Investment Policy Statement of The GiveClear Foundation

IPS Give Clear Foundation 2018

 

I. Background, Purpose and Scope

The GiveClear Foundation is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, that is a public charity described in Section 509(a)(1) of the Code that operates Donor Advised Funds, referred to as “Giving Funds”. The GiveClear Foundation was formed to rethink and re-imagine the world of giving. Our vision is a world where people can connect easily to the causes they care about, where technology makes giving frictionless, where donors large and small share in the experience and see the impact they make.

The purpose of this Investment Policy Statement (“IPS”) is to establish an understanding of the investment philosophy of The GiveClear Foundation and to provide guidelines for the management and oversight of The GiveClear Foundation’s investment assets. This IPS applies to all investment assets owned byThe GiveClear Foundation in the Giving Funds, Project Accounts and General Fund Accounts. The Investment Policy shall at all times be administered in accordance with such general policies and procedures as may be adopted or amended by The GiveClear Foundation board and its approved Program Guidelines.
 

II. Governance

1. Role of the Board of Directors (the “Board”)

The Board delegates to its Investment Oversight Committee responsibility for fulfilling its oversight responsibilities with respect to the investment assets of The GiveClear Foundation. The Board shall annually appoint an Investment Oversight Committee Chair and members. The members of the Investment Oversight Committee shall be comprised of at least 3 members of the Board. The Board shall appoint one of the Committee members to serve as Chair.

2. Role of Investment Oversight Committee (the “Committee”)

The Committee assists the Board in fulfilling its oversight responsibilities with respect to the investment of the assets of The GiveClear Foundation. The Committee reviews the performance of the investment funds and the investment managers used by The GiveClear Foundation consistent with the Investment Policy Statement adopted by the Committee. Each member of the Committee shall serve until a successor is appointed or until his or her resignation. In carrying out its oversight responsibilities, the Committee shall:

  • Adopt an Investment Policy Statement and periodically review and approve any changes to the Investment Policy Statement deemed to be necessary or appropriate.
  • Review the performance of investment funds underlying the pools used by The GiveClear Foundation at least quarterly, or more frequently if the Committee or the Board deems such review necessary, in a manner consistent with the Investment Policy Statement, and implement changes as the Committee deems appropriate.
  • Review the investment performance of The GiveClear Foundation at least quarterly, or more frequently if the Committee or the Board deems such review necessary, in a manner consistent with the Investment Policy Statement.
  • Review the Committee Charter periodically and recommend any changes to the Board.
  • Consider such other matters pertinent to the Committee’s purposes as the Committee deems necessary or appropriate.
  • Report its activities to the Board on a periodic basis and make such determinations or recommendations with respect to the above and other matters as the Committee may deem necessary or appropriate.

3. Standard of Oversight and Duty of Care

The Committee shall exercise prudence and appropriate care in accordance with the Uniform Prudent Management of Institutional Funds Act. In overseeing the assets of The GiveClear Foundation, each member of the Committee shall act in good faith, in a manner such member believes to be in the best interests of The GiveClear Foundation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

4. Role of the Donor

Each GiveClear Foundation Giving Fund is composed of contributions made by individual donors. Once the donor makes the contribution, The GiveClear Foundation has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of the funds and the investment of assets in each Giving Fund.

III. Investment Philosophy of The GiveClear Foundation

The investment objectives of The GiveClear Foundation are to provide for long-term growth of principal and incomewithout undue exposure to risk to ensure that (1) The GiveClear Foundation isable to meet its goal of making aggregate grants equal to at least 5% of its net asset value, calculated as a five-year rolling average, (2) Giving Fund Holders are able to recommend grants on a continuing and reasonably consistent basis; and (3) Project Account Assets of The GiveClear 3 Foundation overall will be invested in a manner as to avoid being overly speculative, looking instead to the permanent disposition of the assets, and considering the probable income as well as the safety of The GiveClear Foundation’s assets. In pursuing these objectives, The GiveClear Foundation endeavors to achieve risk-adjusted total returns that, over time, are commensurate with broad-based market averages.
 

IV. Investment of General Funds

The investment objective for the general funds of The GiveClear Foundation, funds that are in transit from net contributions and distributions, is to provide for growth without risk to principle balances. The general fund assets will be invested in money market cash equivalent products with immediate liquidity until such time that The Give Clear Foundation can estimate comfortably, the amount that is consistently on deposit in general fund accounts.
 

V. Investment Pools and Guidelines

Giving Fund holders with balances above $1,000 may allocate their contributions among the following investment pools approved by the Committee. The Committee shall periodically review and approve changes to the Investment Pools deemed to be appropriate.

INVESTMENT POOL OPTIONS

POOL NAME UNDERLYING FUND ASSET ALLOCATION AND INVESTMENT STRATEGY
Conservative Pool Approximately 70% fixed income+cash/30% equities (+/- 15%). Actively managed fund.
Balanced Pool Approximately 45% fixed income+cash/55% equities (+/- 15%). Actively managed fund.
SRI Balanced Pool Approximately 40% fixed income+cash/60% equities (+/- 15%). Actively managed fund. Social responsibility fund mandate.
Growth Pool Approximately 20% fixed income+cash/80% equities (+/- 15%). Actively managed fund.
Money Market Pool Money market instruments limited to institutional prime, institutional, municipal, government, or U.S. Treasury

1. Selection of Investments of Pools

The Committee shall review and approve investment funds for investment pools at least annually and implement changes as the Committee deems appropriate. In selecting the investment funds, the Committee shall consider, among other factors, the stability and strength of the mutual fund’s investment company, investment objectives, long-term risk/ return profile, peer ranking, size, fees and the length of time the fund has been managed by the same portfolio manager or portfolio committee.

2. Evaluation of Investments of Pools

The Committee shall evaluate each investment fund’s performance on a quarterly basis against each fund’s benchmark. An investment fund manager may be requested to explain a significant variance from the benchmark. In addition to performance monitoring, other events may result in closer monitoring of an investment manager or further action by The GiveClear Foundation. Such events might include, for example, notice of legal or SEC action involving the pool fund manager, its funds or personnel, departure of key personnel or style drift.
 

VI. Professionally Managed Portfolio Investment Guidelines

Investment Objectives and Philosophy

The investment objectives of the Professionally Managed Portfolio shall be consistent with The GiveClear Foundation’s investment objectives as established and overseen by the Committee. A primary Investment Advisor (“IA”) and its delegated sub-advisor(s) may advise each Portfolio Account or an aggregate of the Accounts of a particular Giving Fund or Project Account.

The IA will work with the Giving Fund holder to establish the recommended investment objectives and strategy for the Portfolio, considering the projected timing of grants, target returns, risk tolerance, and other unique considerations, consistent with these investment guidelines.

Criteria for Professionally Managed Accounts

  • Minimum account size $100,000 and must be on the sponsoring organizations trading platform for custody.
  • IAs must be approved in advance by The GiveClear Foundation. In approving IAs, The GiveClear Foundation will consider, among other factors, the length of time the firm has been in existence, its track record, fees, assets under management, related party compliance, the familiarity with and amount of charitable assets managed by the IA. 5
  • The IA will manage the assets on a discretionary basis adhering to these investment guidelines and to any specific guidelines established for individual Accounts.
  • Giving Fund Holders, any secondary Account Holders(s), any Successor(s), any Additional Account User(s) , family members or affiliates of such people may not receive payments for any services, including Investment Advisory services.
  • The IA shall vote proxies, and respond to legal and corporate actions in a manner that is in the best interest of The GiveClear Foundation and consistent with The GiveClear Foundation’s investment objectives stated .
  • Should the asset level in the Account fall below $100,000 and remain below $100,000 for more than 6 months, the Account will no longer be eligible for professional portfolio management and must be reinvested in the investment pools.
  • No deviation from this policy is permitted without the prior written approval of The GiveClear Foundation.
     

Investment Guidelines (excluding Private Investment Funds)

The IA shall manage the Portfolio’s investments in compliance with these guidelines, in a manner that provides sufficient liquidity to support the Account Holder’s recommended grants and to cover Account expenses. It is highly recommended that all accounts reserve 15% in funds annually in cash or cash equivalents.

This section does not apply to contributions of assets. All contributions must be made into The GiveClear Foundations General Fund Accounts first; then be liquidated and cash sent to the appropriate investment center. For further details related to contributions, please see The GiveClear Foundation’s Program Policy.

Diversification

In general, investments should be managed prudently and diversified among asset classes, sectors and securities within the Portfolio, taking into account the Account Holder’s time horizon and planned giving strategy. Ordinarily, the Portfolio should contain more than one asset class. The Portfolio may contain a single diversified mutual fund or 100% cash only if the IA waives its fees. Investments shall be diversified. Excess concentration without prior approval from The GiveClear Foundation is prohibited in the Portfolio.

ASSET CLASS PRIMARY PORTFOLIO PURPOSE DIVERSIFICATION REQUIREMENTS
Equities Growth Weightings in each individual security limited to not more than 10% of the current market value of the portfolio. No greater than 50% exposure to any one sector. No greater than 25% exposure to emerging market equities.
Fixed Income Income Weightings in each individual debt instrument limited to not more than 10% of the current market value of the portfolio. No greater than 25% exposure to emerging market fixed income. No greater than 50% exposure to below investment grade bonds.
Real Assets Inflation Protection Weightings in each individual position to not more than 10% of the current market value of the portfolio. No greater than 25% exposure to publicly traded Real Assets such as Real Estate investments or Precious Metal investments.

Permitted Investments and Transactions

The following Investments and transactions are permitted. Preapproval from The GiveClear Foundation is required for any investments and transactions not listed below:

i. Cash and cash equivalents

ii. Publicly traded stocks, bonds and CDs, exclusive of flow-through entities

iii. Publicly traded mutual funds, publicly traded REITs, ETF and ETNs, exclusive of flow-through entities

Prohibited Investments and Transactions

The following are prohibited unless specifically named as an exception to the Investment Advisory Agreement.

PROHIBITED INVESTMENTS AND TRANSACTIONS
 
  • A participating Investment Advisor’s (or affiliate’s) own stock or debt
  • Contributions of securities with trading restrictions
  • Real estate, except as held in a diversified REIT, ETF, or mutual fund position
  • Short sales, or any transaction on margin
  • Non-negotiable securities
  • Investments in companies for the purpose of exercising control or management
  • Commodities
  • Futures, warrants, or other leveraged investment strategies that employ derivatives, synthetics, or forward contracts
  • Oil, gas, or other mineral exploration or development programs or mineral leases
  • MLPs that generate Unrelated Business Income Tax (“UBIT”) for tax-exempt investors (generally indicated by the issuance of Form K-1); MLPs that provide 1099 reporting are usually acceptable
  • Investments that charge a fee upon redemption (e.g., “back-end load” or “deferred sales charge”)
  • Non–publicly traded structured products
  • Investments that charge a front-end load, unless the Investment Advisor deems it as a lower-fee share class, or if the Investment Advisor obtains a waiver of any front-end load offered for charitable accounts

Benchmarking

The IA shall consider the Account Holder’s input when establishing the Portfolio investment strategy, and shall propose a performance benchmark consistent with that strategy. The IA may select The GiveClear Foundation’s default benchmark listed below or may propose a customized benchmark for the Portfolio.

DEFAULT BENCHMARK PORTFOLIO WEIGHT
Russell 3000 Index 35%
MSCI ACWI ex-US Index 25%
Barclays Capital US Aggregate Bond Index 20%
Barclays Capital Short Treasury Index 20%

The GiveClear Foundation will review and approve proposed custom benchmarks consistent with these guidelines. Custom benchmarks must be documented in the Investment Advisory Agreement. Benchmarks are intended to offer some consistency to the investment strategy and should not be changed unless the long-term investment strategy has changed significantly.

VII. Private Investments

The GiveClear Foundation recognizes the importance of private investments as part of an overall asset allocation and sets the following criteria for investing in private funds. These criteria are designed to provide for thoughtful oversight, thorough due diligence and sufficient availability of liquid assets for grantmaking:

  • An individual Account must have an asset balance of at least $1,000,000 in order for the IA to recommend a private investment fund.
  • IAs may recommend private investment funds that qualify for the Portfolio’s investment strategy provided that the advisor has the experience required to select and monitor private investments.
  • Specific criteria for a private investment fund includes:
    • All due diligence documents with a copy of the IA’s researched investment recommendation required.
    • The investment should not produce any Unrelated Business Taxable Income (“UBTI”). The Giving Fund and investment account will be reduced for any tax liability.
    • Quarterly Valuation updates, annual financial statements and quarterly investor statements are required.
ASSET CLASS ASSET CLASS RESTRICTIONS
Equity
  • Emerging and Frontier markets combined limited to 25% of portfolio’s market value.
Fixed Income
  • Fixed Income securities with split credit ratings will use the lower credit rating
  • Bank loan funds and high-yield (below investment grade) combined limited to 25% of the portfolio’s market value
  • Convertible and municipal combined limited to 50% of the portfolio’s market value
  • Emerging and Frontier markets combined limited to 25% of the portfolio’s market value
Hedge Funds
  • Limited to 25% of the portfolio’s market value
  • Must have a 3rd party administrator and custodian for asset valuation and shareholder accounting.
Private Equity and Venture Capital Funds
  • Accounts should limit ownership to less than 2% of any private investment fund that could result in effective ownership of any operating business. In no event may an Account make an investment which, taken together with a Giving Fund Holder’s personal and/or affiliated holdings, could result in effective ownership of 20% or more of any operating business.
Liquid Alternative Investments
  • Limited to 50% of the portfolio’s market value
Cash and Equivalents
  • Money market instruments limited to institutional prime, institutional municipal, government, or U.S. Treasury

Other events resulting in monitoring include notice of legal or SEC action involving the IA, its funds or personnel, departure of key personnel, or style drift. IAs shall promptly notify The GiveClear Foundation of significant events that may impact the IA’s ability to perform its responsibilities with respect to a Portfolio. The GiveClear Foundation or an IA may terminate their Investment Advisory Agreement at any time upon written notice to the other party. The GiveClear Foundation will terminate an agreement if the IA consistently underperforms the benchmark for a given portfolio, fails to abide by these investment guidelines or its Investment Advisory Agreement with The GiveClear Foundation.

1. Custody

All investments (excluding private investments) must be held in custody at the sponsoring organizations required firm.

2. Evaluation of Investment Advisors and Right to Terminate

The GiveClear Foundation shall review Portfolio composition and performance quarterly, evaluating long term performance in the context of the Portfolio investment strategy. In the event of sustained underperformance, the IA shall explain underperformance and a plan of action to remedy underperformance. Failure to remedy performance issues will result in termination of the Investment AdvisoryAgreement.

3. Exceptions

Any exceptions to these investment guidelines must be approved in writing by either the President of The GiveClear Foundation or the Vice President of Investment Oversight & Risk Management or by another delegated officer of The GiveClear Foundation and documented in the Investment Advisory Agreement. Any material exception to the above list of prohibited investments and transactions will be presented to the Investment Oversight Committee.

VIII. Investment Policy Statement Review

1. Annual Review and Acknowledgment

The Board shall be responsible to ensure that all Investment Committee members and Investment Advisors retained by the Foundation review the IPS at least annually. 10

2. Amendments

This IPS may be amended by the recommendation of the Foundation’s Board of Directors.