Investment
This investment policy for La Leche League International (LLLI) provides direction and authorization for LLLI Directors, Officers, and staff regarding investment and stewardship of the financial assets of LLLI. The purpose of this investment policy is to provide guidelines and objectives for the investment of LLLI funds.
Acknowledging that risk is inherent in all investments, the primary investment goal is to provide optimum growth over time while preserving the principal of the investment. The LLLI Board recognizes that the allocation of the investment funds will change over time as the amount of the funds increases through investment returns and through additions of additional capital. As the amount of investments increases, the options for investment vehicles increases. Until the time that LLLI has $1 million in reserves, the funds will be invested to preserve principal with very low risk. Once LLLI has an amount in investments of more than $1 million, the recommended investment allocation is a percentage in stocks, a percentage in bonds, and a percentage in money market funds.
Effect: The LLLI Treasurer reviews this policy and makes a formal recommendation to the LLLI Board of Directors every two years regarding whether this policy should remain in force or be rescinded and superseded by an amended policy. This policy will remain in effect until rescinded by the LLLI Board of Directors and superseded by a replacement resolution.
Policy: The policy consists of four parts and covers investments in Operating Reserves, LLLI Board Directed Reserves, Endowment and Restricted Accounts.
1. All funds are to be invested in socially screened funds with an overall orientation consistent with our mission, either:
- mutual funds, or
- non-speculative, diversified, passive, low-cost vehicles bearing competitive returns
Investments will not include speculative items such as margin accounts, options, forwards, futures, junk bond funds, hedge funds, or leveraged investment funds.
Investing in any other type of investment vehicle requires prior approval by the Finance Committee.
Any stocks donated to LLLI will be liquidated and invested as specified in this policy unless other actions are requested by the donor.
Specifically, an investment advisor may be hired to make recommendations and suggestions to investment vehicles based on the above enumerated risk tolerance. The investment advisor is hired to act in a fiduciary capacity and within the risk parameters outlined by the Board at any given time.
Directors and staff avoid trying to “pick winners,” give advice, or spend considerable time and effort on selecting “outperforming” mutual funds. Instead the LLLI Treasurer and Executive Director in consultation with the Finance Committee may select one or two broad-based, high-quality mutual funds that have no front-end load, commission or back-end fees, and have very low average expense ratios. In general, these would tend to be broad “index funds.” Index funds are very diversified by nature and mirror stock market performance.
Privately placed commercial paper, equity in privately held companies, loans, tax-exempt securities, preferred stock shares and other risky investments will not be utilized by LLLI investments. Again, the risk tolerance that the Board approves from time to time rules any investment decisions.
2. The return objectives and risk tolerance of the funds are determined by the LLLI Board of Directors as follows:
- Operating Funds maximize liquidity and preservation of capital by being invested in insured bank accounts, insured Certificates of Deposits (CDs), and/or a low-cost, investment-grade money market fund. All efforts are made to insure that the aggregate bank deposits are at or below FDIC coverage limits. This may result in having many CDs and bank accounts to insure full coverage.
- LLLI Board Directed Reserve Funds are invested (60% – 80%) in a low-cost, investment grade money market fund with the remainder invested in a low-cost, broad-based equity fund.
- The Endowment Fund is invested mostly (65% – 80%) in a low-cost, broad-based equity fund; with the remainder invested in a low-cost, investment-grade money market fund.
- Restricted Funds are invested predominantly (80% – 100%) in a low-cost, investment-grade money market fund, and any remainder may be invested in a low-cost, broad-based equity fund.
3. Restrictions
- The Endowment Fund will not be transferred or used to cover Operating Fund shortfalls.
- Earnings from the Endowment Fund may be used for operating expenses only with the approval of the LLLI Board of Directors.
- The LLLI Board Directed Reserve Fund will not be transferred or used to cover Operating Fund shortfalls without specific authorization from the LLLI Board of Directors. The Board Chair/co-Chairs and Treasurer will be the signatories.
- Restricted Funds are to be used in accordance with donor requests and budgets, unless specifically authorized otherwise by the donor and the LLLI Board of Directors.
Explanation of terms:
Operating Fund: Funds from operating surplus, or other funds specifically available for expenditures in the near term.
LLLI Board Directed Reserve Funds: Unrestricted funds invested to support LLLI during times of economic hardship. Money will be available to operations as determined by the LLLI Board of Directors.
Endowment Fund: Fund established to provide long term stability for LLLI. Additional funds are to be invested as endowment if specified by the donor. Proceeds from this investment may be used only with LLLI Board of Directors’ approval. The principal is not available for use.
Restricted Fund: Funds given by donors with expressed requests for use of funds. {LINK to accounting procedures for non-profit organizations, and to LLLI’s list of restricted funds and the uses they are restricted to.]
Diversified: Preference is given to investing in broad based index funds so that no one underlying stock or bond represents more than 5% of the total fund.
(Jul 06; Mar 17; Oct 20)