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ADMINISTRATIVE POLICY
Home : Finance : Cash Management and Investments

Selecting Investment Options for University Funds

Effective Date: March 2000
Last Update: April 2009
Responsible University Officer:
  • Treasurer
Policy Owner:
  • Chief Investment Officer
Policy Contact:

Printed on: . Please go to http://policy.umn.edu for the most current version of the Policy or related document.

POLICY STATEMENT

University assets are consolidated in various investment portfolios in order to achieve specific investment objectives. The three investment options are:

  • Temporary Investment Pool (TIP)
  • Group Income Pool (GIP)
  • Consolidated Endowment Fund (CEF)

Each investment portfolio has different objectives, requirements and restrictions. As custodians of University funds, departments may choose to allocate their resources among the various investment options.

In addition, the Permanent University Fund (PUF) is used to account for public endowments. All PUF assets are invested in the Consolidated Endowment Fund (CEF).

The Separately Invested Funds (SIF) represents gifts with special restrictions from donors and are separately managed by the Office of Investments and Banking (OIB).

Restrictions

  • No endowments may be invested in TIP.
  • No True endowments, nor associated Quasi-restricted endowments, may be invested in GIP. No Term or Life Income endowments may be invested in GIP.
  • Quasi-restricted and Quasi-unrestricted endowments may only participate in GIP after receiving written approval from the University CFO/Treasurer and CIO.
  • Participation in GIP requires a $25,000 minimum and all non-sponsored accounts must have positive aggregate balances. If the balance falls below the minimum, the balance must be brought up to $25,000 in two months or participation ceases.
  • Quasi-restricted or Quasi-unrestricted endowments will not be established for amounts under $25,000, except to reinvest income from a True endowment.

REASON FOR POLICY

The University intends to maximize income and minimize risks for its investments while at the same time:

  • Complying with State laws related to investments
  • Following established Board of Regents investment policies:
  • Meeting any donor restrictions
  • Maintaining appropriate cash liquidity

PROCEDURES

FORMS/INSTRUCTIONS

APPENDICES

FREQUENTLY ASKED QUESTIONS

ADDITIONAL CONTACTS

Subject
Contact
Phone
Fax/Email
Primary Contact(s)
612-624-5858
TIP Rates
Budget and Finance
612-624-2858
 
Account Set Up
Treasury Accounting
Katia Wieber
612-625-2012
Investment Options & Reporting
Office of Investments and Banking
612-624-5558
612-626-7271 fax

DEFINITIONS

Administrative Fee
Fee charged to Non-PUF endowments. The fee provides partial support for funding of capital campaigns and is determined by the President and the Board of Regents.
Asset Allocation
A diversification strategy that focuses on balancing investment risk and return through use of various asset classes such as stocks, fixed income, cash, commodities, derivatives etc.
  • Temporary Investment Pool (TIP)
    Operating reserves primarily invested in high-quality, short-term, fixed income securities such as domestic and foreign commercial paper, money market mutual funds and shorter-term U.S. Government and Agency Securities as well as a portion available for investment in CEF. TIP is the daily working capital for the University.

  • Group Income Pool (GIP)
    Long-term reserves invested in domestic and international fixed-income related securities of varying maturities. Regents' policy allows for up to 50% of GIP to be invested in equities and a maximum of 50% of GIP may be invested in CEF.

  • Consolidated Endowment Fund
    Endowment and Quasi-endowment funds of the University that targets a 60% investment in domestic equities including alternative investments such as venture capital and real estate, and a 20% investment in international equities. The remaining 20% is targeted for fixed-income related investments. The asset allocation strategy is implemented through a diversified group of external investment managers.

Authorized Signer
University department personnel with the authority to approve additions, withdrawals or make changes to an income distribution allocation. For CEF endowments the departmental preparer serves as the authorized signer. For GIP the Dean (or equivalent administrative officer) or Chancellor, the University CFO/Treasurer, and the University CIO serves as the authorized signer.
Endowments
Accounts established from gifts or administrative decision. Types of endowments are:
  • True
    Must remain permanently intact; principal may not be spent.
  • Quasi-restricted
    Principal and income distribution may be spent for designated purpose.
  • Quasi-unrestricted
    Principal and income distribution may be spent for designated purpose (if specified) or any purpose. Typical funding sources include royalties or unrestricted gifts.
  • Term
    Remains an endowment for a period of time certain.
  • Life Income Fund
    Principal may never be spent. Income distribution is paid to the donor or donor designee, or combination thereof, for the life of the recipients or for a fixed period of time. Thereafter, becomes a True endowment.
Investment Objectives

The investment guidelines used by various investment pools to meet the goals of the investors and donors.

  • TIP - Maximize short-term income while protecting principal and maintaining liquidity.
  • GIP - Maximize current income. Principal appreciation is a secondary objective of the pool.
  • CEF (and PUF) - Maintain the inflation-adjusted value of the fund and maximize total return (income plus capital appreciation).
  • SIF - Each separately invested fund has its own investment objective specified by the terms of the gift or by administrative decision.
Investment Pools
  • Temporary Investment Pool (TIP)
    The working capital funds of the institution are invested in the Temporary Investment Pool. Funds in this pool come from appropriations, tuition receipts, federal grants, student loan funds, plant funds, gifts for current use, unexpended endowment distributions, and other funds derived from University operations, such as external sales. The pool represents the University's daily cash balances and other funds needed within a short period of time to fund the University's daily banking requirements. The funds are generally not exposed to significant market risk. The accounting for TIP is on a book value basis, i.e. there is no risk of loss of principal to a University department.

  • Group Income Pool (GIP)
    Long- term operating reserves of the University created from auxiliary enterprises, depreciation and departmental reserves. The funds support various capital and infrastructure needs. Funds should be invested in GIP when current income is the main goal and the dollars will not be expended for at least three years. GIP is accounted for on a per-share market value basis. The value of shares changes monthly depending on market fluctuations.

  • Consolidated Endowment Fund (CEF)
    The fund represents the pooling of individual endowment funds from both public and private sources. Essentially permanent funds, endowments have the longest investment timelines. Funds should be invested in CEF when principal appreciation is the main goal and dollars will not be expended for at least three years. The accounting for CEF is done on a per-share market value basis. The share value is adjusted monthly as the overall value of CEF assets change due to market fluctuations.

  • Permanent University Fund (PUF)
    PUF is a public endowment derived from sources such as state iron ore taxes, royalties, and federal land grants. By legislative mandate, PUF assets are used to match private contributions with the goal of providing substantial financial support for endowed chairs and professorships throughout the University. All PUF endowments are True endowments and as such the original principal may not be spent. These endowments are invested in CEF and subject to the same policies.

  • Separately Invested Funds (SIF)
    Separately invested funds are primarily gifts of securities which by virtue of the terms of the gift, administrative decision, or practical expediency cannot be liquidated and combined with other investment pools and managed externally. These gifts are always established as endowments. SIF funds are accounted for on a market-value basis.

RESPONSIBILITIES

Authorized Signer
GIP: Approve participation in GIP. Also approve all deposit and withdrawal requests. Completes and forwards form UM 1638 as directed. Authorized signer is the Dean (or equivalent administrative officer) or Chancellor, the University CFO/Treasurer and University CIO.
CEF: Submit deposit, withdrawal and income distribution allocation requests, via the financial system. Authorized signer is the departmental preparer.
Investment Advisory Committee
A group of external investment professionals who serve in an advisory capacity to the Office of Investments and Banking and meet quarterly to evaluate investment performance, asset allocation strategy and manager selection and spending policy. The committee is chaired by the Regent of the Board of Regent's Finance Sub-Committee.
Office of Investment and Banking
Manage the TIP, GIP, CEF, PUF and SIF pools. Recommend and monitor external investment advisers. Implement Regents policy.
University Chief Financial Officer (CFO/Treasurer)
Approve Quasi-restricted and Quasi-unrestricted endowment participation in GIP. Also, approve all GIP deposit and withdrawal requests.
Treasury Accounting
Process Form UM 1638 and verify that appropriate approvals have been granted for deposits and withdrawals from GIP. Approve all CEF and GIP endowment transactions in the financial system. Maintain TIP Tables. Initiate quarterly income distribution and provide financial reporting.
University Chief Investment Officer (CIO)
Approve Quasi-restricted and Quasi-unrestricted endowment participation in GIP. Also, approve all GIP deposit and withdrawal requests.
University Department
Choose investment options. Request a Quasi-restricted or Quasi-unrestricted endowment be established. Initiate deposits, withdrawals and income distribution allocation changes from CEF and GIP. Monitor fund activity and reports. Adhere to Board of Regents policy, Administrative policy and donor's instructions when spending funds.

RELATED INFORMATION

HISTORY

Amended:
March 2009 - Updated to clarify policy, and more fixes to reflect EFS conversion. Procedures rewritten and reorganized. Added new appendices.
Amended:
July 2008 - Updated to reflect rollout of the Enterprise Financial System (EFS).
Amended:
October 2003 - Updated GIP Income Distribution policy, Asset allocation for CEF changed from 50 Domestic/ 30 International, to 60% Domestic/20 International/ 20 fixed income. Distribution is now 5% (rather than 5.5%). FAQ and procedure 3.12.4.2 also updated to reflect these changes.
Effective:
March 2000
Supercedes:
University Policy - Investments

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Last modified on May 12, 2014