Investment policy statement and terms of reference of the Investment Committee

1.0          Introduction

This policy statement sets out the arrangements under which the investment assets and endowmentMoney that is invested for the long-term. funds (the Endowment) of Cornwall Community Foundation (CCF) and those held on behalf of donors and fundholders are managed and controlled.

2.0          Overview

This policy statement will be overseen by the Board of Trustees of CCF (the Board).

3.0          Reserves Management 

The Board will have responsibility for the management and control of the financial reserves of CCF.  The Hon. Treasurer will report to the Board at each meeting on the levels of reserves and the arrangements for their safe custody. Day to day supervision will be conducted by the Finance, Audit & Risk Committee (FAR), working within restrictions as set out by the Board. The Hon. Treasurer, on behalf of FAR, will consult with the Investment Committee when seeking to place funds on the money markets or on term deposits.

4.0          AssetAn item of monetary value that an organisation owns. Management

The management of the investment assets of CCF will be supervised by an Investment Committee whose composition will be determined by the Board and reviewed annually.

The Investment Committee will advise the Board on the selection of professional investment management companies, who will act as day to day managers of the CCF’s investments. The Investment Committee will seek advice on matters that it deems to be outside its competence or that require specialist expertise.

The composition and size of the Investment Committee is the responsibility of the Committee Chair but it should include the Chair of the Board, at least two trustees and two independent members.

The Terms of Reference of the Investment Committee are incorporated in this policy statement.

5.0        The Endowment Funds 

5.1 Objectives: The objectives are to maintain at least the real value of the investments while generating a growing income to fundA sum of money made available for grant making, often with specific criteria/conditions. grant making. It is hoped that the overall return over the cycle will exceed the increase in the most generally accepted measure of inflation, currently the CPI.

CCF seeks to generate the investment return from a combination of income and capital gains. The income element is seen as being more significant as this helps ensure that CCF can maintain levels of grant giving.

CCF is expected to exist in perpetuity. The investments should be managed with a long-term perspective holding this in mind.

5.2 CCF pursues a policy of responsible investment. There should be no specific exclusions on how the Endowment is invested, but the Investment Committee will ensure that the appointed external investment managers are able always to demonstrate that robust ESG (Environmental, Social and Governance) principles and criteria are embedded in their investment processes. In particular, our managers should focus on the UN Sustainable Development Goals and demonstrate adherence to the Paris Climate Change Accords at all times. 

5.3 Attitude to risk: The Endowment provides the investment income to fund part of CCF’s grant making. Inflation is a key risk to the long-term sustainability of CCF and the assets should be invested to mitigate this risk over the long term. The Board understands that this is likely to mean that investment will be concentrated in equities, recognising that the capital value of equities is likely to fluctuate more than bonds over shorter periods due to their inherent volatility. The Board must be prepared to tolerate volatility of the capital value of CCF’s investments.

5.4  Assets and Asset Allocation: In order to reduce volatility wherever possible, the Endowment should be diversified to include other asset classes. It is expected that all investments will be primarily in charity specific pooled funds deemed appropriate for CCF. By investing in professionally managed pooled funds that hold many individual securities, further diversification is achieved within an asset class.

The Investment Committee is responsible for setting a suitable asset allocation strategy,

designed to achieve CCF’s investment objectives. The use of multi-asset funds has simplified this process considerably but it is recognised that on occasion the requirementsSpecific terms that a project has to meet to be eligible to receive funding. For example, grants in a specific geographic location. of CCF may require a different emphasis.  Should this arise, the Investment Committee will advise the Board on the overall balance of investments to be held in different asset classes, subject to:

• the level of risk deemed acceptable
• market conditions
• any special requirements set by individual fundholders.

Changes to the balance of investments will be recorded in the minutes of Board meetings.

5.5 Overriding Limitations and Restrictions:

Assets may be held in the following:

• Government fixed interest stocks (gilts)
• Corporate bonds of at least investment grade, of not more than 7 years duration
• Managed funds investing in fixed interest stocks
• Cash deposits with reputable authorised financial institutions that participate in the FSCS.
• Open and closed-end managed funds or trusts investing in UK listed and overseas equities as well as other asset classes, whether actively managed or passively managed.

Assets may not be held as direct investments in:

• Private equity
• Venture capital
• Commodities
• Works of art
• Derivatives and structured products
• Direct listed or unquoted equities, other than those categories otherwise permitted in this Policy, unless agreed by the Board
• Direct property investments
• Crypto currency assets
• Individual projectsA piece of work that delivers an output..

5.6 Liquidity: The liquidity of any investment will be a central consideration in the determination of how assets are allocated.

CCF aims to balance the needs of current and future beneficiariesIndividuals being supported by the group or organisation applying for a grant.. Income from the Endowment’s investment portfolio will be used to fund current grant making. Liquidity should be maintained to cover adequate grant making for each individual fund. This should obviate the need to access capital at a time of excessive market volatility.

 5.7 Reporting: A report on the performance of investments, including the annual rate of return and capital growth of each investment vehicle, will be made by the Investment Committee to the Board quarterly. This report should include a review of asset allocation strategy, performance, risk profile and consistency with long term investment objective.

At each Board meeting, the Chair of the Investment Committee will update the Board as to the current situation of CCF’s managed investments.

5.8 Community First Excess Gains. The Investment Committee will review the annual Community First capital gains reports on receipt and make a recommendation to the Board on whether any or all of these gains should be realised. It should be noted that the Committee’s remit is to continue to build the endowment and that this is unlikely to change for the foreseeable future.

5.9 This policy will be reviewed on an annual basis.

Note

Charity law imposes the following duties in the management of CCF’s investments

• Duty to invest – The Board has a duty to invest funds not required for current commitments in order to protect their value.
• Duty to balance beneficiary interest – Particularly in the case of a fund which is permanent endowment, the Board must be even-handed between the interests of both present and future beneficiaries.
• Duty to invest within powers – The Board must comply with any stipulated investment powers.
• Duty to consider diversification and suitability – Diversification is about spreading investments to reduce risk.  Suitability is about appropriate choice of investment characteristics.
• Duty to take advice – The Board must take advice from suitably qualified persons on matters beyond its own competence.
• Duty to review – The Board must monitor the performance of investments.
• Duty to declare potential conflicts of interest.