowment Fund Time Horizon
It is the intent of the ASFB Board that the Endowment Fund will achieve a competitive long term growth rate consistent with prevailing net total rates of return. The ASFB Board is keenly aware of the risks associated with investing and states that all potential investments must be reviewed and understood so that a potential full loss of the principle in a single investment will not materially damage the long term viability of the Endowment Fund.
Section 4 Operating Reserve Time Horizon
It is the intent of the ASFB Board that these funds be apportioned between fUnds needed for possible inclusion in the current fiscal year (short term) and funds that are not currently identified for use (intermediate term). The ASFB Board is keenly aware of the risks associated with investing and states that all potential investments must be reviewed and understood so that a potential full loss of the principle in a single investment will not materially damage the long term viability of the Operating Reserve account.
Section 5 Investment Manager
It is the intent of the ASFB Board that either one or several Investment Managers be used to make the actual selection of investments and manage the assets of both the Endowment Fund and the Operating Reserve account. The Investment Manager’s fee may be paid from each respective fund. This fee must be competitive and appropriate for the size and complexity of each fund and should be reviewed annually by the Finance Committee.
Article II Purpose and Application
Section 1 Purpose
The ASFB Board has established this Endowment Fund and its Operating Reserve account to support the operating needs of the ASFB Organization. Both the corpus and any investment returns, whether from appreciation, interest income, dividends or any accrued or accumulated values from its investments are for the sole benefit and use of the ASFB Organization.
Section 2 Application
This policy applies to all funds under the direct investment control of the ASFB Board.
Article III Management and Execution
Section 1 Execution and Authority
The ASFB Board delegates all necessary and ordinary authority to execute this policy to its Finance Committee.
Section 2 Endowment Funds
All of the assets of the Endowment Fund are restricted and therefore must follow the distribution procedures identified in Article IV in this Investment Policy Statement {IPS).
Section 3 Operating Reserve
All of the assets held in the Operating Reserve account are not restricted and therefore may be distributed at the sole discretion of the ASFB Board in consultation with the Executive Director.
Section 4 Investment Rules
The Finance Committee is authorized to establish all necessary policies, procedures and investment rules to execute the guidelines contained in this IPS for both the Endowment Fund and the Operating Reserve account.
Section 5 Liquidity
It is the intent of the ASFB Board that all investments in the Endowment Fund and the Operating Reserve account trade on an active exchange or on an internal custodian maintained market allowing for accurate valuation and easy liquidation.
Section 6 Diversification
The ASFB Board accepts that a well-diversified portfolio offers lower investment risk than a portfolio concentrated in any sector or class of securities. It is the intent of the ASFB Board that the Finance Committee takes advantage of this safety feature. It is the responsibility of the Finance Committee to write and execute, or to verify that each investment manager uses, an allocation policy that allows for growth in the total value of the Endowment Fund while at the same time minimizing its exposure to an uncontrolled reduction in total value of the assets under its control due to a selloff in highly correlated investments.
Section 7 Leverage
The use of leverage is not authorized in the Endowment Fund or the Operating Reserve account. This includes the use of margin, derivatives, commodities or any device used to enhance or multiply the exposure to an investment or strategy.
Section 8 Endowment Fund Investment Objective
The investment objective of the ASFB Endowment Fund is long term moderately aggressive growth, such as defined in Merrill Lynch Research and Investment Committee strategic guidelines.
Section 9 Operating Reserve Investment Objective
The investment objective of the short term Operating Reserve account is current income without a material loss to principle. The investment objective of the intermediate Operating Reserve account is moderate growth and income over an expected time period of two (2) to five (5) years.
Section 10 Endowment Fund Risk Tolerance
The risk tolerance of the ASFB Endowment Fund is moderately aggressive, such as defined in Merrill Lynch Research and Investment Committee strategic guidelines.
It is the responsibility of the Finance Committee to monitor this by measuring the risk exposure of the Fund in its entirety. This means that an individual investment may be of a lower risk or a
higher risk and may be included in the Endowment Fund as long as its inclusion does not alter the overall character of the Endowment Fund from a moderate to aggressive risk profile.
Recognizing this, the board accepts the possibility of a material loss in principle in a portion of the Endowment Fund, if, in the judgment of the Finance Committee, the potential for long term return justifies the investment risk.
Section 11 Operating Reserve Risk Tolerance
The risk tolerance of the short term portion of the Operating Reserve account is cash or cash equivalents of 12 months or less. These assets are intended for use during the current fiscal year and should not be exposed to a potential loss in principle.
The risk tolerance of the intermediate portion of the Operating Reserve account is moderately conservative, such as defined in Merrill Lynch Research and Investment Committee strategic guidelines. These assets are held for possible use in a company project within a two (2) to five
(5) year time frame. As such, the board would like to minimize their exposure to a material loss in principle.
Section 12 Reporting
It is the responsibility of the Finance Committee to report to the ASFB Board at least annually on the performance of the Endowment Fund and the Operating Reserve account.
It is expected that the ASFB Board would be notified, at its next regular meeting, if there is ever a material loss in the value of the Endowment Fund or the Operating Reserve account.
Section 13 Material Loss
A material loss is defined as anything greater than or equal to twenty percent (> or =20%) of the total value from the last fiscal year ending report.
If in any quarter, the Endowment fund and/or the Operating Reserves show a material loss, the Finance Committee must confirm that its current investment strategy and allocation policy is appropriate and consistent with the guidance contained in this IPS and continues to offer the best opportunity for recouping the funds loss in value.
Article IV Distributions
Section 1 Endowment Fund Distributions
It is the intent of the ASFB Board that the Endowment Fund will distribute annually to the operating needs of the ASFB Organization. The distribution rate will be between one (1%) and six (6%) percent and will be calculated based on a moving average of the value of the Endowment Fund at the end of the trailing twelve (12) quarters. This calculation will be based on the total value of the Endowment Fund at the appropriate quarter ends and therefore, will not be restricted by the classifications of “income”, “principle” or “corpus”. The distribution decision will be made annually at the end of the fiscal year and will apply for the following fiscal year. The actual rate will be determined by the Finance Committee based on its best judgment to maintain the size of the corpus at a level that would allow continued growth and future support for the life of the ASFB Organization versus the current financial needs of the ASFB Organization.
The Finance Committee does have the authority to hold in abeyance, for up to two (2) fiscal years, distributions from the Endowment Fund if, in its best judgment, the long term needs of the ASFB Organization would be better served by with-holding distributions.
Section 2 Endowment Fund Borrowing
The ASFB Organization is authorized to borrow from the Endowment Fund. All loans must be paid in full within three-hundred-and-sixty-four (364) days from their inception. The Finance Committee will apply a rate of interest on the loan appropriate to the needs of the ASFB Organization and in compliance with any applicable regulatory requirements.
The Executive Committee has the authority to approve borrowing from the Endowment Fund in consultation with the Finance Committee.
Section 3 Operating Reserve Distributions
The ASFB Board may distribute, in its sole discretion, any and all funds in both the short term and intermediate term Operating Reserve account to meet the ongoing operating needs of the ASFB Organization. The ASFB Board will exercise this authority in consultation with the Executive Director.
Article V Amendments and Review
Section 1 Amendments
The ASFB Board may, in its sole discretion, amend this IPS based on the guidance from its Finance Committee.
Section 2 Review
It is the responsibility of the Finance Committee to review this IPS, at a minimum, on a three year cycle to ensure it continues to meet the needs of the ASFB Organization. Recommended changes will be made to the ASFB Board.
Section 3 Change in Finance Committee Chair
It is the responsibility of the executive director of Aspen Santa Fe Ballet to notify Merrill Lynch when there is a change in the chair of the finance committee.