Endowment Investment Policy Information

2.1 Purpose and General Principles

The Endowment Investment Policy together with Appendix A (collectively, the “Policy”), sets forth the policies and procedures that guide The Foundation for WWU & Alumni (“Foundation”) in the investment, management and monitoring of all long-term investments, (collectively, the “Endowment”).

The Foundation seeks to include responsible investing practices into its investment selection and management duties. As a responsible investor, the Foundation will work to grow the endowment in a way that appropriately balances the risks we assume with the returns we achieve.

The Foundation will also reflect the values of Western Washington University through thoughtful incorporation of environmental, social, and governance (ESG) factors into our investment process. This includes working with advisors that support the six Principles for Responsible Investing1, and who incorporate financially material ESG issues into their active investment management decisions.

The Foundation’s approach to responsible investing will continue to evolve as we learn from peers with similar investment models and as best practices emerge. Additional information regarding the Foundation’s Responsible Investment practices can be found in Section 2.5 “Responsible Investing”.

2.2 Objectives

The investment objectives are to maintain the Endowment’s long-term purchasing power by maximizing returns while also maintaining a prudent and reasonable level of risk. The portfolio must also be positioned to provide the necessary liquidity to support the Foundation’s commitments to Western Washington University. Overall portfolio return objectives should align with the return objectives stated in the Endowment Spending Policy. To meet the return objectives of the Endowment, the Committee is willing to accept an investment risk level that is commensurate with the return objectives.

2.3 Roles and Responsibilities

2.3.1 Executive Committee Responsibilities

Consistent with the Foundation Bylaws, the Foundation Board has delegated to the Executive Committee the responsibility to review and approve this Endowment Investment Policy. At its discretion, the Executive Committee may submit to the Foundation Board any proposed changes for approval by the Board.

The Executive Committee shall also have the responsibility to review and approve any recommendations from the Finance Committee to select or terminate any investment advisors, managers or other investment professionals required to appropriately execute the investment policy.

2.3.2 Finance Committee Responsibilities

The Finance Committee (“Committee”) is responsible for the development of this Policy which includes establishing target asset allocations, benchmarks, investments strategies, guidelines and restrictions. Any proposed changes to this policy shall be submitted to the Executive Committee for approval.

The Committee also has the responsibility to make recommendations to the Executive Committee for approval for the selection, retention and/or termination of investment advisors, managers and other professionals necessary to conduct the business of the Committee.

The Committee shall ensure that oversight and management of the Endowment is in accordance with this Policy.

The Committee shall require no less than quarterly investment reports from all investment managers or accounts which shall include balances, current values, asset allocation, investment performance, benchmark performance, and other information as determined by the Committee.

The Committee will monitor investments and managers for performance and adherence to the investment policy and the operating investment guidelines.

The Committee will prepare and present to the Board, at least annually, a report of the investment structure and financial performance of the Endowment.

2.3.3 Foundation Management Responsibilities

The President/CEO, and the Vice President/CFO (collectively, “Management”) are responsible for the day to day implementation of the investment policies and procedures as directed by the Committee.

Management shall execute any documents necessary to facilitate implementation of this policy, including, but not limited to, contracts with advisors, investment managers, custodians and other professional services.

Management shall support the Committee to ensure quarterly reports for all investments and accounts are provided by which shall include balances, current values, asset allocation, investment performance, benchmark performance, and other information as determined by the committee.

Management shall monitor all hired investment managers, advisors or other third parties to ensure that the Foundations’ investment policies and objectives and other contract requirements are complied with. Management shall inform the Committee, or the Committee Chair if urgent, of any failure to comply.

Management shall also monitor all hired investment managers, advisors or other third parties for material changes in personnel, structure, investment philosophy or other events that could be relevant to the Foundation’s interests. Management shall inform the Committee, or the Committee Chair if urgent, of such events.

Management is responsible for the collection and investment of contributions and investment income, and the payment of expenditures for the management of the Endowment.

2.4 Operating Guidelines

The Endowment shall be managed in accordance with the Operating Guidelines described in this section and Appendix A.

2.4.1 Investment Selection

The Endowment shall be invested using the Endowment Portfolio Guidelines found in Appendix A, which outlines asset classes, asset targets and ranges, and representative benchmarks. The Endowment Portfolio

Guidelines are designed to meet the objectives of the Endowment investment policy.

2.4.2 Rebalancing

The Endowment shall be rebalanced on a regular basis to keep asset allocations within target ranges of the portfolio. Rebalancing within the target ranges of the portfolio in order to take advantage of shorter-term market conditions is allowed, as long as it does not cause undue risk or extra expense to the Endowment.

2.4.3 Standards of Conduct

In the management and investment of the Endowment, the Committee shall act in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances as outlined in the Uniform Prudent Management of Institutional Funds Act (UPMIFA).

The Committee and Management will ensure that costs are appropriate and reasonable in the relation to the assets and the services provided.

2.4.4 Policy and Guideline Deviations

Deviations from the Endowment Investment Policy may be allowed under the following circumstances.

1. Action is required to provide the necessary liquidity to meet the Foundation’s immediate financial obligations.
2. Action is required to avoid or to correct a violation of the law or regulation.

In such circumstances, any and all actions that deviate from this policy must be approved by the Foundation Board Chair, the Foundation Board Treasurer, the President/CEO and the Vice President/CFO of the Foundation, and one other member of the Committee who is also a Foundation Board member. Deviations approved and the reasons for the deviations shall be documented in the Committee’s minutes.

2.5 Responsible Investing

The Foundation’s approach to responsible investing focuses on three key activities:

1. Maximizing investment returns while managing investment risks;
2. Considering the University’s values while also minimizing any associated investment risks; and
3. Reporting the Endowment’s financial performance, and its alignment with responsible investing guidelines, as appropriate.

2.5.1 Maximizing Investment Returns

The Foundation is charged with maximizing the Endowment’s financial returns while simultaneously assuming appropriate levels of risk. The Foundation seeks to achieve this balance by diversifying its investments in a way that enhances total return while avoiding undue risk concentration in any single asset class or investment strategy.

2.5.2 Considering University Values

The Foundation will seek to reflect the values of the University in investment decisions when possible and may consider actively managed investment vehicles that seek to integrate appropriate ESG factors while also achieving appropriate risk-adjusted returns and portfolio diversification.

The Foundation may also consider targeted private investment strategies as a means of reflecting its commitment to responsible investing. Selected vehicles may adopt a range of responsible investment approaches, including opportunities in sustainable growth themes. Expected performance from such investment vehicles shall not materially vary from the returns of similar assets in the portfolio.

Selected vehicles may provide limited transparency and limited opportunity to implement specific University requests.

2.5.3 Regular Portfolio Monitoring and Reporting

The Committee will monitor the extent to which advisors are implementing the Foundation’s investment goals through regular due diligence and reviews of their responsible investing practices.

In addition to providing annual Principles for Responsible Investing transparency reports, advisors may provide the Committee with a mix of qualitative and quantitative data which they consider to be appropriate for their particular investment objective and strategy.

The Foundation will endeavor to regularly report to stakeholders. The particular reporting metrics will evolve over time as best practices emerge. Reports will be generated based on data availability and materiality.

2.6 Delegation to Outsourced Chief Investment Officers

The Committee may delegate the management and investment of all or part of the Endowment to an outsourced chief investment officer (“OCIO”). The OCIO is generally a firm of investment professionals that demonstrate the ability to manage complex investment portfolios for institutional investors like the Foundation.

2.6.1 Responsibilities

The OCIO is expected to prudently manage the Endowment in a manner consistent with the investment objectives, guidelines, and constraints outlined in this policy statement. The OCIO will act as a co-fiduciary with respect to the management of the Endowment and will have responsibility for all investment decisions delegated as outlined in the contracts between the OCIO and the Foundation.

High level responsibilities include:

1. Assist in development and review of the Investment Policy Statement.
2. Provide guidance on the Endowment’s strategic asset allocation.
3. Implementation of portfolio strategy that includes selection of individual managers (sub-advisors) and oversight of those managers.
4. Maintaining frequent and open communication with the Committee on all significant matters pertaining to the Policy and investment of Plan assets, including, but not limited to:
   • Major changes in the advisor’s investment outlook, investment strategy and structure of the underlying investment vehicles.
   • Significant changes in ownership, organizational structure, financial condition or senior personnel.
   • Any changes in the advisor with respect to their service team.
   • All other pertinent issues which the advisor deems to be of significant interest or material importance to the Committee, plan or policy.
    
5. Rebalance the Endowment in order to maintain target allocations within the allowable ranges, including raising and investing cash as necessary to meet the Endowment obligations and operating needs.
6. Provide a quarterly performance review of the Endowment’s fund performance.
7. Participate in periodic meetings with the Committee to review investment performance, including impact metrics where appropriate, overall Fund positioning, compliance with stated guidelines, market outlook and other relevant topics.
8. Partner with other advisors and/or consultants as requested by the Foundation

Appendix A
Endowment Portfolio Guidelines

* Public Real Assets indexes may include the FTSE EPRA NAREIT Index, and S&P Global listed Infrastructure Index.
Policy Benchmark: Shall be comprised of the asset class weight allocation and the corresponding representative Index.

Investment Classes

Mutual Funds or Commingled Funds

Investments in mutual funds or commingled funds shall be reviewed by the Committee and if approved may vary from the requirements of this Portfolio. For each such mutual or commingled fund, the prospectus, offering memorandum or Declaration of Trust documents of the respective fund will govern the investment policies of the fund investment. These funds guidelines should be similar in principle and spirit to the guidelines and principles of the Portfolio and are subject to the same review and oversight requirements as other investments.

Equity Investments

The purpose of equity investments, both domestic and international, in the Endowment is to provide capital appreciation, growth of income, and current income, with the recognition that this asset class carries with it the assumption of greater market volatility and increased risk of loss. This component includes domestic and international common stocks, American Depository Receipts (ADRs), preferred stocks, and convertible stocks traded on the world’s stock exchanges or over-the-counter markets.

Public equity securities shall generally be restricted to high quality, readily marketable securities of corporations that are traded on the major stock exchanges. Equity holdings must generally represent companies meeting a minimum market capitalization requirement for their respective asset class with reasonable market liquidity. Decisions as to individual security selection, number of industries and holdings, current income levels and turnover are left to investment manager discretion, subject to the standards of fiduciary prudence.

However, no single major industry shall represent more than 20 percent of the Endowment’s total market value, and no single security shall represent more than five percent of the Endowment’s total market value unless approved by the Committee.

Public equity investment managers are also restricted from investing in private placements and restricted stock unless otherwise permitted by the Committee. No assets will be invested in securities whose issuers are or are reasonably expected to become insolvent, or who otherwise have filed a petition under any state or federal bankruptcy or similar statute.

Within the above guidelines and restrictions, investment managers have complete discretion over the timing and selection of equity securities.

Private Capital Investments

Private capital refers to investments that are in privately held companies and not traded on any public exchange. Types of private capital include venture capital, private equity, private debt (credit), and secondary offerings. Investments in private capital are generally illiquid and involve a higher risk than public market investments but can offer higher returns (See Section on Illiquid Investments). Investments in private capital investments will be held in the form of professionally managed pooled investments. Such investments must be made through funds offered by professional investment managers.

Private capital investments require the approval of the Committee.

Fixed Income Investments

The purpose of fixed income investments, both domestic and international, is to provide diversification, and a predictable and dependable source of current income. Fixed income instruments should reduce the overall volatility of the Endowment’s assets.

The fixed income asset class includes the fixed income markets of the U.S. and the world’s other developed economies. It includes but is not limited to U.S. Treasury and government agency bonds, foreign government and supranational debt, public and private corporate debt, public and private credit, mortgages and asset-backed securities, and non-investment grade debt. Fixed income also includes money market instruments, including, but not limited to, commercial paper, certificates of deposit, time deposits, bankers’ acceptances, repurchase agreements, and U.S. Treasury and agency obligations. Investments in fixed income securities should be managed actively to pursue opportunities presented by changes in interest rates, credit ratings, and maturity premiums. These investments will be subject to the following limitations:

Investments of a single issuer, with the exception of the U.S. Government and its agencies (including GNMA, FNMA and FHLMC), may not exceed 5% of the total market value of the Fund;
Within the above guidelines and restrictions, investment managers have complete discretion over the timing and selection of fixed income securities.

Diversifying Investments

Investments into diversifying strategies (e.g. hedge funds) should provide attractive risk-adjusted returns either through lower correlation to traditional equity and fixed income investments and the value added by managers who have the flexibility to employ sophisticated investment strategies.

Diversifying strategies may include a range of hedge fund types (i.e. equity long/short, tactical trading/global macro, event driven, convertible arbitrage, and relative value (fixed income strategies) which can be comprised of publicly listed securities from domestic and international markets. These components may be viewed as equity-like or fixed income-like strategies as defined by their structures and exposures. Such investments must be made through funds offered by professional investment managers.

Diversifying investments require the approval of the Committee.

Public & Private Real Asset Investments

Public and private real asset investments include investing in real estate, infrastructure, and/or natural resources. The purpose of investing in real assets is primarily to hedge the Fund against inflation and to provide diversification to other investment strategies in the Fund. Some real asset investments may also provide long-term opportunities for capital growth or income.

Real estate investments may include public or private real estate, held in the form of professionally managed, income producing commercial, industrial, and/or residential property. Real estate investing focuses on income generation and price appreciation. Such investment may be made through professionally managed pooled funds or held directly by the Endowment.

Infrastructure investments are comprised of assets that are critical to the functioning of societies and often operate in a monopoly-like competitive position with a focus on cashflow generation. Infrastructure investments may include both public and private investments with an emphasis on renewable, digital, social, utilities, transportation and other green energy projects. Such investments may be made only through professionally managed pooled funds.

Commodities & Natural Resources Investments may include a broad range of commodity strategies. These strategies will include but may not be limited to futures, options on futures and forward contracts. The use of swap transactions will be permitted to access this market strategy. Such investments may be made only through professionally managed pooled funds.

Within the above guidelines and restrictions, investment managers have complete discretion over the timing and selection of public real asset securities. Private real asset investments require the approval of the Committee.

Overlay Management Investments

Certain investment managers may be permitted under the terms of their specific investment guidelines to use derivative instruments. Derivatives are contracts or securities whose market value is related to the value of another security, index, or financial instrument. Investments in derivatives include (but are not limited to) futures, forwards, options, options on futures, warrants, and interest-only and principal-only strips. No derivative positions can be established that create portfolio characteristics outside of portfolio guidelines.

Examples of appropriate applications of derivative strategies include hedging market, interest rate, or currency risk, maintaining exposure to a desired asset class while making asset allocation changes, gaining exposure to an asset class when it is more cost-effective than the cash markets, and adjusting duration within a fixed income portfolio. All derivatives positions must be fully collateralized. Investment managers must ascertain and carefully monitor the creditworthiness of any third parties involved in derivative transactions.

Each manager using derivatives shall (1) exhibit expertise and experience in utilizing such products; (2) demonstrate that such usage is strategically integral to their security selection, risk management, or investment processes; and (3) demonstrate acceptable internal controls regarding these investments. Within the above guidelines and restrictions, investment managers have complete discretion over the timing and selection of derivative securities.

Illiquid Investments

In order to help the Endowment achieve its long-term return goals, a portion of the Endowment may be committed to and invested in illiquid investment strategies. Illiquid investments usually have higher expected returns than their public market equivalents. Illiquid investments are defined as investments that do not provide the opportunity for redemption requests at least annually. Typically, illiquid investments are expected to have an investment period of multiple years, sometimes exceeding 10 years. Investments in private capital and private real assets are categorized as illiquid investments.

The Endowment seeks to achieve diversification over time by investing in different market cycles. Therefore, developing a mature, diversified portfolio of illiquid investments will require a commitment spanning a number of years. Once a mature portfolio of illiquid investments has been developed, sustaining it will require additional commitments to new opportunities in order to maintain the Endowment’s exposure to illiquid investments. Fluctuations in valuations of the entire Endowment and lagged reporting of the illiquid investments may also cause allocations to deviate from the policy target.

Because of their long-term nature, individual illiquid investment programs will be considered and approved by the Finance Committee prior to commitment. The Endowment’s allocation to illiquid strategies should not exceed 25% percent of the Endowment’s market value.

Within the above guidelines and restrictions, investment managers have complete discretion over the timing and selection of illiquid securities.

Policy Update History
May 1, 2018 Updated Asset Allocation Matrix
Feb 24, 2020 Include section on Sustainable Investing, and updated names of committees
May 16, 2025 Added new responsible investing language, clarified responsibilities of FC, EC and Management, added section on OCIO responsibilities