Effective May 6, 2015
As provided by the Constitution and Canons of the Diocese of Easton, The Board of Managers of the Easton Episcopal Funds is responsible for all property, real and personal, donated for the benefit or use of the Convention of the Protestant Episcopal Church in the Diocese of Easton, and any parish, congregation or institution thereof, including property in trust, delivered to the Convention, Diocese or Board of Managers of such Funds for investment and safekeeping.
2. Investment Objectives
The Easton Episcopal Balanced Fund shall be invested with the objective of maintaining the real value of the principal of the fund over time, while supporting the needs of the diocese and parishes. The performance of this fund, after all fees, is targeted to meet or exceed the benchmarks described later in this document over time periods of at least three years. All investments will conform to the prudency standards of Maryland law.
3. Investment or Asset Class Description
A. Cash and Cash Equivalent
The amounts of cash and cash equivalents of the Fund shall be maintained at the minimum amount needed to manage the receipts of additional investments from shareholders, redemptions by shareholders, purchases and sales of securities, distributions to shareholders, and payments of expenses.
B. Traditional Fixed Income Securities
The Fixed Income portion of the Balanced Fund will hold readily marketable securities, and may include US Treasury and Agency bonds, investment grade corporate bonds, non-investment grade corporate bonds, mortgage pass-through securities issued by US GSEs, asset-backed securities, money market securities, mutual funds or ETFs primarily invested in fixed-income securities, and any other fixed-income security that conforms to the prudency standards of Maryland law. At least 80% of the Fixed Income portion by market value must be invested directly in investment grade securities as determined by Standard & Poor’s or Moody’s or in investment-grade mutual funds or ETFs. Up to 20% may be held in high-yield securities.
C. Equity Securities
The Equity portion of the Balanced Fund will hold domestic and foreign securities that are readily marketable and may include common stocks, convertible stocks, mutual funds, Real Estate Investment Trusts or ETFs primarily invested in equities. The Board will not make direct investments in non-marketable securities.
4. Strategic and Tactical Ranges
Paragraph 6 (below) sets forth the Strategic Ranges for various asset classes. These ranges represent the absolute minimum and maximum percentages that can be invested in each asset class. As soon as practical after it is determined that the portfolio is outside of these ranges, securities should be purchased or sold to bring the portfolio into compliance with the current ranges. The Board of Managers has determined that these ranges are consistent with the standards of Maryland law and the requirements of the Trust Fund. The Board of Managers shall from time to time adopt Tactical Ranges within the Strategic Ranges in response to current market conditions. Any changes in the Tactical Ranges approved by a majority of the voting members of the Board of Managers will be recorded in the minutes.
5. Rebalancing the Portfolio
The Fund Administrator shall review the actual asset allocation quarterly and make changes as needed to bring the allocation within the Tactical Ranges. When sector percentages at the time of the review either exceed the maximum percentage or are less than the minimum percentage of the Tactical Ranges, the Fund Administrator will rebalance the portfolio. During the quarter, the Fund Administrator will utilize money coming into or out of the fund to partially rebalance the portfolio towards the Tactical Ranges or to hold for shareholder cash flow considerations.
6. Benchmarks and Performance Evaluation
Benchmarks are meant to be reflective of how a reasonable, prudent investor would build a long term portfolio. Benchmarks should not change very often, and when changed should reflect structural changes in either the market place or the objective of achieving different strategies or portfolios.
Benchmarks must be established for each manager and for the Trust Fund. Benchmarks shall be readily and publicly available. Benchmarks may not be changed without approval of the Board of Managers. The minutes will record the benchmark for each manger. The ranges and benchmarks for the Trust Fund are as follows:
The benchmark for US stocks is the Russell 3000 Index; for non-US stocks the benchmark is the MSCI ACWI ex USA Index; and for traditional fixed income the benchmark is the Barclays US Government/Credit Intermediate Total Return Index USD.
The Fund Administrator shall report Fund composition and performance of the Balanced Fund’s portfolio to the Board of Managers on a quarterly basis. The Fund Administrator shall report performance calculated as time-weighted returns.
Outside Managers should report quarterly in writing any changes that have been made in their strategy, major purchases and sales, and an overall evaluation of their performance. Additionally, outside managers should comment on business trends impacting their organization including but not limited to changes in management, changes in ownership, their flow of new and lost business, and the financial stability of their organization.