ENDOWMENT INVESTMENT AND SPENDING POLICY

I. Purpose of the Endowment The purpose of the Endowment is to provide:

  • Contributions to the operating budget of the Library as determined by the Board of Trustees (the “Board”) in consultation with the Finance Committee;
  • A reserve to be available in case of a financial shortfall; and
  • Capital for projects approved by the Board.

II. Investment Objective

The investment objective for management of the Endowment is to maximize its longterm rate of return while maintaining a reasonable level of risk. Endowment investment management shall be implemented and monitored by the Investment Sub-committee of the Finance Committee (the “ISC”).

III. Duties of the ISC The ISC will:

  • Establish asset allocation parameters for investment of the Endowment;  Select investment funds, managers, advisors and/or consultants for the investment portfolio(s);
  • Monitor the quality and performance of funds and managers;
  • Recommend and supervise the implementation of changes in asset allocation and fund management as appropriate; and
  • Report at least quarterly to the Board on the asset allocation, management and investment performance of the Endowment.

IV. Investment Manager Selection

It is the policy of the Library to utilize professional management services for the investment of the Endowment. The ISC will negotiate investment management contracts where appropriate and ensure that the investment guidelines under which the managers are to operate are communicated, understood, and followed by the managers.

V. Asset Allocation

The general policy shall be to invest in a diversified portfolio. In general, the Endowment is to be invested for the long-term in accordance with the asset allocation guidelines set forth in this document and the target allocation guidelines set forth in Appendix A hereto. However, there may be one or more sub-portfolios of the Endowment which are intended for a shorter-term horizon, which will be invested in accordance with Appendix B hereto.

A. Equities

The Endowment may hold US and non-US equities in the form of common and preferred publicly traded stocks. Equity portfolios are to be diversified broadly by style and capitalization. Equity portfolios are to be diversified globally. Equity investments may include individually managed portfolios, exchange traded funds (“ETFs”) and mutual funds. Active or passive approaches may be employed. The policy does not permit holdings in any of the following unless specifically approved by the Board of Trustees:

  • short sales unless for hedging purposes (including currency hedging);
  • holding letter or restricted stock;
  • buying or selling on margin;
  • shares of non- companies; or
  • the use of derivatives.

B. Fixed Income Investments

The fixed income portion of the Endowment may be invested in federally insured bank certificates of deposit, US and Non-US corporate bonds including convertible bonds, and U.S. or other government securities. The average credit rating of the bond portfolio should be AA or better.

No individual account may have more than 10% at cost, or 15% at market value, invested in any individual security or issuer and no more than 25% may be invested in any one industry sector. These constraints do not apply to U.S. government securities.

C. Real Assets

The primary purpose of real asset investments (i.e. commodities and real estate) is to provide diversification from traditional allocations to equities and fixed income, preserve and grow real principal, and provide protection during periods of inflation.

D. Cash and Cash Equivalents

The Endowment shall be fully invested and to the extent possible cash balances in the portfolio should be kept to a minimum. Funds and managers may maintain cash if they feel the market environment dictates, however, any significant cash balance should be justified. Any cash or cash equivalents should be invested in U.S. Treasury securities, commercial paper rated A-1 or P-1, or money market securities issued by institutions rated AA or higher or pooled funds with comparably high quality credit standards.

VI. Commingled Vehicles or Funds

An allocation decision made by the ISC to invest in a commingled vehicle or fund will not be constrained by the general, market-specific or categorical restrictions contained in this policy, but will be bound by the investment restrictions of the commingled vehicle or fund.

VII. Investment Manager Performance Evaluation The ISC shall be responsible for the ongoing monitoring of the performance of the investment managers versus agreed benchmarks over periods of the most recent 12, 24, 36, and 60 months. The investment managers shall report their performance in writing at least every calendar quarter.

VIII. Voting of Proxies Proxy voting will be the responsibility of the investment manager.

IX. Spending

The Endowment shall spend what it must, at a minimum, to maintain its non-taxable status. The Spending Rate shall be recommended to the Board each year by the Finance Committee. However, the spending rate will typically remain within the range of plus or minus 1.5% of the target spending rate of 5.0%. The Spending Rate (the annual amount withdrawn from the Endowment to support the operating budget) is generally to be 5% of the Endowment’s total assets measured each June 30th based on the three-year moving average of the market value of the Endowment Westport Library Endowment Investment and Spending Policy Page 4 taking into consideration the estimated total investment return, the estimated rate of inflation and the operating needs of the Library.

X. Enforcement The provisions of this document shall be construed and enforced by the Finance Committee at its discretion, in consultation with the Board.

XI. Amendment The Library Board of Trustees reserves the right to amend this document at any time.

Adopted by the Library Board of Trustees May 13, 1997, amended September 15, 1999, March 20, 2002, June 20, 2007, October 15, 2008, November 19, 2009, May 18, 2011, September 18, 2013, and November 18, 2015.

APPENDIX A TARGET ASSET ALLOCATION – LONG TERM HORIZON PORTFOLIOS

The Asset Allocation Ranges and Targets are:

Target Total Equities (Including Non-US Equities) (up to 50%) :
(Range)50-70% (with Target) 60%

Real Asset: (Range) 0%-15% (with Target) 10%

Total Fixed Income (Including Non-US Fixed Income) (up to 25%)
(Range) 20-40% (with Target) 30%

Asset Allocation should be reviewed at least once a year.

APPENDIX B TARGET ASSET ALLOCATION – SHORT TERM HORIZON SUB-PORTFOLIOS

Short Term Funds

Funds that are expected to be utilized by the Library for such near term requirements as building construction or major capital acquisitions within a 36 month time horizon may be invested in either federally insured bank certificates of deposit, or in short and intermediate term instruments or commingled pools with an average credit rating of AA or above.

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