Investments

The purpose of the Foundation’s investment portfolio is to preserve and enhance the real (inflation-adjusted) purchasing power of portfolio assets, while providing reasonable annual support to Mississippi State University.

The Board of Directors of the Foundation is aware of its responsibility to provide for prudent management of funds given to the Foundation for the benefit of the University. The Board of Directors hereby charges its Investment Committee with the responsibility of proposing fiscal policies and regulations for adoption by the Board, including investment policies and the employment of investment counsel.

1. For the endowment and treasury pools, the committee shall recommend acceptable asset allocation ranges to the full board. (See the current, established ranges below) Within these ranges, the investment committee shall establish further asset allocation targets.
2. The Committee or its designee(s) shall allocate funds to investment managers and/or established investment funds with demonstrated superior performance in a specific investment area. From time to time, the Committee or its designee(s) may withdraw funds or reallocate funds between funds or managers.
3. The Committee will monitor each manager's performance by comparison to appropriate equity and fixed income market indices, and/or with mutual funds/investment managers having similar objectives, and with other endowment funds.
4. The Committee shall select and appoint a qualified, independent investment consultant.
5. The Committee shall monitor and review, on at least a quarterly basis, the overall investment performance and asset class targets.
6. The Committee or its designee(s) will meet as necessary with the investment managers. Substantive meetings with each investment manager will be conducted at least annually, in person or by phone.
7. The Committee or its designee(s) will provide quarterly investment reports to the full board; these reports should depict the absolute and relative performance of the investment and treasury pools.

1. The Foundation is responsible for the investment of both non-endowed and endowed funds. When appropriate, non endowed funds will be invested in a manner consistent with their objectives. Endowed funds, on the other hand, will be prudently invested as permanently invested funds, in a manner consistent with earning superior long-term capital appreciation, while minimizing both short and long-term volatility.
2. As a permanent fund, the investment objectives for the endowment require disciplined and consistent management that accommodates all events that are relevant, reasonable, and probable. Extreme positions or frequent variations in management style are not consistent with these objectives.
3. The investments of the endowment shall be appropriately diversified so as to minimize risk and volatility while maximizing expected returns.
4. Unless otherwise indicated, Investment Managers shall have complete investment discretion based on the expectation that the assets of the Fund will be invested with care, skill, prudence and diligence.

1. Endowment Investment Pool
   The return objective for the endowment pool is an average annual total real (adjusted for inflation and fees) rate of return of 4% to 6%, as measured over a three to five year market period.
   
2. Treasury (Short-term) Investment Pool
   The return objective for the treasury pool is an average annual total real (adjusted for inflation and fees) rate of return of 3% to 5%, as measured over a three to five year market period.
   
   The Investment Committee shall determine appropriate asset classes and allocation targets for each pool no less than twice annually.
   
   It is the responsibility of the Foundation's Chief Financial Officer [CFO], to monitor compliance with the asset targets and, in conjuction with the Foundation's investment consultant, recommend adjustments as necessary. The actual asset allocation may vary from the target allocation by up to 5 percentage points within any asset class or subclass.

The spending rate is 4 percent; the amount to be spent in each coming year is calculated each December 31st by multiplying the spending rate (4 percent) by the lesser of: 1) a rolling 24-month average of unit values, or 2) the unit value at December 31. The Investment Committee will review this rate annually. Though changes to the spending rate are expected to be infrequent, the Investment Committee is authorized to change the spending rate when it is deemed appropriate to do so.

Total Portfolio

The total portfolio’s return will be reported at the end of each calendar quarter and measured versus an appropriate benchmark index. The benchmark index will be constructed based on the target asset allocation structure. The benchmark will be balanced within the necessary asset classes to reflect the actual structure of the portfolio.

Individual Managers and Mutual Funds

Total portfolio return for each manager will be reported at the end of each calendar quarter and compared to an appropriate benchmark and peer universe.

The performance goal for alternative investments will be based on the investment strategy and structure of the specific alternative investment strategy. In the case of private equity and venture capital investments, it is expected that the investments will produce a long-term annualized return of 12-15%. Hedge funds investments should produce a relatively consistent return that exceeds the return on treasury bills by 5 percentage points.

1. The assets shall be invested with the care, skill, prudence and diligence under the circumstances prevailing from time to time that a prudent person acting in like capacity and skilled in such matters would use in the investment of a fund of like character and with like aims.
2. The following investments and activities are permitted only with the prior approval of the Investment Committee:
   • Options, financial futures and options in futures.
   • Warrants.
   • The lending of securities.
   • Short sales, margin purchases, or borrowing.
   • Investing in commodities.
   • Use of leverage.
3. Transactions should be entered into on the basis of best execution, which normally means best realized price. Commissions may be designated for the payment of investment services rendered to the Foundation upon approval of the Committee or its designee(s).
4. Investment Managers are responsible for frequent and open communication with the Foundation’s Investment Committee or its designee(s) on all significant matters pertaining to the assets managed.