Investment Policy

Introduction

The Community Foundation is a charity and not for profit company, which exists to help to tackle issues of disadvantage in Staffordshire, Shropshire, neighbouring counties and the wider West Midlands region. We may hold endowments in both permanent and expendable form.

The Community Foundation aims to balance the needs of current and future beneficiaries. For the purposes of a permanent endowment the capital remains invested to provide for future beneficiaries and the income is spent on current beneficiaries. An expendable endowment is invested in a similar way, but there is a plan to spend the entire value of the fund, including the capital sum, over a set period of time.

The trustees of the Community Foundation are governed by the Trustee Act 2000 which sets out the general power of investment. They have delegated decision making on investment matters to the Finance, Audit & Investment sub-committee, who take regular advice from the Investment Managers appointed by the Community Foundation.

Investment Objectives

The Endowment is invested to produce the best financial return within an acceptable level of risk. The investment objective is to balance income and capital returns. The assets are managed to at least maintain the real capital value of the Endowment, whilst generating a sustainable level of investment income to support the current charitable activities.

Risk

The Community Foundation relies on the investment income to fund charitable activities, so the stability of income is important. The endowment is invested to mitigate risks over the long-term. The trustees understand that this is likely to mean that investment will be concentrated in real assets and that the capital value will fluctuate. The trustees are able to tolerate volatility of the capital value of the endowment, as long as the endowment is able to meet current expenditure from investment income.

The Community Foundation’s assets can be invested widely according to the general power of investment and are diversified by asset class, by investment manager and by security. Asset classes could include cash, bonds, equities, property, hedge funds, private equity, commodities and any other asset that is deemed suitable for The Community Foundation.

The Finance, Audit & Investment sub-committee have decided not to set a definitive strategic asset allocation, as they prefer to consult and take advice from Investment Managers annually and make the most prudent decisions based on the financial situation at the time of consultation.

The Finance, Audit & Investment sub-committee are responsible for identifying and monitoring suitable investment managers and investment vehicles for the Endowment. Meetings are held with appointed investment managers at least annually. There will be a full review of investment manager performance every 3 years, including a scoping exercise to determine whether the nominated investment managers are still meeting the needs of the Community Foundation.

The base currency of the investment portfolio is Sterling. Investment may be made in non‐Sterling assets but should not exceed 60% of the total investment portfolio value. Hedging is permitted. The Endowment’s cash balances are deposited with institutions with a minimum rating of A‐ or invested in a diversified money market fund. Bond exposure is focused on investment grade issuers.

Liquidity Requirements

The Community Foundation aims to balance the needs of current and future beneficiaries and as such aims to set a sustainable income target, whilst ensuring the capital is expected to grow in line with inflation over the long-term, and is able to draw down capital upon consultation and agreement with donors. Due to the nature of the Community Foundation’s other work, there is little need for liquidity in the endowment.

Time Horizon

Endowment held as ‘permanent endowment’ is expected to exist in perpetuity and investments are managed to meet the investment objective and ensure this sustainability. The Endowment held as ‘permanent endowment’ can adopt a long-term investment time horizon. Endowment held as ‘long-term endowment’ is expected to exist for not less than 20 years, and so a long-term investment time horizon will be adopted. Endowment held as ‘expendable endowment’ is expected to be awarded fully over a set period, (according to the wishes of the donor), and so a shorter time horizon may be more appropriate.

Ethical Investment Policy

The Trustees of the Community Foundation will regularly review the investments and will ensure that as far as is possible, a general ethical investment procedure is followed. This includes, but is not limited to, ensuring that no investments are made in;

Tobacco
Armaments
Pornography
Any company that engages in animal testing for purposes other than essential medical research where no alternative is available
Any organisation that supports, or is seen to support, an oppressive regime which does not meet basic human rights standards
Any organisation or investment where the primary effect of their product or service causes harm

Management, Reporting and Monitoring

The Finance, Audit & Investment sub-committee select investment managers and vehicles to implement the agreed investment strategy. Managers are required to produce a valuation and performance report quarterly. The committee meets quarterly and will, in at least one meeting per annum, review the portfolio, including an analysis of return, risk and asset allocation. The sub-committee reports formally to the full Trustee board at the first board meeting of each financial year and submit any recommendations for ratification and confirmation on at least an annual basis. This report includes a review of asset allocation strategy, performance, risk profile and consistency with the long-term investment objective.