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Investment Policy of the AATG Endowment Funds
I. The AATG Endowment Funds
A. The AATG Endowment Funds consist of:
1. The AATG Endowment "Friends of AATG"
2. The AATG Endowed Scholarship Fund
3. An "Unrestricted" Emergency Fund (for the upkeep and repair of the condominiums owned by AATG)
B. Objectives of the AATG Endowment Funds
The objective of the AATG Endowment Funds is the long-term support of the services and programs of the American Association of Teachers of German.
II. Management of the AATG Endowment Funds
A. The Finance Committee of AATG
The Finance Committee of AATG consists of at least four members of the Executive Council, including the Treasurer of AATG, who serves as chairperson. The Finance Committee shall oversee the management of the funds and report to the Executive Council annually on the status of the funds. The Treasurer shall be responsible for keeping the other members informed, calling meetings, and relaying decisions to the AATG Executive Council.
B. Annual Reporting
1. The Treasurer shall receive quarterly and year-end
statements of all investments from the Executive Director and/or bookkeeper of the AATG.
2. The Treasurer shall provide an annual report to the AATG
Executive Council on the state of the investments in the Endowment Funds.
III. Disbursement and Use of Funds
A. Decision-making process for use of funds
The Executive Council in consultation with the Executive Director will determine annually how the income from the three AATG Endowment Funds will be used annually.
B. How much will be taken out each year?
When the Endowment Fund "Friends of AATG" has reached the amount of $250,000, the Finance Committee will determine annually what percentage of the income (i.e., interest, dividends, and capital appreciation) of the Endowment Fund will be used. Since the Endowment Fund consists of restricted funds, the principal will not be touched. Depending on the prevailing economic conditions, the annual spending rate shall usually not exceed 5% of the value of the endowment. All earnings and growth over the 5% spending allowance will be reinvested in the fund. If the Endowment Fund experiences a period of subpar performance, the Finance Committee may decide not to use income from the Endowment Fund or to use less than 5% of the income of the fund as defined above. IV. Investment Guidelines of AATG Endowment Funds
A. Investment philosophy
The AATG Endowment Funds shall follow an investment strategy that seeks to maximize long-term total returns while safeguarding the principal by minimizing risk.
B. Return objective
The objective of the Endowment Funds is a return on investments that falls between the average of current money market rates and the return of the S&P 500.
C. Investment recommendations and executions
The Finance Committee shall make specific investment recommendations. The Treasurer of AATG shall inform the Executive Director of this decision, and the Executive Director shall execute the investment. Depending on current market conditions, investments in the Endowment Funds will usually be made quarterly.
D. Investments: types and guidelines
1. The Endowment Funds shall invest in a mix of variable funds (mutual funds and individual stocks) and fixed income vehicles (bond mutual funds, individual bonds, CDs, and other fixed-income producing vehicles).
2. When considering mutual funds or other managed investments for the Endowment Funds, the Finance Committee shall follow these investment criteria whenever possible:
a. No-load funds, i.e., funds that charge no sales fee or redemption fee
b. Funds that do not charge a 12b1 marketing fee
c. Funds with reasonable management fees of usually less than 1%
d. Funds rated in the top 40% by Morningstar or Lipper
e. Funds rated low to average risk
f. Bond funds or individual bonds that are rated "investment grade" and above, i.e., not rated lower than BBB-.
3. If at some point the Finance Committee feels the need for professional investment advice, it shall consult no-fee financial advisors at firms like Fidelity or Vanguard or a fee-only certified financial planner who charges by the hour and not a percentage of assets.
E. Asset allocation
The goal of the AATG Endowment Funds is a balanced portfolio of long-term investments, i.e., stocks, bonds, and/or certificates of deposit, that will try to limit downward movement of the portfolio to no more than 20% in any one year. As a hedge against inflation, the portfolio will normally hold 60-70% variable-income securities (i.e., stocks) and 30-40% fixed-income funds (i.e., bonds and CDs). However, decisions regarding asset allocation or rebalancing the portfolio shall take into account current market conditions.
F. Annual Review of Investments
At the Annual Meeting of the AATG in November, the Treasurer of AATG shall report on the performance of the AATG Endowment Funds to the Finance Committee, which shall review fund performance, investment strategies, and asset allocation and make specific investment recommendations. The Treasurer shall then report on the state of the AATG Endowment Funds to the Executive Council (see II-B).
V. Development
The continued growth of the Endowment Funds shall be an ongoing project of the AATG. Therefore, the AATG shall seek donations to all Endowment Funds.
A. Committee on Planned Giving
The President of AATG shall appoint an external Advisory Committee on Planned Giving, on which the Treasurer shall serve as an ex-officio member. The Committee is charged with advising the Executive Council about strategies for planned giving (AATG Policies, 1/97). The Committee will also advise ExCo on strategies for investigating and soliciting corporations for potential gifts (AATG Policies, 6/99).
B. Endowed Scholarship Fund Advisory Committee
The President of AATG shall appoint an external Endowed Scholarship Fund Advisory Committee, which shall advise ExCo on strategies for soliciting potential gifts from the AATG membership and others who support this effort (AATG Policies, 6/99).
10 August 2006
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