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 of these investment portfolios has different objectives, requirements and restrictions. Within the various fund restrictions, the custodians of University funds decide how best to allocate their resources for investment among funds.
In addition, the Permanent University Fund (PUF) is used to account for public endowments. PUF assets are invested in the Consolidated Endowment Fund (CEF).
The Separately Invested Funds (SIF) represent gifts with special restrictions from donors and are separately managed by the Office of Investments and Banking (OIB).
Special Situations
Restrictions
- No endowments may be invested in TIP.
- No true endowments may be invested in GIP. Quasi-endowments may only participate after receiving written approval from the Controller or the Treasurer.
- 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 endowments will not be established for amounts under $25,000, except to reinvest income from a true endowment.
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 guidelines
- Meeting any donor restrictions
- Maintaining appropriate cash liquidity
- Administrative Fee
- Fee charged to Non-PUF endowments. It provides partial support for funding the capital campaign. Fee is set by the Board of Regents.
- Asset Allocation
- The investment vehicles used by the various investment pools:
Temporary Investment Pool (TIP)
The University's cash balances are 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.
Group Income Pool (GIP)
Currently the pool is 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. Up to 50% of GIP may be investd in CEF.
Consolidated Endowment Fund (CEF including Permanent University Fund (PUF)
The long-term policy for the fund targets a 60 percent investment in domestic equities including alternative investments such as venture capital and real estate, and a 20 percent investment in international equities. The remaining 20 percent is targeted for fixed-income related investments. This allocation policy is implemented through a diversified group of external investment managers.
- Authorized Signer
- The person from a University administrative unit with authority to approve additions or withdrawals from various investment accounts.
- Endowments
- Accounts established from gifts or administrative decision. Types of endowments are:
- True Endowments - Must remain permanently intact; principal may not be spent.
- Quasi-Endowments - Remains an endowment based on management prerogatives; principal may be spent for purpose of the gift.
- Term Endowments - Remains an endowment for a period of time certain.
- Life Income Fund Endowments - Remains an endowment for the life of the donor. Some or all of the income is paid to a life income beneficiary for the remainder of his/her life.
- Investment Objectives
- The investment strategy 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 while adhering to Regent established investment guidelines. 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. It represents the University's daily cash balances and other funds needed within a short period of time. These funds generally should not be 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.
Group Income Pool (GIP)
These are the longer term operating reserves of the University created from auxiliary enterprises, depreciation and departmental reserves. These reserves support various capital and infrastructure needs. They will eventually be used for the activities of various auxiliary-enterprise and support-service units and as longer-term plant funds for a number of identified capital projects. When current income is the main goal, non-gift funds with a specific purpose, which will not be expended for at least one year, should be invested in GIP. GIP is accounted for on a unitized market basis. The value of units purchased changes monthly depending on market fluctuations.
Consolidated Endowment Fund (CEF)
This 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 funds will not be expended for at least three years. The accounting for CEF is done on a unitized market value basis. The value is adjusted monthly as the overall value of CEF assets change. Investments are exposed to market variations.
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 never 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.
- Authorized Signer
- Submit GIP participation requests to Dean or equivalent administrative level. Determine or unit overdrafts preclude participation in GIP. Route requests to Accounting Services. Develop plan for recovering negative balances.
- Treasury Accounting
- Implement GIP additions and withdrawals. Process and approve additions and withdrawal requests from CEF. Maintain TIP Tables.
- Investment Advisory Committee
- Recommend spending and asset allocation policies to Treasurer.
- Office of Investment and Banking
- Manage the TIP, GIP, CEF, PUF and SIF pools. Recommend and monitor external investment advisers. Implement Regents policy. Report endowment information to departments. Assist department with questions.
- CFO and CIO
- Approve GIP participation.
- Treasurer
- Approve quasi-endowment participation in GIP.
- University Department
- Choose investment options. Request participation in, additions to and/or withdrawals from CEF and GIP. Monitor fund activity and reports. Adhere to Regents policy, University policy and donor's instructions when spending funds.
Rates
Administrative Fee:
Non-PUF University Endowments: To be determined annually by the CFO.
Consolidated Endowment Fund (CEF)
The Regents have authorized a distribution rate of 4.5% of a 60 month training average by Fiscal Year 2010. Any excess earnings (income + appreciation) over the required distribution are left in the endowment.
- 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.
- Supercedes:
- University Policy - Investments
- Effective:
- March 2000
-
To obtain a copy of a historical policy,
e-mail the U Policy Librarian at policy@umn.edu or call 612-624-4372.
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