Investment Policy
Policy
This policy applies to the investment of all operating funds of Mid-Ohio Psychological Services, Inc. The purpose of this policy is to establish guidelines for the prudent investment of the agency’s assets. In the process of identifying the investment strategies to be used, these guidelines provide stability in the management of the portfolio. This policy driven approach reduces the Board’s and investment manager’s propensity to act impulsively during volatile markets. The policy furthermore provides parameters for the portfolio by providing guidelines for selecting appropriate investments and classes of assets. It is recognized that from time to time the Board of Directors’ attitudes, expectations, and objectives may change. Therefore, this policy statement is intended to be used as a guideline rather than a rigid statement of policy from which there can be no deviation. The specific purpose of the following policy, which is to be reviewed annually by the board of directors of the agency, is to:
The Board’s investment philosophy is to exercise ordinary business care and prudence in its investment of agency assets considering the long and short-term needs of the agency in carrying out its purposes, its present and anticipated financial requirements, expected total return on its investments, price level trends, and general economic conditions. The agency recognizes that the uncertainty of future events, volatility of investment assets, and the potential loss in purchasing power are present to some degree with all types of investments. While high levels of risk are to be avoided, the assumption of a moderate level risk is warranted and encouraged in order to allow the opportunity to achieve satisfactory results consistent with the objectives and investment philosophy of the agency. Modern Portfolio Theory will form the basis of investment philosophy. Correlations of asset classes will be applied to reduce risk when possible and remain consistent with the portfolio’s investment goal. Future variations may occur as new asset classes become available or as the investment advisor makes moderate adjustments.
Procedure
Responsibility for Management of Funds
All funds of the agency shall be managed by the board of directors. At the discretion of the board, an external agent or agencies may be engaged to manage funds of the agency; in which case, the external manager(s) shall be responsible directly to the board of directors.
External Management of Funds
Investment through external programs, facilities, and professionals operating in a manner consistent with this policy will constitute compliance.
The duties and responsibilities of each investment manager appointed to manage the agency’s assets are:
Semi-annually, the Financial Coordinator and Executive Director will review each manager’s performance and adherence with the guidelines set forth in this document and report to the Board of Directors. Reviews will include:
Investment Objectives
General Objectives.
Assets of the agency shall be invested in a manner consistent with the exercise of ordinary care and prudence under the facts and circumstances prevailing at the time of the investment action or decision.
Assets of the agency should be invested in a manner consistent with the fiduciary standards and prudent investment standards as forth in the Third Restatement of the Law: Trusts (Prudent Investor Rule) (1992), directed that the prudent man, acting in a similar capacity familiar with such matters, would use an investment of like character with like aims and with due considerations given to the tax exempt status of the agency.
All transactions must be undertaken for the sole interest of the agency’s portfolio and its beneficiaries.
The assets must be invested with the safeguards to which a prudent person would adhere.
Investments shall be diversified so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so.
Broad Objectives:
Preservation of capital with the potential for capital growth that is moderate risk.
Over all time periods, achieving the highest possible return commensurate with the level of risk assumed.
To achieve the highest rates of return feasible within the risk parameters established by the policy.
Investment Goals
The agency seeks to achieve as much income as possible, consistent with preservation of capital while considering the potential for capital appreciation. In recognition of this investment goal, the agency desires a portfolio of investments having moderate relative
Risk Measures
Risk measures will be incorporated in the form of standard deviation and initial acceptable levels will be limited by comparison with the standard deviation inherent in the S&P 500 Index and Shearson Lehman Government Bond Index on a blended level 60/40 respectively.
Time Horizon – For the portfolio, evaluation and performance measures will be set to a 6 to 10 year period that is necessary to encompass at least one full market cycle.
Financial Guidelines. The Board of Directors believes that the agency’s assets should be managed in a manner that reflects the following statements.
Asset Allocation.
All MOPS assets should be allocated as follows:
Policy
This policy applies to the investment of all operating funds of Mid-Ohio Psychological Services, Inc. The purpose of this policy is to establish guidelines for the prudent investment of the agency’s assets. In the process of identifying the investment strategies to be used, these guidelines provide stability in the management of the portfolio. This policy driven approach reduces the Board’s and investment manager’s propensity to act impulsively during volatile markets. The policy furthermore provides parameters for the portfolio by providing guidelines for selecting appropriate investments and classes of assets. It is recognized that from time to time the Board of Directors’ attitudes, expectations, and objectives may change. Therefore, this policy statement is intended to be used as a guideline rather than a rigid statement of policy from which there can be no deviation. The specific purpose of the following policy, which is to be reviewed annually by the board of directors of the agency, is to:
- Establish the investment objectives, policies, guidelines, and eligible securities relating to any investment owned or controlled by the agency.
- Identify the criteria against which the investment performance will be measured.
- Communicate the objectives of the Board, staff, investment managers, brokers, and funding sources that may have involvement.
- Serve as a review document to guide ongoing oversight of the management of the agency’s investments.
The Board’s investment philosophy is to exercise ordinary business care and prudence in its investment of agency assets considering the long and short-term needs of the agency in carrying out its purposes, its present and anticipated financial requirements, expected total return on its investments, price level trends, and general economic conditions. The agency recognizes that the uncertainty of future events, volatility of investment assets, and the potential loss in purchasing power are present to some degree with all types of investments. While high levels of risk are to be avoided, the assumption of a moderate level risk is warranted and encouraged in order to allow the opportunity to achieve satisfactory results consistent with the objectives and investment philosophy of the agency. Modern Portfolio Theory will form the basis of investment philosophy. Correlations of asset classes will be applied to reduce risk when possible and remain consistent with the portfolio’s investment goal. Future variations may occur as new asset classes become available or as the investment advisor makes moderate adjustments.
Procedure
Responsibility for Management of Funds
All funds of the agency shall be managed by the board of directors. At the discretion of the board, an external agent or agencies may be engaged to manage funds of the agency; in which case, the external manager(s) shall be responsible directly to the board of directors.
External Management of Funds
Investment through external programs, facilities, and professionals operating in a manner consistent with this policy will constitute compliance.
The duties and responsibilities of each investment manager appointed to manage the agency’s assets are:
- Managing the assets in accordance with the policy guidelines and objectives expressed herein, or expressed in a separate written agreement when deviation is deemed prudent and desirable.
- Exercising complete investment discretion within the guidelines and objectives expressed herein. Such discretion includes decisions to buy, hold, or sell securities in amounts or proportions reflective of the manager’s current investment strategy and compatible with the objectives of the agency.
- Promptly informing the Financial Coordinator and Executive Director regarding all significant matters pertaining to the investment of the assets. The Board of Directors should be kept apprised of major changes in investment strategy, portfolio structure, market value and other matters affecting the investment of assets.
- Managers shall periodically distribute all ordinary income earned in their respective portfolio.
Semi-annually, the Financial Coordinator and Executive Director will review each manager’s performance and adherence with the guidelines set forth in this document and report to the Board of Directors. Reviews will include:
- Market and total fund returns
- Total portfolio volatility
- Individual manager returns vs. indices, benchmarks and universes
- Adherence to mission related guidelines and objectives
- Asset allocation and spending policy
- The continuing appropriateness of this document
Investment Objectives
General Objectives.
Assets of the agency shall be invested in a manner consistent with the exercise of ordinary care and prudence under the facts and circumstances prevailing at the time of the investment action or decision.
Assets of the agency should be invested in a manner consistent with the fiduciary standards and prudent investment standards as forth in the Third Restatement of the Law: Trusts (Prudent Investor Rule) (1992), directed that the prudent man, acting in a similar capacity familiar with such matters, would use an investment of like character with like aims and with due considerations given to the tax exempt status of the agency.
All transactions must be undertaken for the sole interest of the agency’s portfolio and its beneficiaries.
The assets must be invested with the safeguards to which a prudent person would adhere.
Investments shall be diversified so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so.
Broad Objectives:
Preservation of capital with the potential for capital growth that is moderate risk.
Over all time periods, achieving the highest possible return commensurate with the level of risk assumed.
To achieve the highest rates of return feasible within the risk parameters established by the policy.
Investment Goals
The agency seeks to achieve as much income as possible, consistent with preservation of capital while considering the potential for capital appreciation. In recognition of this investment goal, the agency desires a portfolio of investments having moderate relative
Risk Measures
Risk measures will be incorporated in the form of standard deviation and initial acceptable levels will be limited by comparison with the standard deviation inherent in the S&P 500 Index and Shearson Lehman Government Bond Index on a blended level 60/40 respectively.
Time Horizon – For the portfolio, evaluation and performance measures will be set to a 6 to 10 year period that is necessary to encompass at least one full market cycle.
Financial Guidelines. The Board of Directors believes that the agency’s assets should be managed in a manner that reflects the following statements.
Asset Allocation.
All MOPS assets should be allocated as follows:
Equities may be represented in the portfolio up to a maximum of 50% of the agency’s market value with a minimum of $0%. Under normal conditions, the target equity exposure should be 30%.
Fixed income securities (including preferred stocks and convertible bonds) shall have a minimum exposure of 0% and shall not exceed a maximum exposure of 50% of the agency’s market value. Under normal conditions, the target fixed income exposure shall not exceed a maximum exposure of 5%.
Cash equivalent (including all senior debt securities with less than one year to maturity) may compromise up to 80% of the agency’s market value.
Fixed Income Investments.
Guidelines.
Fixed income assets selected for agency’s portfolio must have a readily ascertainable market value and must be readily marketable.
Bond and corporate debt obligation maturities may not exceed 30 years.
Adequate diversification across the individual holdings should be maintained. The investment manager may not:
Invest more than 15% of the assets taken at cost in any one industry or group of related industries.
Invest more than 5% of the assets taken at cost in any one company.
Invest more than 5% of assets taken at cost in any one issue. (US government guaranteed issues and its agencies are excluded from these limitations.).
Restrictions.
U.S. Government Obligations, including fully-guaranteed Federal Agencies.
No restrictions.
Commercial Paper.
Must be rated within the two highest classifications, by two rating services.
Must mature within 270 days or less from issue.
U.S. Government-sponsored Agency Obligations (not fully guaranteed).
No restrictions.
Corporate Debt Obligations.
The majority must be rated, at time of purchase, AA or better by Moody’s or AA or better by S&P.
Cash Equivalents.
It is desirable that the agency use interest bearing money market funds, FDIC insured certificates of deposit, U.S. Treasury Bills and other cash equivalent securities with a maturity of one year or less and a credit rating of AA or better by the S&P. A commitment to any federally insured institution shall not exceed $250,000.
Individual Collateralized Mortgage Obligations (CMO’s) may not be purchased.
Individual derivatives may not be purchased.
Equity Investments – Common Stocks. The following guidelines on common stock investments shall apply.
Individual issue or individual common stock purchases shall:
Have paid dividends in at least 3 of the past 5 consecutive during which period net earnings shall have exceeded dividends paid. Ninety (90) percent of all equities held are to meet these criteria.
Be registered on a national securities exchange (excluding common stocks of insurance, banks, or trust companies).
Not exceed of more than 5% of the outstanding common stock of any one company.
Not exceed more than 5% of the agency’s assets in any one corporation valued at cost.
Restrictions – Common Stock Investments. The agency is not authorized to invest in the following classes of securities, nor will it allow the employment of any of the following market techniques without the Board’s written approval.
Purchase tax-exempt securities.
Purchase individual issues of unregistered or restricted stock.
Deal in individual issues or direct naked options. Covered option writing is permitted as are options utilized in a hedging program designed to protect portfolio values.
Deal in individual issues in commodities (including gold and silver), commodity futures, oil, gas, or other mineral exploration or development programs.
Purchase on margin or with borrowed funds or sell short.
Purchase private placement debt.
Direct purchase of real estate.
Mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owed or held by the agency.
Purchase Conditional Sales Contracts or Lease-Backs.
Maturity of Investments
The maximum maturity for fixed-income securities will not exceed five years. The average maturity, however, should not exceed 2 years.
The maturity limitation is established to provide an appropriate degree of liquidity and may be amended to reflect the agency’s operating requirements.
Benchmarks
The benchmarks for evaluating performance of the two main asset classes will be:
Equities: S&P 500 Index – Goal: To exceed the average annual return over a full market cycle (3-5 years)
Fixed Income: Barclays Aggregate Bond Index – Goal: Exceed the average annual return of the index in a full market cycle (3-5 years)
It will be the responsibility of the Financial Coordinator and Executive Director to regularly review the performance of the investment account and investment policy guidelines, and report to the Board of Directors at least every other board meeting with updates and recommendations as needed.
Spending Policy
Each year, the agency is authorized to withdraw 25% of the total market value of the portfolio for the agency’s operating purposes as measured by the last day of the preceding year without Board approval. The dollar amount and timing of any distribution from the investment account will be left up to the discretion of the Executive Director and Financial Coordinator. With board approval, any amount can be withdrawn from the portfolio for the agency’s operating purposes.
Ethics and Conflicts of Interest
Directors and agents involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or could impair their ability to make impartial decisions. Directors and agents shall disclose any material interest in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio.
Authorized Individuals
The following individuals are authorized to engage in securities transactions as contemplated by and further described in the Investment Policy
Executive Director
Financial Coordinator
Created: 5/9/13
Board Approved: 9/11/14
