Jon Sims Endowment Fund for the Performing Arts
Investment Policy Statement
Adopted June 4, 2024
Mission Statement
To prudently manage the investment assets of the Jon Sims Endowment Fund for the Performing Art (hereinafter JSEF) to ensure the long-term growth and sustainability of JSEF so that it may meet the needs of its investing organizations and the JSEF. In this connection JSEF will balance the requirement of capital preservation with long term growth of JSEF, with a goal of providing income and growth to its constituents.
Assignment of Responsibilities
Board of Directors
The Board of Directors has overall responsibility for oversight of the investment portfolio. It must approve the investment policy and investment strategy, and material changes to either the policy or strategy. It must approve investment and spending policies and objectives that reflect the long-term risk orientation of JSEF. The Board monitors the performance of the investment portfolio and the performance of the Investment Advisor or other professionals as appropriate. The Board analyzes all grant applications and must approve such applications prior to the funding of a grant. It may take steps to retain or dismiss the Investment Advisor or other professionals when deemed appropriate.
General management of the investment portfolio is delegated to an Investment Committee.
Investment Committee
The Board of Directors has established an Investment Committee to manage the JSEF investment portfolio. The Committee is comprised of three members of which the JSEF Treasurer serves as chair, and includes the President of JSEF and one at-large Board member. The Investment Committee shall determine that the JSEF assets are prudently and effectively managed for the benefit of the organization and its beneficiaries. The Investment Committee shall recommend to the Board investment and spending policies and objectives that reflect the long-term risk orientation of JSEF. The Committee shall review financial reports produced by the Investment Advisor and other information that may be provided to the Committee by other professionals regarding the status of JSEF.
JSEF Treasurer
The Investment Committee delegates day-to-day management of the investment portfolio to the JSEF Treasurer. The Treasurer is the primary point of contact with the JSEF Investment Advisor. The Treasurer will report investment performance monthly to the Board. The Treasurer should have a strong working relationship with the Investment Advisor to ensure execution of the investment objectives of the portfolio. Investment Committee meetings will be chaired by the Treasurer and should be held at least quarterly, or more frequently if circumstances dictate.
Investment Advisor
The Investment Advisor shall act in a fiduciary capacity for JSEF, as directed. The Investment Advisor, working with the Treasurer, will be responsible for routine management of asset allocation, liquidity needs, and overall execution of the investment strategy. The Investment Advisor shall provide financial reports, periodically review investment objectives and performance, and provide advice and direction on investment strategy and material changes to the investment portfolio through the Treasurer and the Investment Committee. Serving in a fiduciary capacity, it shall minimize all fees and expenses incurred by the Fund in achieving its objectives set forth therein to the degree possible.
Legal Entity
JSEF is a tax-exempt 501c3 organization and receives virtually all its funding from its investing organizations. Such funding is deployed as investments in the accounts of the investing organizations. The Fund provides grants to eligible organizations for purposes related to their mission and goals.
Investment Objectives
JSEF takes a conservative approach to the management of its investments. In this regard, JSEF seeks a balance between capital preservation and growth of the portfolio for each investing organization. JSEF also seeks to earn dividends and interest income from its investments as a further benefit in building wealth for investing organizations.
Risk Tolerance
The Board seeks a low to moderate risk tolerance in the JSEF portfolio to enhance capital preservation and to “smooth the ups and downs” of investment cycles. A portion of the portfolio may be subject to an increased (moderate) risk to generate a greater rate of return.
Investment Time Horizon
Investments in the portfolio are invested under an undefined long-term perspective. As an endowment fund, the preponderance of investments in JSEF are expected to remain in the Fund into the indefinite future.
Taxes
As a 501c3 corporation, JSEF is exempt from income taxes. However, it must file a tax return annually with the Internal Revenue Service, with a copy sent to the Franchise Tax Board, State of California, together with California Form RRF-1. Financial penalties exist for non-filing or late filing of the returns.
Liquidity Needs
JSEF manages a general fund and the McGlade Fund and draws on these for the payment of expenses and the payment of grants. The McGlade Fund is a non-designated endowment account which had the stipulation upon receipt that it may be used by the Board for any worthwhile purpose. Both funds generate income from dividends and interest derived from their investments and grow from capital appreciation reflecting gains from their invested assets.
Asset Allocation Policy
JSEF may invest in equities, fixed income securities, and specialized investments such as REITS. Equities and fixed income investments, such as US Treasury securities, municipal securities and corporate bonds may be acquired individually or through mutual funds or ETFs.
All investments must carry an investment grade rating by a recognized rating agency. Investments carrying an investment grade between A and AAA should constitute the preponderance of the portfolio. Investments carrying an investment grade of no less than BBB may be considered. In special cases, investment with a lower rating than BBB may be approved by the Board for investment. No unrated investment is permitted.
As a guideline, the portfolio should consist of 60% equities, 30% fixed income, 5% specialized and 5% cash. Investment in a specialized security must first be approved by the Board.
Restrictions
As a LGBTQ+ organization, JSEF seeks to make investments which focus on the principles of ESG (Environmental, Social, Governance) provided they meet the aforementioned criteria. There are no restrictions other than those described under the Asset Allocation Policy. However, the Board may institute certain restrictions at any time.
Portfolio Review and Evaluation
The Board must review and evaluate the investment portfolio at least quarterly. The Investment Committee shall do so monthly based on the financial reports submitted by the Investment Advisor. The Treasurer shall be in communication with the Investment Advisor on an ad hoc basis relative to investment strategy and asset allocation of JSEF’s investments. Communications between JSEF and the Investment Advisor are subject to the terms of the investment program and the investment advisory agreement as well.
Investment Policy and Notification of Changed Circumstances
To ensure continued relevance of the guidelines and objectives established in this investment policy, the Board shall review this policy at least annually and will inform the Investment Advisor of any material change to investment objectives, risk tolerance, liquidity needs, or other matters that may impact the performance of tasks related to the execution of the policy.
Conflict of Interest
The Investment Advisor shall address conflicts of interest in an appropriate manner, whether by avoidance, disclosure, or recuse as appropriate. Likewise, JSEF board members must recuse themselves from decisions regarding financial matters if they are employed by, may receive commissions or other compensation from a recommended financial transaction.
Adoption of Investment Policy Statement
The Board has reviewed, approved, and adopted this Investment Policy on June 4, 2024.