Educational Investment Fund
Investment Policy Statement
Introduction
The Illinois State University Educational Investment Fund (EIF, the Fund) is tax-exempt security portfolio that is managed by a faculty-selected group of Illinois State University students who receive academic credit for their participation in the Educational Investment Fund Program (EIF program). The Fund is managed in accordance with the policies described herein. The purpose of this investment policy statement is to provide an understanding of the investment objectives, policies and guidelines for the Fund.
A. Management of the Educational Investment Fund
Illinois State University Faculty manage the Fund. The Board of Directors advises the Faculty in establishing investment objectives, advises on budgetary matters, as well as advises on changes to the investment policy. The Faculty assigns the responsibility for investment analysis and investment recommendations to the student analysts. The students will present to the Board on the performance of current holdings and may make recommendations regarding changes to these holdings.
1. Faculty Functions
Faculty in the EIF program will be responsible for the selection of student analysts. Faculty is responsible for the primary instruction of students. The Chairperson the Department of Finance, Insurance, and Law is a member of the Faculty and is ultimately responsible for the Fund.
2. Board of Directors
The Board consists primarily of Illinois State University and EIF alumni who either are actively or were previously engaged in the investment and/or finance profession. The bylaws of the EIF describe the position of board member.
3. Student Analyst Functions
The student analysts are students who have been accepted to participate in the EIF program for academic credit. Student analysts will carry out the functions assigned to them by Faculty. These will include:
- Investment research on assigned securities which may include but are not limited to current holdings in the portfolio and potential securities that could be included in the portfolio
- Student presentations of their recommendations
B. Policy Statement and Guidelines
1. Investment Objective
The primary objective of the Fund is to educate students in investment management through active participation in investment research and portfolio management. In support of that objective, the Fund is to provide funding for expenses related to operating costs, scholarships, and occasional purchases of investment-related materials. Based on the primary objective, the long-term (three to five years) goal of the fund is to maintain the purchasing power of principal and provide a total return that meets or exceeds the S&P 500.
2. Performance Measurement and Monitoring
Performance is measured four times a year. The time-weighted total portfolio return is compared to the Fund's benchmark.
3. Risk Tolerance
The Fund has an above-average risk tolerance, given the Fund's benchmark. The Board recognizes that in some periods the return may be significantly different than the benchmark.
4. Security Selection
The Fund is comprised of two portfolios, an equity portfolio and an asset allocation portfolio. Securities that are unacceptable for the Fund include: Municipal Bonds, Options and Futures contracts, Non-convertible preferred stock. Securities acceptable for review: Must have at least 3 years of operating history and are broadly classified as institutional quality.
5. Portfolio Management
Actions on securities under review will be proposed to other Student Analysts, Faculty, and the Board. Student analysts will make buy/hold/sell recommendations. The Chairperson the Department of Finance, Insurance, and Law will consider these recommendations when making portfolio changes.
6. Time Horizons
The Fund, to serve its purpose, will effectively act in perpetuity.
7. Liquidity Issues
It is important that the Fund maintain sufficient liquidity to meet expenses.
8. Endowment Spending Policy
A goal of the fund is to maintain the purchasing power of principal. A policy of this nature allows the Fund to continue to meet its objectives without jeopardizing the long-term financial health of the program. Generally, annual expenses should not exceed 5% of the Fund. The expenses and fees may include, but are not limited to: Subscriptions to investment databases, magazines, and research tools, scholarships for EIF students, reimbursements for travel expenses for mentorship program, Board meeting expenses, alumni meetings and programs, and costs associated with the EIF website.
9. Gift Policy
Occasionally donations in the form of cash or securities may be given to the EIF program. In the event that a security is donated, the Chairperson the Department of Finance, Insurance, and Law is responsible for determining the suitability of the security, in terms of portfolio inclusion.
C. Acknowledgments
The Chairperson the Department of Finance, Insurance, and Law will be responsible for the investment policy statement, with advisement from the Board.