Investment Policy

Fitzwilliam Town Library Investment Policy

Statement of Investment Objectives, Principles and Guidelines

Introduction

This statement sets forth the Library’s general investment principles and objectives and provides guidelines for use by the Library Trustees and the Library’s investment managers with respect to management of the Library’s invested funds.

Investment Objectives

The Library’s endowment and similar funds are invested in order to grow and expand the assets of the Library and create the monies needed to fulfill the income objectives of donor-provided and Town or Library-designated funds.  The Library’s investments will be managed in accordance with The Uniform Prudent Management of Institutional Funds Act and the Prudent Investor Rule as set forth in RSA 292-B:1-10; RSA 564-B:9-901; and RSA 564-B:9-906.

The Library’s investments shall be managed consistent with the responsibilities of a fiduciary or of a steward of the public trust. The overall investment objectives of all long-term funds are diversification of assets, real growth after any distributions, competitive investment returns, prudent levels of investment risk, and to preserve and enhance the purchasing power so as to provide adequate funds to sufficiently support designated Library activities.  The investment objective for all short-term funds will be maximum return with little to no risk.

Investment Return Objective

For long-term funds, a real (inflation-adjusted) annualized rate of return of at least 5.00%. This objective is required to protect purchasing power and accounts for the spending policy and any other investment expenses. The Library Trustees understand that the total return on Library investments during any single measurement period may deviate from the long-term return objective.

Spending Policy

The spending policy is designed to provide predictable and steady support for Library activities, while attempting to preserve the intergenerational equity of investment assets.  The disbursement of invested funds will be made in accordance with donor wishes, or made using a spending rate that is determined following prudent consideration of general economic conditions, the expected total return from invested assets, along with the uses, benefits, purposes, and duration of the investments.

In order to be able to respond to unforeseen downturns and protracted periods of lower returns, absent donor instructions,  the spending rate on invested funds will be annually determined and may range from a minimum of 0% to a maximum of 5% of the average fair market value over the prior three years through the June 30th preceding the fiscal year in which the distribution is planned.

 

Exceptions to this spending policy must have the approval of the Library Trustees. 

Roles and Responsibilities

The Library Trustees are responsible for directing and monitoring the investment management of the Library’s investments. As such, the Library Trustees may delegate certain responsibilities to investment managers who are professional experts in various fields.

Investment Managers will:

  • Manage the Library’s assets in accordance with the policy guidelines and objectives expressed in this document, or in a separate written agreement that has received approval from the Library Trustees.
  • Provide quarterly reports describing portfolio holdings, transactions, and performance.
  • Provide quarterly written commentary regarding Library investments under their management.
  • Vote proxies received after careful assessment of the issues involved; however, the investment managers are instructed to always vote in the best economic interest of the Library.
  • Promptly inform the Library Trustees regarding all significant matters pertaining to the investment management of Library assets including, significant changes in the ownership, affiliation, organizational structure, financial condition, and staffing of their firm.
  • Meet periodically with the Library Trustees.
  • Preservation of Capital – Consistent with their respective investment styles and philosophies, investment managers should make reasonable efforts to preserve capital,
  • Investment managers are to make reasonable efforts to control risk and will be evaluated regularly to ensure that the risk assumed is commensurate with the given investment style and objectives.

Asset Allocation Guidelines

The Library Trustees believe that asset allocation of invested funds should be undertaken from a long-term, strategic perspective. Market timing or “tactical” asset allocation is not an acceptable investment style.  Cash positions may temporarily result from the net selling in the portfolios.  However, the Library Trustees expect the investment portfolio to be fully invested.

The Library’s asset allocation strategy focuses on maintaining a portfolio balanced between mutual funds, exchange traded funds, bonds, and other types of investments in order to minimize the exposure to negative returns during difficult market phases, thereby emphasizing capital preservation over market cycles.

Asset allocation guidelines will be adhered to by any professional manager hired by the Library Trustees.

Overall Asset Allocation Guidelines:

Short-Term Funds – temporary investments and funds whose entire corpus will be expended within 24 months:

                                                                                 Minimum         Maximum

                        Fixed Income                                       0%                   45%

                        Cash and Equivalents                           60%                  100%

            Intermediate-Term Funds – entire corpus will be expended within 24 to 60 months:

                                                                                Minimum         Maximum

                        Equity funds                                        0%                   30%

                        Fixed Income                                       0%                   70%

                        Cash and Equivalents                           10%                  40%

Long-Term Funds – entire corpus will be permanent or expended in no fewer than 60 months:

                                                                                       Minimum             Maximum

                        Equity securities, Equity funds and ETF’s      50%                    70%

                        Hedged Equities                                          5%                      10%                   

                        Fixed Income and Cash                                25%                     45%

The asset allocation guidelines may be changed as long-term capital market conditions, or the characteristics or requirements of the investment portfolio changes.

Allowable Assets

  1. Cash Equivalents
  2. Treasury Bills
  3. Money Market Funds
  4. Exchange Traded Funds
  5. STIF Funds
  6. Commercial Paper
  7. Banker’s Acceptances
  8. Repurchase Agreements
  9. Certificates of Deposit
  1. Fixed Income Securities (which shall include all forms of debt obligations)
  2. U.S. Government and Agency Securities
  3. Corporate Notes and Bonds
  4. Mortgage-Backed Securities
  5. Fixed Income Securities of Foreign Governments and Corporations
  6. Planned Amortization Class Collateralized Mortgage Obligations (PAC CMOs) or other “early tranche” CMOs
  7. Index and Exchange Traded Funds
  8. Mutual Funds
  1. Equity Securities
  2. Common Stocks
  3. Hedge Funds
  4. Index and Exchange Traded Funds
  5. Mutual Funds

Prohibited Assets (hedge funds investments are exempt from these restrictions.)

Prohibited investments specifically include, but are not limited to the following:

  • Commodities and Futures Contracts
  • Options
  • Interest-Only (IO), Principal-Only (PO), and Residual Tranche CMOs
  • Derivatives

Prohibited Transactions (Hedge Funds are exempt from these restrictions.)

  • Short Selling
  • Margin Transactions
  • Purchase of illiquid securities
  • Borrowing of money.
  • Pledging, mortgaging, or hypothecating of any securities except for loans of securities that are fully collateralized.

Investment Benchmarks

The following benchmarks will be used to evaluate the performance of the Library’s Investment Portfolio.

Asset Class                                                       Benchmark

   Equity:

            Small Cap                                             Russell 2000, Russell 2000 Value,

                                                                                    Russell 2000 Growth

            Mid Cap                                               Russell Mid-Cap Growth

            Large Cap                                              Russell 1000, Russell 100 Value,

                                                                                     Russell 1000 Growth

International Equity                                           MSCI EAFE

Hedge Funds                                                    HFRI Fund of Funds w/1 month lag                              

Bonds

            Fixed Rate                                             Barclays Intermediate Gov/Credit Index                                                                                                                         

Cash                                                                91-Day T Bills

Performance Monitoring

The Library Trustees shall monitor the overall performance of the investment portfolio to insure it is meeting the Library’s investment objectives, which includes the monitoring of all investment managers.

Criteria for the Review and Termination of Investment Managers:

Investment managers may be placed on “watch” status, replaced, or eliminated whenever the Library Trustees lose confidence in the work, communication, or performance of an investment manager. The following are some examples of reasons that may cause the Trustees to lose confidence in a manager:

  • Poor performance relative to objectives:  A manager that posts two consecutive years in which relative performance is below the 60th percentile of other similar managers, and performance is below the relevant benchmark will be evaluated for replacement.
  • A change in the portfolio manager assigned to the Library.
  • The departure of one or more key investment professionals.
  • Violation of an investment guideline; and
  • A change in the ownership or control of the investment management organization.

Revised and approved by the Trustees on May 2, 2022

Amended and approved by the Trustees on August 1, 2022

Amended and approved by the Trustees on September 11, 2023