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Investment

Responsible Department
Comptroller
Effective Date
12/11/2018
  1. .

    Policy Purpose

    The purpose of this policy is to ensure that University of North Georgia (the University) investments are effectively monitored in a manner that is in compliance with the laws of the state of Georgia and the rules established by the Board of Regents (BOR) of the University System of Georgia (USG). The objective is to also guarantee that the investments are appropriately managed in support of the University’s primary Strategic Plan.

  2. .

    Definitions

    1. Short Term Fund: The Short Term Investment Fund, available through the Board of Regents (BOR), provides a current return and stability of principal while affording a means of overnight liquidity for projected cash needs. The investment maturities in this fund will range between daily and two (2) years (Business Procedures Manual 9.2.2 Pooled Investment Funds).

    2. Balanced Income Fund: The Balanced Income Fund, available through the Board of Regents (BOR), is designed to be a vehicle to invest funds that are not subject to state regulations concerning investing in equities. This fund is comprised of fixed income, equity and cash equivalent instruments.

    3. Georgia Fund 1: Georgia Fund 1 (GF1) is the combined state general fund and local government investment pool managed by the Office of the State Treasurer. Georgia code 36-83-1 to 36-83-8 authorizes Georgia entities to invest funds in these local pools. In regards to credit risk, GF1 is a money market fund rated AAAf by Standard & Poor’s. The rating of AAAf means that “the fund’s portfolio holdings provide extremely strong protection against losses from credit defaults.”

    4. Municipal Bonds (General Obligation Bonds): A General Obligation Bond, a type of municipal bond, is distinguished by its guarantee to repay bondholders using all available resources of the issuing municipal authority, including tax revenues. When the bond matures, the representative from the financial institution (Cetera) contacts the University asking for permission to buy other bonds.

    5. Certificate of Deposit: A Certificate of Deposit (CD) is issued by a bank to a person or business depositing money for a specified length of time. The CD entitles the bearer to receive interest by means of a check or by rolling the interest continuously in the account. CDs mature annually and are automatically renewed unless the University notifies the bank of a change.

    6. Stocks: Stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. Common stock shareholders may vote at shareholder meetings and are entitled to receive dividends. The Board of Regents (BOR) holds the stocks in its name on behalf of the University. The BOR has the authority to buy and sell stock on behalf of the University.
  3. .

    Policy Statement

    1. Investment Objectives: The University of North Georgia’s investment portfolio shall be managed in accordance with all State and BOR laws and regulations, and with an emphasis on minimizing risk and maintaining liquidity. As such, the two primary objectives of the portfolio are as follows:

      1. Liquidity: Given the cyclical nature of the University’s operations, at times it may be necessary to have access to significant amounts of cash on relatively short notice. As a result, it is important that the University’s investment portfolio maintain a high level of liquidity at all times. Also, given these liquidity needs, the investment portfolio for the purposes of this policy does not include all cash necessary for the University’s daily operations, which can fluctuate substantially at times such as fee payment deadlines.

      2. Preservation of Principal: As a State Institution, it is imperative that the University’s funds be managed in a conservative and responsible manner in support of the University’s Strategic Plan. The preservation of principal is critical throughout all economic cycles.

        Given the University’s low risk tolerance for its investment portfolio and significant liquidity needs, the portfolio is conservative in nature, with a preference toward investments that provide consistent income as opposed to capital gains. The University understands that a portfolio this conservative in nature, with a low risk tolerance, will result in a lower overall rate of return. A significant portion (approximately 80%) will be invested in pooled funds governed by guidelines established by the Board of Regents for the University System of Georgia.

    2. Permitted Investments: The University is permitted to invest in Stocks, fixed income, and cash and cash equivalent investments under the direction of the Investment Committee. These investments must follow the asset allocation, maturity, credit quality, and other guidelines and procedures set forth in this Investment Policy Statement, and by the laws and rules of the State of Georgia and the Board of Regents.

    3. Asset Allocation Guidelines: The asset allocation of the aforementioned asset classes is established by the Investment Committee.  Any changes to the asset allocation are subject to approval by the Investment Committee and the Senior Vice President (SVP) for Business & Finance. The current asset allocation may vary in accordance with the ranges and targets set forth as follows:

      1. Stocks: 0-25%; Target: 15%
      2. Fixed Income: 5-45%; Target: 30%
      3. Cash & Cash Equivalents: 40-90%; Target: 55%

    4. Diversification Plan: High credit quality bonds and cash and money market funds shall be used to maintain a stable principal balance, while also maintaining a high degree of liquidity. A minimal investment in common Stocks will also help to diversify the investment portfolio and provide some opportunities for capital gains to protect the purchasing power of the portfolio. These investments will be chosen in consultation with the University’s designated Investment Committee. These designated representatives shall review the investment portfolio on at least an annual basis to ensure the investments are properly diversified and maintained in accordance with this Investment Policy and all other applicable rules and regulations. Some factors and guidelines that the Investment Committee should be mindful of in reviewing and selecting investments are as follows:

      1. Due to the significant liquidity requirements for the portfolio, the portfolio should maintain a significant position in cash and cash equivalent investments, with a relatively short term maturity overall. This constraint will serve to minimize interest rate risk in the portfolio.

      2. The University’s investment portfolio shall be invested primarily in pooled funds overseen by the Board of Regents, the State of Georgia Secure Deposit Program, or other BOR approved investment account. At a minimum, whenever applicable, investments should be held in an investment account in which securities transactions are settled on a delivery vs. payment basis through an approved depository institution in order to minimize custodial credit risk.

      3. With such significant emphasis being placed on low risk investments, the portfolio should be invested primarily in securities with high credit quality ratings in order to guard against credit quality risk. Fixed income securities should be primarily investment grade. In rare instances, some allowances may be made for securities that have been downgraded to speculative non-investment grade, but “junk bonds” are not permissible under this investment policy statement.

      4. In an investment portfolio with such heavy emphasis being placed on high quality, low risk, fixed income instruments, it is also critical to ensure that fixed income instruments are diversified by issuer to reduce concentration of credit risk to mitigate the risk of default while still maintaining a modest total market rate of return (whereby income payments and capital gains are considered together in calculating total return).

      5. Given the conservative nature of the portfolio and constraints placed on permitted investments, investments within the University’s investment portfolio should rarely, if ever, be denominated in foreign currency. Absolutely no more than $100,000 U.S. should be held in a foreign account at any given time, even for temporary Study Abroad purposes. This constraint will ensure that foreign currency risk is at a minimum, if not non-existent.

        Since the vast majority of the University’s investment portfolio is held in pooled funds, secure deposit accounts, and other similarly held investment vehicles, the investment objectives, risk tolerance and other guidelines set forth by the portfolio manager will govern the investment of those underlying funds, in accordance with all applicable State guidelines.

    5. Spending Rules: In order to maintain the flexibility of the portfolio in support of the University’s Strategic Plan, as changes are made to the Strategic Plan, spending of the investment portfolio should be evaluated in the context of the Strategic Plan and the capital requirements necessary to support that Strategic Plan. Although the investment portfolio does not include the cash necessary for the ordinary daily operations of the University, the majority of the portfolio shall be invested in cash and other highly liquid securities to ensure that the liquidity of the investment portfolio can be accessed quickly in the event of an emergency as determined by the Investment Committee.

    6. Collateralization: The investment portfolio shall be collateralized in accordance with the requirements of the Board of Regents, and all applicable state and federal laws and regulations. The collateralization requirements of the BOR are defined in the Business Procedures Manual (section 9.1 Banking) and are governed by the Official Code of Georgia Annotated Section 50-17-59. They are reprinted here for reference purposes only and are as follows:
      All depositories, where the University’s funds are held in time and demand deposits, shall either give a depository bond in some acceptable security company qualified to do business in Georgia or, in lieu thereof, may deposit with some other depository satisfactory to the Treasurer of the BOR securities of the following classes, the current market value of which shall be not less than 110% of the amount after the deduction of the amount of the deposit insurance:

      1. Direct obligations of the United States Government;
      2. Obligations unconditionally guaranteed by the United States Government;
      3. Direct obligations of the State of Georgia;
      4. Direct obligations of any political subdivision of the State of Georgia; and/or
      5. Georgia municipal, county, or State of Georgia Authority Bonds acceptable to the Treasurer of the Board of Regents.
  4. .

    Support Information

    University System of Georgia Business Procedures Manual (BPM) 9.1 and 9.2

  5. .

    Investment Procedures

    1. The Investment Committee shall consist of the SVP for Business & Finance, the AVP for Financial Services/Comptroller, the Assistant Comptroller and any other representatives appointed by the SVP for Business & Finance.

    2. The President shall grant authority for investment decisions to the SVP for Business & Finance. The SVP for Business & Finance may appoint representatives to assist in making any and all investment decisions, but all decisions must be approved in writing by the SVP for Business & Finance.

    3. The University investment portfolio shall be managed in a very conservative nature, in accordance with all State and BOR rules and regulations. If the University is contacted by a donor about gifting investments, that donor will be directed to the UNG Foundation first, so that those investments can be better managed to provide greater resources for student needs.

    4. In addition to being managed in accordance with all State and BOR rules and regulations, any disbursements of donor funds from the University Investment Portfolio shall be made in accordance with donor intent.

    5. The Comptroller’s Office shall provide a report to the Investment Committee for review at least quarterly on the performance of the University’s investment portfolio and any investment activity that has taken place in the previous quarter. However, given the conservative nature of the portfolio, and its investment objectives, the Committee should not expect a high level of return, so long as the risk is kept to a minimum.

    6. In addition, the value of the investment portfolio as it is recorded in the University’s financial records shall be updated on at least an annual basis and in accordance with all policies and procedures set forth by the BOR and the state of Georgia.

    7. The Comptroller’s Office must also provide an annual report to the Vice Chancellor for Fiscal Affairs and Treasurer asserting that all investments have been made in accordance with this Investment Policy Statement (BPM 9.2.1 Investment Policy).

    8. This Investment Policy shall be reviewed by the Investment Committee on at least an annual basis as well, in accordance with the policies and procedures required by the BOR and the state of Georgia. In addition, in accordance with the requirements of BPM section 9.2.1, the Comptroller, under the direction of the Investment Committee, shall submit an updated copy of this Investment Policy Statement to the Vice Chancellor for Fiscal Affairs and Treasurer immediately upon making any changes approved by the Investment Committee, and at a minimum of once every two (2) years.

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