The asset allocation targets in the investment policy relate to the state of the overall portfolio of working capital reserves that will be pursued at the end of FY 2015, as the levels of the fund stabilize following any transitional expenses or adjustments from the sale of the building, the elimination of liabilities and investment in the new offices.
The targets set for investments vary by fund; the following represent the investment objectives established for our investment managers.
The primary objective for the AIGA Endowment Fund is to
invest for long-term growth. No annual distributions are expected from
this pool of assets. Given the emphasis on growth, a 70 percent equity
allocation and 30 percent target to fixed income and cash, each +/- 5 percent
points, are appropriate targets in order to achieve the primary objective.
The primary objective for AIGA’s Sustaining Reserves Fund is
long-term growth with an expected 4–5 percent of assets distributed annually to
fund various projects. In order to preserve real purchasing power after
the effects of inflation and spending, at least a 60 percent allocation to
equities is required, with the remainder in cash and fixed income.
This pool of assets is expected to be drawn down over the
next 3–5 years as projects are funded. Given the short time horizon and
low risk tolerance, an allocation comprised of 80 percent short-term investment
grade fixed income and 20 percent cash is warranted.
We believe two critical variables must be considered when
determining the appropriate asset allocation for endowments and
foundations: the expected annual spending policy and the overall risk
tolerance of the Board. The current allocation policies for the AIGA portfolios
are consistent with our understanding of these two variables. We approach asset
allocation from a long-term strategic perspective and believe that diversification
across asset classes is the most effective way to control risk and generate
consistent returns over time.
Given our view that the global economic expansion will
endure over the next year, which should be accompanied by continued muted
inflation and a gradual drift upwards in interest rates, we believe the
portfolios should be invested at or slightly above the target allocations to
equities. Currently, the Endowment Fund has 71 percent of assets in
equities and the Sustaining Fund with 61 percent in equities. We will likely
allow the equity exposure to edge higher by ~1–2 percentage points, but would
probably rebalance the portfolios should the equity allocations reach the upper
end of the stated targets.
policies contribute to the board’s ability to maintain
accountability over the soundness and integrity of the organization.
Section: About AIGA -
AIGA chapters fulfill AIGA’s mission at the local level, supporting members through organizing projects and events to educate, inform and connect designers.
Section: About AIGA
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