BOM Investment Policy

Effective January 17, 2023

Investment Policy Statement

1. General

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 the parishes thereof. 

The underlying Investment Style can best be described as active/passive indexing where the philosophy is to make small deviations from index funds that mimic the benchmarks.

The performance of this fund, after all fees, is targeted to meet or exceed over rolling three year time periods:

  1. The Constant Rate of Return as determined by the Board of Managers from time to time.
  2. The benchmark described in this document over most three year rolling time periods, and
  3. Returns that are in the top third of comparable balanced mutual funds tracked by Morningstar, Inc.  

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.  Cash may temporarily exceed this minimum amount during periods of market volatility.

B. Traditional Fixed Income Securities

The Fixed Income portion of the Balanced Fund shall hold mutual funds and/or ETFs (exchange traded funds) that are readily marketable and invest in securities such as US Treasury and Agency bonds, investment grade corporate bonds, non-­investment grade corporate bonds, mortgage pass-­through securities issued by US Government Sponsored Enterprises, asset-­backed securities, money market securities, mutual funds or ETFs primarily invested in fixed-­income securities or other income producing securities that conform to the prudency standards of Maryland law. At least 80% of the mutual fund and ETF investments in the Fixed Income portion by market value must be invested in investment grade securities as determined by Standard & Poor’s or Moody’s.  Up to 20% may be held in non-investment grade (high-­yield) securities.

C. Equity Securities 

The Equity portion of the Balanced Fund shall hold mutual funds and/or ETFs (exchange traded funds) that are readily marketable and that invest in domestic and foreign common stocks, convertible stocks, real estate investment trusts (REITs), mutual funds 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 Board’s minutes.

5. Rebalancing the Portfolio

The Investment Advisor shall review the actual asset allocation no less than 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 Investment Advisor shall rebalance the portfolio. During the quarter, the Investment Advisor shall 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.  In managing the Fund’s 4 asset class weightings, deviations up to 2% of the Fund’s total assets outside of the Tactical Ranges may be approved by the Vice Chair of the Board of Managers but must be ratified by the voting members of the Board at its next meeting. [Example: Assume the Tactical Range for a particular asset class is 40% to 60%. With the approval of the Vice Chair, holdings of that class could be as low as 38% or as high as 62% of total assets].

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 change infrequently, and when changed should reflect structural changes in either the market place or the Board’s adoption of different strategies or portfolios. 

Benchmarks established for the Trust Fund shall be readily and publicly available. Benchmarks may not be changed without approval of the Board of Managers. The minutes will record the benchmarks adopted. The ranges and benchmarks for the Trust Fund are as follows:

       All Stocks      Fixed Income             Cash
Strategic Range    50% to 75%       20% to 50%         0% to 10%
Benchmark Weight           65%              35%               0%

The benchmark for stocks, including U.S. and non-U.S. stocks is the Russell 3000 Index.    The benchmarks for U.S. and non-U.S. fixed income securities as well as investment grade and non-investment grade fixed income securities is the Bloomberg US Government/Credit Intermediate TR Index. 

7. Reporting

The Investment Advisor shall report Fund composition, performance and ranking of the Balanced Fund’s portfolio in writing to the Board of Managers on a calendar quarterly basis. The Investment Advisor shall report performance calculated as time-­weighted returns for the most recent calendar quarter, year-to-date, last 12, 36, 60 and 120 months.  To the extent feasible, the Investment Advisor shall also report the performance of each major asset and sub-asset class. The Board of Managers shall retain copies of the Investment Advisor’s report and the minutes of the Board meeting when quarterly performance is reviewed.

                                                                                                Approved by The Board of Managers on January 17, 2023