Investment Policy

Policy:

General

Funding required to support the activities of the Cape Vincent Community (CVC) Library is derived primarily from annual donations, capital fundraising drives, school budget vote, Village and Town budgets, and investment assets.  The source of these funds is primarily from private citizens and the taxpayers in the Village and Town of Cape Vincent.  Therefore, CVC Library believes that a prudent and formal Investment Policy is warranted to specify how CVC Library will invest these monies that have been entrusted to it.  This Policy outlines how the CVC Library invests its assets and the objectives it seeks to achieve.

Investment Approach

The financial assets of the CVC Library are managed externally by professional investment managers.  Individual stocks, bonds, and commingled vehicles (e.g. mutual funds) may be used.  Short-term cash used for operating purposes is managed in-house but CVC Library may, from time to time, choose to outsource cash management as well.

Investment managers are given investment guidelines as defined in this policy.  Managers have full discretion to implement their investment strategies within the constraints of these guidelines.  The Board of Trustees of the Library will evaluate managers’ performance on a total return basis, net of fees, and in relation to generally accepted (e.g., S&P 500) performance benchmarks and time periods it deems appropriate for each manager’s mandate. Appropriate benchmarks will be established and communicated to each manager.  Authority to appoint and change investment managers are the responsibility of the Board of Trustees.

Investment Objectives

Cape Vincent Community Library’s financial assets must support current activities as well as longer term obligations and objectives.  Accordingly, the investment policy is based on three fundamental objectives – safety, liquidity, and return:

  • Investments are placed in investment grade financial instruments to ensure an appropriate level of safety of principal
  • Maturity / portfolio duration is designed to ensure that the liquidity requirements of CVC Library are adequately serviced

–     Average returns are consistent with market indices based on target asset allocations

Funding for current spending needs is met largely through annual cash donations.  The Cape Vincent Community Library Board of Trustees and staff budget for funding of annual operating activities.  As part of the annual budget review, the Board may allocate a portion of the income from the investment account to meet annual operating requirements.  The Board of Trustees is responsible for providing investment managers with liquidity requirements of the organization to meet these short-term needs.  Long-term funding objectives and obligations are also met by CVC Library’s investment portfolio which includes investment funds designated for specific purposes. 

Cape Vincent Community Library’s return objective is to earn 3% on average assets (trailing 3 years) above the rate of inflation, net of fees.  CVC Library’s Board of Trustees believes that a diversified portfolio is not only prudent, but also necessary to achieve its long-term return objective without incurring excessive risk.  CVC Library has established an asset allocation designed with appropriate weightings to best achieve the 3% real return objective.  The target asset allocation provides diversification within and across asset classes.  It also incorporates ranges for each asset class to provide the investment manager some flexibility to adjust to changing market conditions.

The table below outlines Cape Vincent Community Library’s asset allocation policy weightings:

Overall Asset Allocation

Asset ClassTarget Allocation (%)Range (%)
Equities6050-70
Fixed Income and Cash4030-50
TOTAL100 
Table of Asset Allocations by class, target and range.

U.S. Equities will be targeted at 45% with Large Cap representing 30-40% and Mid/Small Cap representing 5-15%.  Foreign equities shall be targeted at 15% of total assets within a designated range of 10-20%. Within foreign equities, emerging market equites will be targeted at 5% of total assets within a designated range of 0-10%. Securities of a single issuer, valued at cost at the time of purchase, should not exceed 5% of the market value of the portfolio.  No equity sector shall exceed 25% of the total equity position at any time.

Investment Quality

All individual fixed income securities shall maintain an investment grade credit rating from either Moody’s Investor Services or Standard & Poors. In the event a previously investment grade securities were to be downgraded to high yield, the investment manager would notify the Board of Directors promptly. Guidance on the responsive action would be to remove the security, but to allow the investment manager an adequate window with which to monitor market conditions in the context of avoiding short-term market volatility. Bonds rated high yield (those not holding an investment grade rating from either Moody’s or Standard & Poors) at the time of purchase are only to be purchased through a fund and are limited to 10% of the total portfolio.

The following fixed income investment vehicles are not permitted and should not be purchased for or held in Cape Vincent Community Library’s portfolios:

  • Futures contracts, options and other derivative financial instruments
  • Collateralized loan obligations (CLO), including but not limited to mortgage-backed vehicles
  • Collateralized debt obligations (CDO), including but not limited to mortgage-backed vehicles
  • Collateralized bond obligations (CBO), including but not limited to mortgage-backed vehicles
  • 2nd– lien collateral securities
  • Auction Rate securities
  • Non-agency mortgage-backed securities

Reporting Requirements

Investment manager will provide an annual report including a portfolio performance report indicating the year-to-date return on investments in each asset class, net of fees, and for the most recent 12-month period, three-year period and five-year period, relative to designated benchmarks.  In addition, monthly reports will be provided to the Board of Trustees showing the individual investments held, gains and losses, both realized and unrealized, and investment activity during the month, including any donations of stocks/bonds to the Library that were received and sold by the investment manager during the reporting period. Finally, a formal investment review will be provided to the full Board on an annual basis.

Adopted:  March 9, 2017

Revised:  August 15, 2019