Appendix 1

Long Term Investment Policy

Contents

Overview

Management

University objectives

Risk tolerance

Constraints

Portfolio benchmark

Ethical and Social Considerations

Policy Review

Overview

This policy document establishes the objectives and parameters for management of the University’s long term investment funds. The market value of these funds on the 31stMarch2015is in excess of £15m

Management

TheInvestment Committee, reporting to Finance Committee, is responsible for management of the Long term investment portfolio, development of policy, appointment of Investment Managers / Advisors and performance monitoring.

Management of the long term investment fund will be assigned to Investment Management specialists to be appointed by tender on a 5 yearly contract. Cazenove ManagementLimited being the current appointed Investment Managers with effect from 1st November 2014.

Independent specialist advice will also be sought by the University to monitor, review and report on the performance of the Investment Manager. Stanhope Consulting being the current appointed advisors to the University originally appointed with effect from 1st October 2006.

University objectives

  1. To maximise returns from the portfolio within the constraints and risk tolerance established by the University Investment Policy.
  2. To achieve an average total investment return of4% in real terms p.a. (after inflation RPI)over the longer term.

Risk tolerance

The University is prepared to tolerate volatile investment returns on the expectation that this volatility will lead to higher average returns over the long term. The degree of volatility the University is prepared to accept would be a decline in the value of capital funds in the range of 15%-20% in any one year.

Constraints

  1. The time horizon that funds are expected to be available for investment is a minimum of ten years from the 1st October 2014.
  1. Funds need to remain readily realisable in the event that circumstances change but there is no current expectation of need to draw upon the funds.
  2. The University is exempt from UK income and capital gains tax. Tax considerations are therefore not a constraint upon investment strategy.
  3. Returns are required in sterling.
  4. A well diversified portfolio is required working within specified asset class ranges.
  5. All dividend and interest earned is to be reinvested in the fund.

Portfolio benchmark

The portfolio benchmark by asset class agreed with the Investment Manager is as follows:

Weightings % / Range / Indices
Cash / 0 / 0-10 / Sterling 3 month LIBOR
Conventional government bonds / 0 / 0-10 / FTSE All Stocks All Gilts
Index linked bonds / 10 / 5-20 / FTSE All Stocks All Index Linked
Corporate bonds / 10 / 5-20 / Merrill Lynch Sterling Corporate Bond
Total bonds / 20 / 10-30 / ---
UK equities / 50 / 40-60 / FTSE All Share
Overseas equities / 20 / 10-30 / FTSE World Ex UK
Emerging equities / 10 / 0-20 / MSCI Emerging Markets
Total equities / 80 / 60-90 / ---
Alternatives / 0 / 0-10 / ---
Total / 100 / --- / ---

The manager’s objective is to outperform the benchmark by at least 1% per annum (net of fees) over rolling 3 year periods

Ethical and Social Considerations

  1. The University prescribes to a socially responsible investment policythat prohibits investment in selected areas and it is a requirement that there is;
  • No investment in companies that produce or derive their turnover directly from the manufacturing of tobacco (following Church of England restriction list).
  • No investment in companies that are clearly involved in the pornographic materials or adult entertainment services.
  1. The University is committed to improvement of social, environmental and sustainability standards through its Ecoversity programme. Positive investment screening opportunities will therefore, as part of this process, be considered on a continual basis with the Investment Manager to tailor the approach further as and when appropriate.
  2. Approximately 3% of the original investment (£300,000) will be invested in an Environmental Fund.
  3. In the interests of transparency the University will produce on an annual basis at the year end a list of all companies and funds in which long term investment funds are invested. This list will be available on request from the University’s Director of Finance.

Any representative body within the University (i.e. Student Union, Trade Union or Committee) may draw attention to any investment in a company or fund that is considered to be unethical, socially or environmentally irresponsible.Representations should only be made on the basis of evidence that a company’s activities or values are clearly far removed from the University’s core values and that these give serious grounds for concern.

The Investment Committee will consider any representations in consultation with the appointed Investment Manager against the following criteria;

  • Is the complaint substantiated
  • Is it contrary to the University’s values, goals or mission
  • Is it of significant wider social, environmental or humanitarian concern
  • Impact on portfolio risk, diversification and returns

The Investment Committee will make the final decision to continue or discontinue with any investment and will communicate the reasons for this to the group raising the concern.

Policy Review

This policy will be subject to annual review by the Investment Committee.

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