Investment Policy

June 2023

INVESTMENT OBJECTIVES AND GUIDELINES

HIAS Foundation Funds

INVESTMENT POLICY STATEMENT

HIAS Foundation is a New York not-for-profit corporation with long-term investment assets that are managed to fulfill the mission of the foundation.

This policy statement is issued for the guidance of fiduciaries, including investment managers and members of the HIAS Foundation Investment Committee (the “Committee”), in the course of investing assets for the Fund.

This Statement is intended to provide a foundation so that the Investment Committee and its OCIO (outsourced chief investment officer) can effectively evaluate the performance of the Fund and its Investment Managers and oversee the management of Investment assets in a prudent manner.

This Statement is not intended to remain static. At least annually, the OCIO and the Investment Committee will review this Statement.

STATEMENT OF GOALS AND OBJECTIVES

This statement of investment goals and objectives expresses the HIAS Foundation’s position regarding risk tolerance and the asset mix of the Fund; defines the spending policy; sets forth an appropriate set of goals and objectives for the Fund’s assets; and defines parameters within which the investment managers may formulate and execute their investment decisions.

Assets of the Fund shall be invested to ensure that capital is preserved and enhanced over time, both in real and nominal terms.

1. Total return, consistent with prudent investment management outlined with Uniform Prudent Management of Institutional Funds Act (UPMIFA), is the primary goal of the Fund. Total return, as used herein, includes income plus realized and unrealized gains and losses on Fund assets.
2. The rate of return objective for the fund is at least the rate of inflation, CPI, plus the Foundation’s spending rate. The Committee is aware that there may be short-term deviations from these objectives and shall evaluate compliance with these and other performance expectations over the time frames outlined in paragraph 7 of this section, page 2.
3. The overall asset allocation targets and permissible ranges for eligible asset classes are detailed in Appendix I of this policy statement. However, from time to time, the allocation to a particular asset class as noted in Appendix I may exceed the minimum and maximum ranges due to changing market conditions. In such instances, the OCIO will notify the client and use reasonable efforts to bring the ranges back into compliance in a prudent manner.
4. The Fund’s spending policy is outlined in Appendix II.
5. Total return for the overall Investment Fund should be evaluated against the Policy Index over the short and medium term. The policy index is calculated using the benchmark indexes multiplied by each asset class’s target weighting as outlined in Appendix I.
6. Total portfolio risk exposure and risk-adjusted returns will be regularly evaluated and compared with the policy index.
7. Normally, long term results are evaluated over a ten+ year period while medium-term results are evaluated over a three-to-five-year time horizon. Shorter-term results will be regularly reviewed, and earlier action taken if in the best interest of the Fund.

ROLES AND RESPONSIBILITIES

The Investment Committee is authorized by the Board of Trustees to act on its behalf subject to this Policy Statement.  The Investment Committee, in turn, is authorized to delegate certain responsibilities to professional experts in various fields, including the flexibility to retain, terminate, or replace the OCIO, Investment Managers, Consultant/Advisor or the Custodian Bank.

The Investment Committee is responsible for:

1. Establishing and maintaining the Statement of Investment Objectives, Policy, and Guidelines, and Target Allocation
2. Monitoring the performance and risk profile of the Fund as a whole
3. Reviewing the OCIO’s implementation of the investment program
4. Hiring, terminating, or replacing the OCIO
5. Reviewing and addressing all potential conflicts of interest

The OCIO is responsible for:

1. Recommending the Target Allocation to the Investment Committee
2. Hiring the investment managers
3. Monitoring, rebalancing, and making tactical shifts between Asset Classes and Investment Managers
4. Monitoring the appropriateness of each Investment Manager’s strategy in light of the organization’s overall investment strategy, philosophy, objectives, and mission
5. Monitoring and reporting on investment performance for each Investment Manager compared to a benchmark
6. Terminating investment managers when necessary
7. Overseeing the organization’s investment assets and regularly reporting on the status of the investments to the Investment Committee and Board of Trustees

INVESTMENT GUIDELINES

1. Full discretion, within the parameters of the investment policy guidelines described herein, is granted to the OCIO in selecting investment managers regarding the asset allocation. The selection of individual securities and the timing of transactions will be performed by the investment managers selected by the OCIO.
2. Investment managers’ reserve and cash equivalent investments should be made in the short-term investment fund (STIF) designated by OCIO through the foundation’s designated custodian bank, primarily on the basis of safety and liquidity, and only secondarily by available yield.
3. There shall be no specific limitation to turnover. However, modest turnover is preferred.
4. No security, excepting issues of the U.S. Government or its agencies, shall comprise more than 5% of total Fund assets, measured at market. Further, no individual portfolio shall hold more than 20% of its assets in the securities of any single entity, excepting issues of the U.S. Government or its agencies, or in the case of international bonds, the issues of sovereign nations or their agencies.
5. The use of protected, or covered, futures, options, and short sales, is permitted in the interest of reducing volatility and controlling overall Fund structure within policy guidelines. Such instruments may not be used to create leverage in the portfolio.
6. Responsibility for the exercise of ownership rights through proxy solicitations shall rest solely with the investment managers.
7. Investment managers shall use their best efforts to ensure that portfolio transactions are placed on a “best execution” basis. Additionally, arrangements to direct commissions shall only be implemented by specific written authorization from the Committee.

SEGMENT OBJECTIVES AND INVESTMENT GUIDELINES

Each segment is included in the portfolio with the intention that it serve the purpose of:

1. providing a stream of real returns that are positive over the long term.
2. providing a stream of returns that are not perfectly correlated with returns to the other segments comprising the overall Assets.

The objective of every segment (except for Cash Equivalents) is to outperform, net of fees, its benchmark over three to five-year periods.

• DIVERSIFYING ASSETS: This includes fixed income and liquid alternative investment strategies with minimal exposure to global equity markets. These segments are designed to enhanced overall portfolio returns in environments of poor equity market performance.

Domestic Fixed-Income

Credit quality, liquidity and preservation of capital are the core emphasis for this asset class. Therefore, the asset class will primarily invest in high quality government, corporate, municipal, mortgage and asset backed bonds, and cash equivalents. The segment may hold mutual funds, exchange traded funds, separately managed accounts with individual securities, and/or non-listed commingled equity funds. Holdings may be diversified across maturity and fixed income sectors. Each non-listed commingled fund or separately managed account will have its own specific investment objective and guidelines, which are agreed to contractually at the time of initial investment. The Investment Committee recognizes that the fixed income managers hired may employ an active investment style quite different than the exact composition of the respective index.

Objective: Earn an average annual return from income and capital appreciation that exceeds the benchmark index net of management fees over a full market cycle of five years. The investment performance of fixed income managers shall be measured against the investment performance of indices and other fixed income managers with similar bond investment styles (e.g., core against core, active duration against active duration.

Hedge Funds

Included in this category are strategies often pursued by hedge funds, including long/short equity and credit, event-driven and special situations investing, merger and capital structure arbitrage, and distressed securities. This category also encompasses strategies focused on corporate and structured bonds, including those rated below investment grade. The roles of this segment are to provide portfolio diversification and access to unique strategies and manager skills. This encompasses investments that are typically available for liquidation within less than 365 days.

Objective: Earn an average annual return from a diverse group of strategies that exceeds the benchmark index net of management fees over a full market cycle of five years. Positive, generally equity-like returns are expected over time with less volatility and smaller interim declines than that of the public equity markets.

• INFLATION PROTECTION ASSETS: This includes liquid alternatives that historically provide a partial hedge during periods of inflation such as marketable real estate and natural resourced based investments.

Marketable Real Estate

This segment includes public real estate such as REITs and REOCs listed on global equity exchanges. 

Objective: Earn an average annual return from income and capital appreciation that exceeds the benchmark index net of management fees over a full market cycle of five years.

Natural Resources

This category includes energy, natural resources equities, diversified commodities, inflation-linked bonds, and other inflation-sensitive investments. The segment may hold mutual funds, exchange traded funds, separately managed accounts, and/or non-listed commingled funds.

Objective: Earn an average annual return that exceeds the benchmark index net of management fees over a full market cycle of five years.

• GROWTH ASSETS: These investments are generally expected to perform well during periods of economic growth.

Global Equities

Long-term capital appreciation is the core emphasis for this asset class. Therefore, the asset class will primarily invest in publicly traded global equities on a long-only basis. Underlying securities may include developed, emerging and frontier market equities. The segment may hold mutual funds, exchange traded funds, separately managed accounts with individual equities, and/or non-listed commingled equity funds. Holdings may be diversified across global, regional, country, style, and sector-based strategies. Each non-listed commingled fund or separately managed account will have its own specific investment objective and guidelines, which are agreed to contractually at the time of initial investment. The Investment Committee recognizes that the equity manager may employ an active investment style quite different than the exact composition of the economic sectors that comprise their respective index. It is understood that active investment styles will come in and out of favor versus the broad market indices. The OCIO will monitor and update the Investment Committee when a manager’s investment style has fallen out of favor with the broad markets.

Objective: Earn an average annual return that exceeds the benchmark index net of management fees over a full market cycle of five years. The investment performance of equity managers shall be measured against the investment performance of indices and other equity managers with similar equity investment styles (e.g., growth against growth, value against value, international against international.)

Private Markets

This will include investments in underlying venture, buyout, growth equity, and private equity partnership funds, both domestic and international, via a manager of managers strategy. Fund vehicles will have their own specific investment objective and guidelines, which are agreed to contractually at the time of initial investment.

Objective: Earn an average annual return that exceeds the benchmark index net of management fees over a full market cycle of five years. This asset class is expected to deliver premium returns due to long term nature and inaccessibility of capital for many years.

CHARACTERIZATION OF EXPECTED VOLATILITY BY SEGMENT

STANDARD OF INVESTMENT PERFORMANCE

Performance of this Fund will be evaluated on a regular basis. Consideration will be given to the degree to which performance results meet the goals and objectives as set forth herewith. Toward that end, the following standards will be used in evaluating investment performance.

1. The compliance of each investment manager with the guidelines as expressed herein.
2. The extent to which the total rate of return performance of the Fund achieves or exceeds the targeted goals measured over the long term.

LIQUIDITY

Liquidity is a consideration for HIAS Foundation’s Investment Program. Therefore, efforts will be made to report and ensure adequate liquidity is available to meet expected and unanticipated cash flow requirements.

REPORTING REQUIREMENTS

Each investment manager is expected to meet with the OCIO on request. Additionally, each manager and/or the OCIO shall submit monthly reports to the Investment Committee encompassing overall performance by asset class and quarterly reports with details of individual managers.

Investment managers are required to provide reports to the OCIO as requested. Reports should include the following:

Monthly:   Certification of market value (reconciliation with master custodial bank)

Portfolio Overview

Portfolio Performance

Quarterly: Investment Manager and performance

Portfolio characteristics

Market outlook (narrative)

Annual:  Receipt by the OCIO of annual filing of form ADV with the Securities & Exchange        Commission

The Investment Committee understands that from time to time there will be a difference in market values between the Investment Manager and the custodial bank/fund administrator(s).

Proxy Voting

Responsibility for the exercise of ownership rights through proxy solicitations shall rest solely with the investment managers, who shall exercise this responsibility strictly for the benefit of the Plan, its participants, and beneficiaries. The one exception to this is with respect to the State of Israel. The Investment Managers shall solicit the opinion of the Committee with regards to any proxy vote related to the State of Israel. Managers shall report to the OCIO any changes that have occurred in their proxy voting policies. Additionally, investment managers shall, upon the Committee’s request, provide a written annual report of the proxy votes for all shares of stock in companies held in the Plan’s portfolio. These reports shall specifically note and explain any instances where proxies were not voted in accordance with standing policy.

Directed Commissions & Trading Costs

It is the responsibility of the Foundations’ investment managers to seek “best execution” in all trades executed for the HIAS Foundation portfolio. Additionally, arrangements to direct commissions shall only be implemented by specific authorization of the Committee.

IMPLEMENTATION

All assets invested for the Fund by its investment managers after the adoption of this Investment Policy shall conform to this policy.

Commingled Funds

The Committee, in recognition of the benefits of commingled funds as investment vehicles (i.e., the ability to diversify more extensively than in a small, direct investment account and the lower costs which can be associated with these funds) may, from time to time, allow investment in such funds. The Committee recognizes that they cannot give specific policy directives to a fund whose policies are already established; therefore, the Committee is relying on the OCIO to assess and monitor the investment policies of any funds used by the Fund to ascertain whether they are appropriate for this Fund.

ADOPTION

The foregoing Investment Policy was adopted by the Investment Committee of the HIAS Foundation at their meeting held on August 28, 2023.

APPENDIX I

INVESTMENT OBJECTIVES AND GUIDELINES

HIAS FOUNDATION PORTFOLIO

ASSET CLASSES, TARGETS AND RANGES

In order to have a reasonable probability of earning the current rate of return target over a market cycle, the Committee has adopted the long-term asset allocation policy detailed below.

                                                                                                                                    APPENDIX II

INVESTMENT OBJECTIVES AND GUIDELINES SPENDING POLICY

The objective for HIAS Foundations’ Spending Policy is to provide a level of operating support to the current operations of HIAS Foundation which can be maintained on a real and nominal basis, net of gifts, over an extended horizon.

The Investment Committee has approved the following spending rates:

• for the fiscal year 2024, the spending rate shall be 5%;
• for the fiscal year 2025, the spending rate shall be 4.75%;
• for the fiscal year 2026, the spending rate shall be 4.5%; and
• for subsequent fiscal years, the spending rate shall remain at 4.5% unless the parties mutually agree in writing to make further adjustments to the rate.

The calendar year spending rate shall be applied to the average of the twelve most recent quarter ending market values of the Foundation funds. As a further point of clarification, the spending rate shall be applied to total assets, which includes realized and unrealized earnings.