Statement of Investment Policies and Objectives

Policy Statement

Adelphi intends to typically use pooled or mutual funds as the investment managers in the University’s Endowment Fund. The prospectus or investment management agreement of each fund considered or currently in place as an investment manager will be reviewed periodically to ensure that the stated investment philosophy of the manager is appropriate versus this investment policy. If the investment manager exhibits an investment philosophy or objective inconsistent with those previously approved by the Finance and Investment Committee, such will be taken into consideration by the Committee in its performance monitoring evaluation.

Reason for Policy

The Statement of Investment Policies and Objectives is the result of discussions between the Finance and Investment Committee (“the Committee”) of Adelphi University (“the University”) and Aon Hewitt Investment Consulting, Inc. (“AHIC”). The purpose of this statement is to assist the University and the investment managers in effectively supervising and managing the assets of the Adelphi University Endowment/Quasi-Endowment Fund (“the Endowment”), and Operating Cash pool (“Operating Cash”).

Who Is Governed by this Policy

Staff

Policy

Introduction

This Statement of Investment Policies and Objectives sets forth Adelphi University’s plan for effectively supervising and monitoring the investment of the University’s Endowment Fund and Operating Cash assets.

Delegation of Responsibilities
The Finance and Investment Committee has responsibility for formulating Endowment Fund and Operating Cash investment policy, developing investment objectives, retaining and monitoring investment advisors, and allocating assets among the advisors. The Finance and Investment Committee (“the Committee”) will oversee the routine operations of the University’s investment programs and will report its recommendations to the Board of Trustees regarding substantive changes in policies, asset mix, and investment advisors. Day-to-day responsibilities for implementing Endowment Fund and Operating Cash policies will be assigned to University staff, including the Executive Vice President of Finance and Administration.

Endowment Fund Objective
总捐赠基金的基本目标是最大化总回报，同时遵守资产组合政策指导方针和这里定义的风险约束。整个捐赠基金的总回报目标是“真实”(即扣除通胀因素)的每年至少5%的回报。达到每年5%的实际回报目标，大学董事会可批准每年支出不超过4.5%的资产，同时至少保留基金总资产的实际价值。

Endowment Fund Components
The total Endowment Fund actually consists of two sub-portfolios, the true Endowment and Quasi-Endowment. For the purpose of this policy statement, both sub-portfolios are combined and have the same investment characteristics, risk tolerance levels, and objectives.

Operating Cash Objective
The basic objective of the Operating Cash pool is to provide a reasonable level of current income while minimizing the likelihood of a capital loss, subject to the asset-mix policy guidelines and risk constraints defined herein. The Operating Cash is a short-term liquidity pool used to meet near-term operating liabilities.

Risk Posture

Investment theory and historical capital market return data suggest that, over long periods of time, there is a relationship between the level of risk (i.e., volatility of investment returns) assumed and the level of return that can be expected in an investment program. In general, higher risk is associated with higher expected returns.

Given this relationship between risk and return, a fundamental step in developing investment policies for the University is the determination of the Endowment Fund’s and Operating Cash’s risk posture. The Committee has examined both the risk tolerance, (i.e., the ability of the University to take risk) and its risk preference (i.e., the willingness of the Committee to take risk in the investment programs).

Risk Tolerance
The Committee has examined two important factors that affect its risk tolerance:

• Business and financial characteristics; and
• Liquidity characteristics.

Through an analysis of these factors, the risk tolerance of the University has been determined by the Committee to be average relative to other endowment funds. Any operating surpluses for the next several years will be spent to facilitate building or to maintain strategic spending policies. The balance sheet is reasonably strong and the endowment will remain intact for the foreseeable future.

Business and Financial Characteristics

• Investment earnings and endowment spending represent a moderate proportion of Adelphi’s revenues that decreases, as a percentage of revenues, through the forecast period.
• Adelphi’s statement of financial position is fairly strong.

根据公司的财务特征，Adelphi公司对经营性现金和短期现金的风险承受能力是平均的。对于捐赠基金的资产，Adelphi的风险承受能力是平均的。

Liquidity Characteristics
在可预见的未来(预计)，Adelphi可能会将任何运营盈余用于建造建筑物或维持战略支出政策。Adelphi的流动性特征表明经营性现金池的平均风险承受能力。流动性特征也意味着捐赠基金的平均风险承受能力。

Risk Preference
Adelphi’s risk preference (i.e., its willingness to accept risk) is average. The University is willing to accept some short-term volatility to achieve higher long-term rates of return. The University is also focused on the long-term viability of the Endowment/Quasi-Endowment in real purchasing terms, rather than short-term absolute returns. Additionally, the University is willing to be somewhat different than its peers (in terms of overall asset allocation) if circumstances dictate.

Spending Policy

The University’s annual operating needs are financed partially by distributions from the Endowment Fund. The University’s endowment spending policy is predicated on the following principles:

• Preservation of Capital —The Endowment’s purchasing power, at a minimum, must be preserved in perpetuity. Therefore, the Endowment will be invested in a diversified asset portfolio that is expected to produce an average annual total return that at least equals inflation plus endowment spending without assuming undue risk.
• Intergenerational Equity—A balance must be maintained between the needs of today and those of tomorrow to ensure endowment spending for current and future generations is equitable.
• 稳定性——为了提供年度分配的可预见性，并减轻金融市场固有的短期波动，年度支出将基于捐赠基金过去5年的平均市场价值。这将有助于制定长期战略和财务计划。随着时间的推移，目标是使年度支出至少随着通货膨胀而增加。捐赠基金的资产配置投资策略与这一目标相一致。

In the context of these principles, annual spending from the total Endowment Portfolio will be targeted to be 4.5% of its average market values over the trailing 5-year period. The Endowment Portfolio will make quarterly distributions based on its stated spending policy.

In the event the University’s budgetary needs cannot be met by the above spending policy, at its discretion, the Finance and Investment Committee may recommend to the Board of Trustees an appropriate course of action. Similarly, if the University’s budgetary needs are fully met without any spending from the endowment, earnings will be reinvested and no supplemental draw will be taken.

营运现金池可应付大学的即时现金流动需要。其余额预计会因大学的收入和开支周期而有所不同。

Asset Allocation Policy

Over the long term, asset allocation policy will be the key determinant of the returns generated by the Endowment Fund and Operating Cash and the associated volatility of returns. In particular, the level of equity exposure is the key element within the University’s investment policies.

In developing asset allocation policies for its Endowment Fund and Operating Cash, the Committee examined asset projections to evaluate possible results over the next ten years. These projections examined the risk/return tradeoffs of alternative asset classes, as well as alternative levels of equity exposure. Through incorporating the results of these projections with its risk posture, as well as considering typical practices and practical investment issues, the Committee has developed the following asset mix guidelines:

Percentage of Total Endowment Fund
	Minimum	Target	Maximum
Equities
Large Capitalization	23%	28%	33%
Small/Medium Capitalization	8%	13%	18%
International Developed	━	18%	━
Emerging Markets	━	6%	━
Total International Equities	19%	24%	29%
Total Equities	50%	65%	75%
Fixed Income	20%	25%	40%
Alternatives (i.e., Hedge Funds, Distressed Debt, etc.)	0%	10%	15%
Cash Equivalents	0%	0%	5%

The Committee reviewed the above asset allocation targets in March 2017 and the target portfolio allocation remained the same. The target allocation above reflects the Committee’s desire for growth in the Endowment assets at a reasonable level of risk. The Committee will review its asset mix at least annually and rebalance its portfolio mix at any time that an asset class(es) reaches the minimum or maximum allocation specified above. In rebalancing, the University will allocate assets back to the target mix over a reasonable period of time. (Note: The primary focus in rebalancing will be on overall equity exposure.)

Percentage of Total Endowment Fund
	Minimum	Maximum
Short-Term Fixed Income	0%	100%
Cash Equivalents	0%	100%

Investment Manager Structure

To implement its asset allocation policies, the Committee has developed the following investment manager structure for the Endowment Fund:

Investment Manager	Portfolio
Vanguard	S&P 500 Index Fund
Fiduciary Management Inc. of Milwaukee	Large Cap Equity
Rothschild Asset Management	Small/Medium Cap Equity
Vanguard	Total International Stock Index
Franklin Templeton	Foreign Equity Series
Oaktree	Emerging Markets Equity
Shenkman	Energy Opportunity Fund Ltd.
Commonfund	Global Distressed Debt Fund Series 2
Baird	Aggregate Bond Fund
Reams	Scout Core Plus Bond
PIMCO	Diversified Income Fund
iShares	TIPS Bond ETF
TD Bank	Money Market Fund

The investment manager structure for the Operating Cash pool is as follows:

Investment Manager	Portfolio
TD Bank	Money Market Fund
Merill Lynch	WCMA Money Fund Class I

Investment Manager Guidelines

以下准则已被制定用于管理大学捐赠基金的资产。在使用共同基金或混合基金时，虽然委员会承认基金的章程或指导原则取代了大学的章程或指导原则，但预期投资组合一般应符合这些指导原则。

U.S. Equity Portfolios

• 按市值计算，任何一家公司的股权(包括普通股和可转换证券)不得超过该经理投资组合的8%。
• 在投资组合的股权部分至少应持有20只个股。
• Equity holdings should represent at least 90 percent of the portfolio at all times.
• Equity holdings in any one economic sector (as defined by the Global Industry Classification Standard) should not exceed the lesser of three times its weighting in the Standard & Poor’s 500 Index or 30 percent of the portfolio for large capitalization portfolios.
• 任何一个经济部门(根据全球行业分类标准定义)的股票持有量不应超过罗素2500指数权重的三倍以下，或中小型投资组合的30%。
• Marketable common stocks, preferred stocks convertible into common stocks, S&P 500 futures contracts, and fixed income securities convertible into common stocks are the only permissible equity investments.
• Securities of foreign (non-U.S. domiciled) entities denominated in U.S. dollars that trade on a U.S. stock exchange are permitted. Securities denominated in currencies other than the U.S. dollar are permissible investments up to 20% of the manager’s portfolio measured at market value.

International Equity Portfolio

• Equity holdings in a single company (including common stock and convertible securities) should not exceed 8 percent of the manager’s portfolio measured at market value.
• A minimum of 25 individual stocks should be held.
• 任何一个行业(根据全球行业分类标准的定义)的股票持有量不应超过按市值衡量的经理投资组合的25%。
• A minimum of 50 percent of the countries within the MSCI EAFE Index should be represented within the portfolio. The allocation to an individual country should be limited to the lesser of 35 percent or 4 times the country’s weighting within the MSCI EAFE Index. Where allocations to non-EAFE countries are used, they should not exceed 35 percent in total.
• 货币套期保值的决定由投资经理决定。

Fixed Income Portfolios

• The duration of the market duration fixed income portfolio should be targeted to that of the Bloomberg Barclays Aggregate Index (“BAGG”). The duration may range from plus or minus 2 years of the duration of the BAGG.
• The duration of the short-term fixed income portfolio should be targeted to that of the Bloomberg Barclays 1-3 Year Government Index. The duration may range from plus or minus 1 year of the duration of the benchmark.
• Fixed income holdings in a single security (excluding obligations of the United States Government and its agencies) should be limited to 6 percent of the manager’s portfolio measured at market value.
• At least 80% of fixed income investments should be limited to “investment grade” securities, i.e., securities with ratings of BBB- (Standard & Poor’s) or Baa3 (Moody’s) or higher or unrated securities which the investment manager deems to be investment grade.
• Securities of foreign (non-U.S.) entities denominated in U.S. dollars are limited to 20 percent of the manager’s portfolio, measured at market value. Securities denominated in currencies other than the U.S. dollar are limited to 20 percent of the manager’s portfolio.
• 对于为大学的投资组合购买或持有的证券，投资经理在评估证券的流动性和价格影响时，不仅应考虑大学的部分，还应考虑其所有帐户中持有的总额。

Hedge Funds

• The hedge fund investment managers may make investments which utilize both traditional assets (stocks, bonds, cash) and additional alternative assets which are aligned to their particular strategy.

Distressed Debt Investments

• The distressed debt fund(s) invests in securities that are often illiquid and trade at distressed prices. This manager may utilize both traditional assets (stocks, bonds, cash) and additional alternative assets.

Cash Equivalent Investments

• Managers generally are expected to utilize a high quality, broadly diversified commingled fund or other vehicle made available by the custodian bank. Managers also may use alternative money market funds or vehicles that meet the strong standards of quality, safety, and diversification.

Prohibited Investments or Strategies

• Investments may not be made in margin purchases, use of leverage, short sales, options, commodities, oil, gas or mineral leases, mineral rights, royalty contracts, letter stock purchases, , leasebacks, land loans or other direct loans. The exemption to this policy is for the hedge managers, private equity or debt managers and the commodities manager, who through various investments may invest in prohibited investments or strategies.

Policy for Utilization of Futures and Options and Leveraging

• Futures and options positions will be permitted in the management of the Endowment assets but should be limited to covered hedges or equitization of cash balances only. The notional balances for all futures and options positions should be limited to 10 percent of the portfolio’s market value. Leveraging portfolio positions through borrowing, short sales, or other encumbrances of the University’s assets is prohibited. The hedge fund, private equity, real estate, infrastructure or debt managers, and the commodities manager are exempt from the above restrictions.

Policy for Utilization of Investment Manager Affiliated Securities

• The investment manager shall not purchase any securities of its organization or affiliated entities.

Investment Performance Objectives

To facilitate ongoing review and evaluation of the Endowment Fund and Operating Cash, the Committee believes that specific investment performance objectives are appropriate. These performance objectives are designed to provide a quantitative basis to judge the effectiveness of the investment programs and their investment managers.

Total Endowment Fund Performance Objectives

The total Endowment Fund investment program is structured so that it offers a reasonably high probability of meeting a real return objective of at least 5% per year over a period of five to ten years. The Endowment Fund’s real return will be, in part, a function of the capital market environment in which the Endowment’s investment managers operate. Therefore, regardless of whether or not the market environment permits the achievement of substantial real returns, the University expects any active investment managers that it retains to produce results that are above average relative to other actively-managed funds and relative to passive alternatives. Investment managers should cover the fees paid and provide a return increment that justifies the risk assumed in active management.Over a three- to five-year period, the annualized total return of the portfolio should exceed the annualized total return of the Adelphi Revised Custom Index which reflects the underlying asset allocation and the benchmarks associated with the respective investment manager accounts. These are rebalanced every calendar quarter.

Performance Monitoring

The Committee will use some or all of the following means to monitor the performance of its investment managers:

• Periodic meetings with the investment managers;
• Investment manager reports;
• Custodial statements (including transactions costs); and
• 绩效评估报告。

With a long-term perspective toward three- and five-year time horizons, the Committee will evaluate whether each manager has:

• Performed satisfactorily when compared with the specific objectives for its portfolio;
• Produced results that compare favorably to other investment management organizations managing similar portfolios;
• Exceeded the returns of appropriate market indices;
• 因应资本市场的发展，作出合理及有效的投资组合管理决策;而且
• Adhered to the relevant policies and objectives.

Among the events that the Committee will examine closely in its review of its investment managers are:

• Poor results relative to objectives over a fairly short period of time (i.e.., one year);
• Poor absolute performance over a three- to five-year period;
• Poor performance relative to objectives over a three- to five-year period;
• A change in the portfolio manager assigned to the University or a departure of one or more key individuals;
• Violation of an investment guideline; and
• 投资管理机构的所有权或控制权的变化。

The Committee will evaluate investment managers and events in light of the current situation and other related factors then present.

Responsibilities of the Investment Managers

The duties and responsibilities of the investment managers include:

• 在投资大学的捐赠基金及营运现金资产时，应以审慎的专业投资经理在投资该等资产时所应有的细心、技巧、审慎及勤勉，熟悉该等事项并以该等身分行事，并符合本指引的规定。
• Adhering to the investment policies and guidelines prescribed by the University.
• Initiating written communication with the University whenever the investment manager believes the guidelines should be changed. The Committee recognizes that such changes may be necessary from time to time given the dynamic nature of capital markets.
• Informing the University regarding all significant matters pertaining to the investment of its assets. These matters include:
  • Substantive changes in investment strategy or portfolio structure; and
  • Significant changes in the ownership, affiliations, organizational structure, financial condition, and professional staffing of the investment management organization.
• Submitting at least quarterly reports describing portfolio holdings, performance results (on an after-fee basis), and transactions activities (including brokers used, commissions directed to each broker, and “soft dollars” generated).
• 告知大学经理和经纪人之间的“软美元”安排(并描述用“软美元”购买的服务)由大学的捐赠基金和营运现金资产产生。这些信息应该定期更新，特别是当“软美元”关系发生重大变化时。经理还应定期向大学通报投资组合内的周转情况，并准备记录投资组合周转发生重大变化的理由。
• Voting all proxies after careful assessment of the issues involved. The managers should pay particular attention to items that may reduce the economic value of stockholders’ rights of ownership and thereby impact adversely the performance of the University’s assets.
• Investment manager should meet with the University. The Committee (or its designated representatives) expects to meet with the investment managers on a periodic basis. During such meetings, the managers will be expected to explain their current investment strategies and the rationale for them, and comment on performance.

Definitions

This policy does not have definitions associated with it at this time. Upon periodic policy review this area will be evaluated to determine if additional information is needed to supplement the policy.

Forms

This policy does not have forms associated with it at this time. Upon periodic policy review this area will be evaluated to determine if additional information is needed to supplement the policy.

Related Information

This policy does not have related information at this time. Upon periodic policy review this area will be evaluated to determine if additional information is needed to supplement the policy.

Document History

• Last Reviewed Date: October 16, 2017
• Last Revised Date: October 16, 2017
• Policy Origination Date: Not known

Who Approved This Policy

Robert DeCarlo, Chief Financial Officer & Associate Vice President

Michael J. McLeod, Director of Financial Operations and Associate Vice President