Community-led development "The Apache Way"
This was extracted (@ 2022-01-19 22:10) from a list of minutes
which have been approved by the Board.
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WHEREAS, the Board of Directors desires to facilitate sound governance of the Foundation's financial assets, and WHEREAS, the Board of Directors desires to to establish the financial structures necessary to maintain an endowment NOW, THEREFORE, BE IT RESOLVED, the investment policy statement in Attachment CH be adopted; and be it further RESOLVED that the Treasurer be charged and entrusted with managing the Foundation's investments in line with the investment policy; and be it further RESOLVED, that the Treasurer be charged with regularly reviewing the investment policy and proposing updates. Special Order 7C, Investment Policy Statement, was approved by Unanimous Vote of the directors present.
ORGANIZATION Established in 1999, The Apache Software Foundation ("ASF") is a United States 501(c)(3) charitable organization, funded by individual donations and corporate sponsors. Organizational affairs of the ASF are managed following the bylaws (https://www.apache.org/foundation/bylaws.html). PURPOSE This statement establishes policies, guidelines, and procedures related to all investable assets held by The ASF. In doing so the policy: * defines the duties and responsibilities of all parties involved in the management of investable funds * identifies the objectives, risk profiles, and benchmarks for each purpose-driven investment pool * outlines policies and procedures relative to the expenditure of institutional funds * serves to assist the Board in effectively supervising, monitoring, and evaluating the investment of The ASF's management of the organizations’ investments. ROLES AND RESPONSIBILITIES Board of Directors: The Board of Directors has a direct oversight role regarding all decisions that impact The Apache Software Foundation’s investable assets. The Board must ensure that appropriate policies governing the management of the portfolio(s) are in place and that these policies are being effectively implemented. In doing so, the Board sets and approves the Investment Policy Statement and delegates responsibility for the management of these funds to the Treasurer. Based on the advice and recommendations of the Treasurer, the Board shall: * adopt an investment strategy that addresses the organization's operating needs while reflecting the long-term risk-adjusted return objectives of the endowment. Treasurer: The Treasurer shall not be held accountable for portfolio performance. Instead, the Treasurer is responsible for the development, recommendation, implementation and maintenance of all policies relative to The ASF's investable funds and shall: * present investment strategy recommendations to the Board. These recommendations should address short and long-term objectives, liquidity needs and diversification * recommend the retention and/or dismissal of an Investment Advisor and/or other outside professionals * meet with the Investment Advisor on a regular basis (quarterly / semi-annually) to evaluate and assess compliance with investment guidelines, performance, outlook and investment strategies; monitor asset allocation and rebalance assets * on an annual basis, evaluate whether this policy, investment activities, risk management controls and processes remain consistent with set goals and objectives The Treasurer and Assistant Treasurers shall also be responsible for the day-to-day administration and implementation of policies established by the Board and/or the Treasurer concerning the management of investable assets. Specifically, the Treasurer shall: * serve as the primary liaison between the Investment Advisor and/or other outside professionals that may be retained to assist in the management of such funds * oversee the day-to-day operational activities subject to policies established by the Board * contract with any necessary outside service providers, such as: Investment Advisors, investment managers, banks and/or trust companies etc. * ensure that service providers adhere to the terms and conditions of their contracts; have no material conflicts of interest with the interests of The ASF; and ensure that performance monitoring is sufficient to provide the Treasurer with timely, accurate and useful information * comply with official accounting and auditing guidelines regarding due diligence and ongoing monitoring of investments * prepare and issue periodic status reports to the Board Investment Advisor: The Investment Advisor is responsible for all aspects of managing and overseeing the portfolio. On an ongoing basis the Investment Advisor will: * monitor the asset allocation to promote diversification in the portfolio * implement an unbiased, open-architecture approach to manager/security selection * provide the Treasurer with quarterly performance reports * assist the Treasurer with periodic reviews of this Investment Policy including an assessment of the current asset allocation and investment objectives * supply the Treasurer with other reports or information as requested * attend meetings with the Treasurer and/or Board concerning performance results, economic outlook, efficacy of investment strategy, organization changes (if any), and any other pertinent matters identified by the Board, and/or the Investment Advisor. Custodian: The Custodian will be responsible for the safekeeping of securities held by The ASF. Additional responsibilities include the collection of dividend and interest payments, redemption of maturing securities, and receipt of delivery following purchases or sales. The Custodian will provide accounting of all assets owned, purchased, or sold, and the movement of assets into or out of The ASF's account(s). Additional specialists, such as attorneys, auditors, actuaries, and others may be employed by the Board to assist in meeting its responsibilities and obligations to administer portfolio assets prudently. FIDUCIARY RESPONSIBILITY In seeking to attain the investment objectives set forth in this IPS, members of the Board, the Treasurer, Assistant Treasurer, the Investment Advisor, and all other persons acting as fiduciaries, shall exercise prudence and appropriate care in accordance with the Uniform Prudent Management of Institutional Funds Act (UPMIFA). All investment actions and decisions must be made solely in the interest of The ASF and fiduciaries must provide full and fair disclosure to the Board regarding all material facts pertaining to any potential conflicts of interest. When making any decision relative to the expenditure of donated funds, each of the following factors must be considered, and properly documented, in the minutes or other records of the applicable decision-making body: * general economic conditions; * possible effect of inflation or deflation; * expected tax consequences, if any, of investment decisions or strategies; * the role that each investment or course of action plays within the overall investment portfolio of the fund; * expected total return from the income and appreciation of investments; * other resources of the organization; * the needs of the organization and the fund to make distributions and preserve capital; * an asset’s special relationship or special value, if any, to the organization’s purposes. PROHIBITED INVESTMENTS The following investments and investment activities are prohibited: * Private placements * Letter stock * Derivatives (excluding mutual funds which may buy or sell derivatives for the purposes of managing portfolio risk) * Commodity contracts * Short sales * Margin transactions OPERATING ACCOUNT The ASF has established a demand deposit account to support its day-to-day operating needs. The ASF will seek to maintain a target balance of 50%-75% of the yearly expenses contained in the most recent board-approved budget in this account to accommodate operating and other expenses. OPERATING RESERVE The ASF has additional reserves set aside to serve as a separate Operating Reserve. This portfolio is meant to meet the expenses occurring as a result of unanticipated fundraising shortfalls or unanticipated board-approved expenses, and to improve the return on funds held in the operating account. The objectives of this portfolio are in order of priority: 1.) Preservation of Principal 2.) Liquidity 3.) Rate of Return The portfolio must be well diversified and consist of fixed-income securities rated "A" or better. ENDOWMENT The ASF's Endowment is meant to support the organization in perpetuity and thus has a longer time horizon and a substantially different risk profile than the Operating Reserve. In all instances, donor intent shall be respected when decisions are rendered concerning the investment or expenditure of donor restricted funds. If a donor, in the gift instrument, has directed that appreciation not be spent, The Apache Software Foundation shall comply with that directive and consider it when making decisions regarding the management and investment of the fund. Any attempt to lift restrictions on any fund shall be conducted in full compliance with the law. Time Horizon: The Treasurer seeks to achieve the investment objectives over a full market cycle. The Treasurer does not expect that all investment objectives will be attained each year and recognizes that over various time periods the portfolio may produce significant over or under performance relative to broad markets. For this reason, long-term investment returns will be measured net of fees over a five-year moving average. Spending Policy: Distributions from the corpus, income and/or appreciation of The ASF's Endowment is prohibited unless approved by the Board in advance. The Board will keep a record of its deliberations and address the factors considered when making its decisions. Strategy: The Board and Committee agree that the benefit of investing in securities with higher return expectations outweighs the short-term volatility risk. * Equity and equity-like strategies will be used for capital appreciation. * Fixed income and diversifying strategies will be used to lower short-term volatility and provide stability, especially during periods of deflation and negative equity markets. * Cash is not a strategic asset of the portfolio but is a residual to the investment process and will be used to meet short-term liquidity needs. Asset Class Guidelines: Asset allocation will likely be the key determinant of the portfolio's total return over the long-term. Thus, diversification of investment across multiple markets that are not similarly affected by economic, political, or social developments is highly desirable. A globally diversified portfolio with uncorrelated returns from various assets should reduce the variability of returns over time. Asset classes are not to be considered individually, rather, the inclusion or exclusion of any particular asset class shall be determined by its potential impact to the total portfolio. The target asset allocation should provide an expected total return equal to or greater than the primary objective of the portfolio while avoiding undue risk concentrations presented by any single asset class or category. The Treasurer has adopted a long-term asset allocation policy that identifies the strategic target weights for each of the major asset classes. The table below highlights these asset classes and identifies strategic target weights and allowable ranges. Asset Allocation: Target Low High Equity 60% 40% 75% Fixed Income 40% 20% 55% Cash / Cash Equivalents 2% 1% 10% Rebalancing: The Investment Advisor is expected to continually monitor the portfolio mix and provide quarterly reports to the Treasurer. Neither the upper nor lower limits of the asset allocations are intended to require portfolio activity for the sole purpose of complying with the guidelines; however, deviations from these guidelines will be treated as discussion topics at portfolio review meetings with the Investment Advisor. Rebalancing should be considered at least annually. It is recommended that the target allocation be maintained so that the portfolio will be able to achieve its long-term goals. Manager Selection: The Investment Advisor's selection of Investment Manager(s) must be based on prudent due diligence procedures. A qualifying Investment Manager must be a registered investment advisor under the Investment Advisers Act of 1940, or a bank or insurance company. Active Versus Passive Management: Asset allocation will be implemented using both active and passive investment managers. Highly efficient areas of the capital markets may be managed using lower cost index or exchange traded funds while other asset classes may be managed using active managers and strategies that the Advisor believes have the ability to outperform. Investment Advisor Performance Review and Evaluation: Performance reports generated by the Investment Advisor shall be compiled at least quarterly and communicated to the Treasurer for review. The investment performance of the total portfolio, as well as asset class components, will be measured against commonly accepted performance benchmarks and relevant indices. Consideration shall be given to the extent to which the investment results are consistent with the investment objectives, goals, and guidelines as set forth in this IPS. The Treasurer intends to evaluate the portfolio(s) over at least a three-year period but reserves the right to terminate an Investment Advisor for any reason. Benchmarks: The primary investment objective is to achieve a total return exceeding that of the target weighted benchmark established by the Treasurer over a full market cycle. This target benchmark will be each asset category benchmark (or appropriate substitute) weighted by its target allocation. The relevant benchmarks for each asset class are as follows: Asset Class Benchmark Domestic Equity S&P 500 International Equity MSCI World Equity Ex US NR USD Fixed Income Barclays Capital U.S. Aggregate Bond INVESTMENT POLICY REVIEW The Treasurer will review this IPS at least annually to determine whether the stated investment objectives remain relevant. It is not expected that the IPS will change frequently. In particular, short-term changes in the financial markets should not require adjustments to the IPS.