Business Procedures Manual

Fiscal Affairs Division

9.2 Investments

(Last Modified on June 13, 2019)

When investing funds, institutions must safeguard invested assets consistent with the fiduciary responsibility USG institutions have to citizens of the State of Georgia, while also conforming to donor intent and BOR and State policies. Per BOR policy, institutions are required to establish an investment policy, which must be reviewed and updated every two (2) years and placed on file with the BOR Treasurer.

Authority for investments of any and all funds resides exclusively with the Treasurer of the Board of Regents. When the Treasurer deems delegation of such authority appropriate, such delegation of authority must be in writing and on file in both the Treasurer’s Office and office of the chief fiscal officer of the institution.

If an institution maintains all of its’ investments in the Regents’ Pooled Investment Program and/or in the OST’s Local Government Investment Pool (LGIP), the institution would not need to develop a detailed investment policy. Investment policy guidelines for the Regents’ Pooled Investment Program are maintained at the system office, while investment policy guidelines adopted by the SDB are included on the OST website under document titled Investment Policy for the Office of the State Treasurer.

9.2.1 Investment Policy

(Last Modified on June 13, 2019)

Institutions, which have investments outside of the Regents’ Pooled Investment Program or LGIP, must develop a written investment policy.

The investment policy must, at a minimum, contain the following items:

  1. Investment objectives - There may be several different investment objectives, depending on the type of funds to be invested and period of investment to be considered. These may include objectives that attempt to preserve the purchasing power of income and principal, maximize current income, or maximize capital values. Each investment objective should clearly state the time horizon for achieving investment objectives.
  2. Investment type - Investment must be consistent with donor intent, Regents policy and applicable federal and state laws.
  3. Asset allocation - Guidelines which outline the asset classes and subclasses that will constitute permissible areas for investment of funds. The guidelines should indicate the maximum and normal distribution of funds among the different asset classes or subclasses and the rationale for selecting these criteria. Asset allocation guidelines should also be tied to the investment objective and consider the potential risks associated with different asset allocations. The investment policy should outline the factors to be considered when an institution proposes a change in asset allocation such as during times of significant rate shift affecting the investment portfolio and instability in inflationary trends.
  4. Diversification (including interest rate risk, custodial credit risk, credit quality risk, concentration of credit risk, and foreign currency risk) – Adequate portfolio diversification is fundamental to the management of risk. The investment policy should include a diversification plan that considers the asset classes and investment products to be utilized in an attempt to achieve desired return with an acceptable level of risk. The plan should also describe how the various risk factors are addressed.
  5. Spending policy - Spending rules must be established to work in conjunction with investment objectives. Variables to be considered include the percentage of return allocated to prevent principal erosion by inflation versus the percentage to be expended currently.
  6. Monitoring – Periodic monitoring of investment results should be addressed in the investment policy.
  7. Utilization of investment managers – Criteria for selection and evaluation of performance of investment managers should be described in the investment policy. If the institution chooses to use outside investment manager(s), the following should be included:
    • Professional background and experience
    • Investment philosophy relative to the institution’s stated investment objectives;
    • Organizational structure and overall product line;
    • Control with respect to ensuring that individual managers adhere to policy objectives and guidelines;
    • Total size of managed assets;
    • Record of performance measured against appropriate benchmarks;
    • Ability to communicate results effectively and in timely fashion;

Each institution shall submit an annual report on investment performance for all investments that are outside of the Regents’ Pooled Investment Program and LGIP to the BOR Treasurer. This report must assert that investments have been made in accordance with the institution’s written investment policy.

9.2.2 Regents Pooled Investment Program

(Last Modified on June 28, 2024)

Units of the University System of Georgia and their affiliated organizations may participate in the Regents Pooled Investment Program. The characteristics and investment objectives of the types of pooled funds are detailed below.

Short Term Fund

The Short Term investment fund is most suited for investment of shorter term operating reserves with a time horizon of 1 year or longer that are subject to Georgia Code investment restrictions. The Fund may also be used to invest other non- appropriated operating reserves with the same time horizon.

Only USG institutions and cooperative/affiliated organizations may invest in the Fund.

The Fund is managed to maintain a stable net asset value with limited principal volatility, however, there is no assurance that the fund will be able to achieve this objective in all market conditions.

Investment Objectives

  1. The primary investment objective is the preservation of principal and current income consistent with permitted investments.
  2. The secondary investment objective is to provide a competitive return on the short term funds of the University Systems of Georgia participants, while providing sufficient liquidity for periodic cash needs.
  3. The portfolio will be limited to domestic fixed income only and shall be well diversified as to issuer and maturity within the scope of permitted investments.
  4. The overall credit quality of the portfolio will be at least AA.

General Investment Guidelines

  1. The investment manager will give frequent and active attention to the portfolio to implement the Fund’s investment strategy.
  2. The investment manager is authorized to make investment changes as deemed necessary on a discretionary basis, but only in accordance with the objectives and guidelines set forth in this document.
  3. The investment manager will meet regularly with the Pooled Fund Program’s Advisory Committee to review investment objectives, investment strategies and performance results.
  4. All investments utilized in the Fund will be highly liquid with readily determinable valuations. Generally, it is anticipated that liquidity needs will be met through maturities, portfolio structure and interest income.
  5. For comparative purposes, the portfolio will be measured against the Bloomberg Barclays Short Treasury Index and Georgia Fund One (LGIP).

Specific Investment Guidelines

  1. Investments in the Fund will be limited to fixed income securities permitted for investment under Georgia Code Section50-17-63.
  2. Consistent with the above Code Sections, permitted investments shall include:
    • Bankers Acceptances;
    • US Treasury bonds, bills and notes;
    • Eligible bonds, bills and notes of counties or municipalities of the State of Georgia;
    • Eligible industrial revenue and development authority bonds created by the laws of the State of Georgia;
    • Obligations (including mortgage obligations) of subsidiary corporations authorized by the U.S. Federal Government including, but not limited to, the Federal Farm Credit Bank, the Federal Home Loan Bank, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association; and the Tennessee Valley Authority;
    • Repurchase agreements collateralized by obligations of the U.S. Treasury and subsidiary corporations of the U.S. Federal Government (the market value of the collateral will at all times be at least 102% of the repurchase agreement investment);.
    • Obligations of U.S. public corporations of that have a market capitalization of at least $ 100 million, provided that such securities are rated A or better by at least two nationally recognized rating agencies, at the time of purchase and while held in the portfolio. If any corporate holding is downgraded below the minimum rating above, it should be sold within 90 days of the downgrade.

      1. If in the opinion of the investment manager, the position should be retained, the manager shall notify the Investment Advisor in writing of the rationale behind the recommendation and obtain approval from the Investment Advisor to retain the position. The Investment Advisor will then notify the Pooled Fund Program’s Advisory Committee of the downgrade and subsequent decision.
  3. The duration of the portfolio will range from .25 to 1.25 years, but will typically average 0.75 to 1 year.
  4. The maximum maturity (average life) of any individual holding will not exceed 3 years at the time of purchase. Once held in a portfolio, should any security’s average life exceed 3 years due to market conditions, the investment manager should maintain the maximum maturity, unless selling the security would realize a significant loss. Should selling the security realize a significant loss, the investment manager has the discretion, in consultation with the USG Chief Fiscal Officer, to retain the security up to a maximum of 4 years average life. Any sell transaction required to maintain policy holding requirements that will result in significant loss should be approved by the USG Chief Fiscal Officer.
  5. For purposes of determining maturities, the next reset date will be used for floating rate securities, the put date for putable securities, the call date for securities trading on a yield-to-call basis, and the average life on securities with periodic principal payments prior to maturity such as mortgage-backed securities and asset-backed securities.
  6. The maximum exposure to obligations of U.S. public corporations will not exceed 30% of the total portfolio.

Legal Fund

The Fund is most suited for investment of donor restricted endowment funds that are subject to Georgia Code investment restrictions, as well as longer term operating reserves with a time horizon of at least 5 years.

Only USG institutions and cooperative/affiliated organizations may invest in the Fund.

Investment Objectives

  1. The Fund’s investment objective is safety of principal and a higher level of current income consistent with permitted investments.
  2. The portfolio will be limited to domestic fixed income only and shall be well diversified as to issuer and maturity within the scope of permitted investments.
  3. The overall character of the portfolio will be at least US Agency quality,.

General Investment Guidelines

  1. The investment manager will give frequent and active attention to the portfolio to implement the Fund’s investment strategy.
  2. The investment manager is authorized to make investment changes as deemed necessary on a discretionary basis, but only in accordance with the objectives and guidelines set forth in this document.
  3. The investment manager will meet regularly with the Pooled Fund Program’s Advisory Committee to review investment objectives, investment strategies and performance results.
  4. All investments utilized in the Fund will be highly liquid with readily determinable valuations.
  5. For comparative purposes, the portfolio will be measured against the Bloomberg Barclays Intermediate Government Bond Index.

Specific Investment Guidelines

  1. Investments in the Fund shall be limited to fixed income securities permitted for investment under Georgia Code Section 50-17-63.
  2. Consistent with the above Code Section, permitted investments shall include:
    • Bankers Acceptances;
    • US Treasury bonds, bills and notes;
    • Eligible bonds, bills and notes of counties or municipalities of the State of Georgia;
    • Eligible industrial revenue and development authority bonds created by the laws of the State of Georgia;
    • Obligations (including mortgage obligations) of subsidiary corporations of the U.S. Federal Government, including, but not limited to, the Federal Farm Credit Bank, the Federal Home Loan Bank, the Federal National Mortgage Corporation, the Government National Mortgage Association, and the Tennessee Valley Authority.
    • Repurchase agreements collateralized by obligations of the U.S. Treasury and subsidiary corporations of the U.S. Federal Government. The market value of the collateral will at all times be at least 102% of the repurchase agreement investment.
  3. The duration of the portfolio will range from 75% to 125% of the duration of the benchmark index with an average maturity (average life) of 3 to 5 years.
  4. The maximum maturity of any individual holding will not exceed 30 years.
  5. For purposes of determining maturities, the next reset date will be used for floating rate securities, the put date for putable securities, the call date for securities trading on a yield-to-call basis, and the average life on securities with periodic principal payments prior to maturity, such as mortgage-backed securities and asset-backed securities.

Balanced Income Fund

The Balanced Income fund is designed primarily for investment of endowment and other donor restricted gifted funds that have net income distribution requirements and may not be eligible for a total return based institutional spending policy.

The Fund may also be used to invest other types of non a ppropriated funds where a more conservative asset allocation is appropriate. Such funds may include charitable gift annuities and other types of planned giving vehicles as well as non-state appropriated longer term operating reserves with a time horizon of at least five years.

Only USG institutions and cooperative/affiliated organizations may invest in the Fund.

Investment Objectives

  1. The Fund’s investment objective is to achieve a meaningful total rate of return with an emphasis on current income.
  2. The overall character of the portfolio should be one of above-average quality, possessing an average degree of investment risk.

General Investment Guidelines

  1. The investment manager will give frequent and active attention to the portfolio to develop and implement the Fund’s investment strategy.
  2. The investment manager is authorized to make investment changes as deemed necessary on a discretionary basis, but only in accordance with the objectives and guidelines set forth in this document.
  3. The investment manager will meet regularly with the Pooled Fund Program’s Advisory Committee to review investment objectives, investment strategies and performance results.
  4. All investments utilized in the Fund will be highly liquid with readily determinable valuations.
  5. The total equity portion of the portfolio will be reviewed over a full market cycle compared to the Russell 3000 Index.
  6. The total fixed income portion of the portfolio will be reviewed over a full market cycle compared to the Bloomberg Barclays Aggregate Index.
  7. The total portfolio performance will be measured against a blended benchmark comprised of 30% Russell 3000 Index and 70% Bloomberg Barclays Aggregate Index.

Specific Investment Guidelines

  1. The portfolio’s equity allocation range shall be between 20%-40%, with a target of 30%, and shall have the following characteristics:
    • Permitted investments are limited to publicly domestic equities only;
    • The portfolio will be well diversified among large cap, mid cap, and small cap equity strategies;
    • The portfolio will have exposure to both growth and value equity styles, with an emphasis on dividend focused strategies.
  2. The portfolio’s fixed income allocation shall typically range between 60%-80%, with a target of 70%, and shall have the following characteristics:
    • Permitted investments are limited to publicly traded domestic investment grade fixed income only.
    • The portfolio will be well diversified as to issuer and maturity.
    • Average maturities will generally be of intermediate term, but may periodically emphasize shorter or longer maturities, depending on yield differentials and market conditions
    • The maximum maturity of any individual issue shall not exceed thirty (30) years at the time of purchase.
    • The average duration of the total fixed income portfolio will not exceed the duration of the Bloomberg Barclays Aggregate Index by more than 20%.
    • The total fixed income portfolio will have an average credit quality rating of at least A.
  3. Cash reserves for scheduled distributions and other contingencies are expected to comprise the balance of the fund:
    • Cash reserves will be invested at all times in SEC registered money market funds that meet the highest NAV rating classification or other principal stable overnight investment vehicles such as U. S. Treasury collateralized repurchase agreements.
    • All cash reserve investments will have daily liquidity.

Total Return Fund

The Total Return fund most suited for investment of endowment and other donor restricted gifted funds that are eligible for a total return based on institutional spending policy.

The Fund may also be used to invest other types of non-appropriated funds where a more aggressive asset allocation is appropriate. Such funds may include charitable gift annuities and other types of planned giving vehicles as well as non-state appropriated longer term operating or board restricted funds with a time horizon of at least ten years.

Only USG institutions and cooperative/affiliated organizations may invest in the Fund.

Investment Objectives

  1. The Fund’s investment objective is to achieve a meaningful total rate of return with an emphasis on capital appreciation.
  2. The overall character of the portfolio should be one of above-average quality, possessing a moderate degree of investment risk.

General Investment Guidelines

  1. The investment manager will give frequent and active attention to the portfolio to develop and implement the Fund’s investment strategy.
  2. The investment manager is authorized to make investment changes as deemed necessary on a discretionary basis, but only in accordance with the objectives and guidelines set forth in this section.
  3. The investment manager will meet regularly with the Pooled Fund Program’s Advisory Committee to review investment strategies and performance results.
  4. All investments utilized in the Fund will be highly liquid with readily determinable valuations.
  5. The equity portion of the portfolio will be reviewed over a full market cycle compared to the Russell 3000 Index.
  6. The total fixed income portion of the portfolio will be reviewed over a full market cycle compared to the Bloomberg Barclays Aggregate Bond Index.
  7. The total portfolio performance will be measured against a blended benchmark comprised of 70% Russell Index 3000 and 30% Bloomberg Barclays Aggregate Index.

Specific Investment Guidelines

  1. The portfolio’s equity allocation will typically range between 60% - 80%, with a target of 70%, and shall have the following characteristics:
    • Permitted investments will be limited to publicly traded domestic equities only;
    • The portfolio will be well diversified among large-cap, mid-cap and small-cap equity strategies;
    • The portfolio will have exposure to both growth and value equity styles.
  2. The portfolio’s fixed income allocation shall typically range between 20%-40%, with a target of 30%, and shall have the following characteristics:
    • Permitted investments will be limited to publicly traded domestic investment grade fixed income only;
    • The portfolio will be well diversified as to issuer and maturity;
    • Average maturities will generally be of intermediate term, but may periodically emphasize shorter or longer maturities, depending on yield differentials and market conditions;
    • The maximum maturity of any individual issue shall not exceed thirty (30) years at the time of purchase;
    • The average duration of the portfolio will not exceed the duration of the Bloomberg Barclays Aggregate Index by more than 20%; and
    • The total fixed income portfolio will have an average credit quality rating of at least A.
  3. Cash reserves for scheduled distributions and other contingencies are expected to comprise the balance of the Fund:
    • Cash reserves will be invested at all times in SEC registered money market funds that meet the highest NAV rating classification or other principal stable overnight investment vehicles such as U. S. Treasury collateralized repurchase agreements; and
    • All cash reserve investments will have daily liquidity.

Diversified Fund

The Fund is most suited for investment of endowment and other donor restricted gifted funds that are eligible for a total return based on institutional spending policy.

The Fund may also be used to invest other types of non-appropriated funds where a more aggressive asset allocation is appropriate. Such funds may include charitable gift annuities and other types of planned giving vehicles as well as non-state appropriated longer term operating or board restricted funds with a time horizon of at least ten years.

Only USG institutions and cooperative/affiliated organizations may invest in the Fund.

Investment Objectives

  1. The Fund’s investment objective is to achieve a meaningful total rate of return, with an emphasis on capital appreciation.
  2. The overall character of the portfolio should be one of above-average quality, possessing a moderate degree of investment risk.

General Investment Guidelines

  1. The investment manager will give frequent and active attention to the portfolio to develop and implement the Fund’s investment strategy.
  2. The investment manager is authorized to make investment changes as deemed necessary on a discretionary basis, but only in accordance with the objectives and guidelines set forth in this section.
  3. The Investment Manager will meet regularly with the Pooled Fund Program’s Advisory Committee to review investment objectives, investment strategies and performance results.
  4. All investments utilized in the Fund will be highly liquid with readily determinable valuations.
  5. Performance results will be measured on an Absolute, Relative (global blended benchmarks and relevant universe) and Real (net of inflation) basis.
  6. The total equity portion of the portfolio will be reviewed over a full market cycle compared to the MSCI All Country World (ACWI) Index. The total domestic equity allocation of the portfolio will be compared to the Russell 3000 Index and the non-US equity allocation will be compared to the MSCI ACWI ex-US Index.
  7. The total fixed income portion of the portfolio will be reviewed over a full market cycle compared to the Bloomberg Barclays Aggregate Bond Index.
  8. The total portfolio will be compared to a blended index benchmark comprised of 50% Russell 3000 Index, 20% MSCI AWCI ex-US Index and 30% Bloomberg Barclays Aggregate Index.

Specific Investment Guidelines

  1. The portfolio’s equity allocation will typically range between 60% - 80%, with a target of 70%, and have the following characteristics:
    • The portfolio will be broadly diversified among large-cap, mid-cap, and small-cap domestic equity strategies, developed international and emerging market equity strategies, and publicly traded real estate investment trusts (REITs);
    • The portfolio will have exposure to both growth and value equity styles. REITs will be permitted on a tactical basis, up to a 5% limit.
    • Non-U.S. equity exposure will not exceed 25% of the total portfolio, or one-third of the total equity allocation.
  2. The portfolio’s fixed income allocation will typically range between 20%-40%, with a target of 30%, and have the following characteristics:
    • Permitted investments will include publicly traded investment grade fixed income, dollar-denominated global bonds, and non-dollar denominated global bonds.
    • The portfolio will be well diversified as to issuer and maturity.
    • Average maturities will generally be intermediate term, but may emphasize shorter or longer maturities, depending on yield differentials and market conditions.
    • The maximum maturity of any individual issue will not exceed thirty (30) years at the time of purchase.
    • The average duration of the total fixed income portfolio will not exceed the duration of the Bloomberg Barclays Aggregate Bond Index by more than 20%.
    • The total fixed income portfolio will have an average credit quality rating of at least A.
  3. Cash reserves for scheduled distributions and other contingencies are expected to comprise the balance of the Fund:
    • Cash reserves will be invested at all times in SEC registered money market funds that meet the highest NAV rating classification or other principal stable overnight investment vehicles such as U.S. Treasury collateralized repurchase agreements.
    • All cash reserve investments will have daily liquidity.

Diversified Fund for Foundations

The Fund is most suited for investment of endowment and other donor restricted gifted funds that are eligible for a total return based institutional spending policy.

The Fund may also be used to invest other types of non-appropriated funds where a more aggressive asset allocation is appropriate. Such funds may include charitable gift annuities and other types of planned giving vehicles as well as non-state appropriated longer term operating or board restricted funds with a time horizon of at least ten years.
Only USG cooperative and affiliated organizations may invest in the Fund.

The Uniform Prudent Management of Institutional Funds Act (UPMIFA) and FSP FAS 117-1 require charitable organizations to account and report for donor restricted and board designated endowments in ways that are substantially different from previous guidance. It is the Fund’s policy to adhere to the statutory requirements of UPMIFA as adopted in Georgia Code.

Investment Objectives

  1. The Fund’s investment objective is to achieve a meaningful total rate of return, with an emphasis on capital appreciation.
  2. The overall character of the portfolio should be one of above-average quality, possessing a moderate degree of investment risk.

General Investment Guidelines

  1. The investment manager will give frequent and active attention to the portfolio to develop and implement the Fund’s investment strategy.
  2. The investment manager is authorized to make investment changes as deemed necessary on a discretionary basis, but only in accordance with the objectives and guidelines set forth in this document.
  3. The Investment Manager will meet regularly with the Pooled Fund Program’s Advisory Committee to review investment objectives, investment strategies and performance results.
  4. All investments utilized in the Fund will be highly liquid with readily determinable valuations.
  5. Performance results will be measured on an Absolute, Relative (global blended benchmarks and relevant universe) and Real (net of inflation) basis.
  6. The total equity portion of the portfolio will be reviewed over a full market cycle to the MSCI All Country World Index (ACWI). The total domestic equity allocation of the portfolio will be compared to the Russell 3000 Index and the non-U.S. equity allocation will be compared to the MSCI ACWI ex-US index.
  7. The total fixed income portion of the portfolio will be reviewed over a full market cycle compared to the Bloomberg Barclays Aggregate Bond Index.
  8. The alternatives portion of the portfolio will be reviewed over a full market cycle compared to the HFRX Global Hedge Index.
  9. Total portfolio performance will be compared to a blended index benchmark comprised of 45% Russell 3000 Index, 20% MSCI ACWI ex US Index, 20% Bloomberg Barclays Aggregate Index and 15% HFRX Global Hedge Index.

Specific Investment Guidelines

  1. The portfolio’s equity allocation typically shall range between 40%-75%, with a target of 65%, and have the following characteristics:
    • The portfolio will be broadly diversified among large-cap, mid-cap and small-cap domestic equity strategies, developed international and emerging market equity strategies, and real estate investment trusts (REITs);
    • The portfolio will have exposure to both growth and value equity styles. REITs will be permitted on a tactical basis, up to a 5% limit.
    • Non U.S. equities will not exceed 20% of the total portfolio, or one-third of the equity allocation.
  2. The portfolio’s fixed income allocation shall typically range between 10% -40%, with a target of 20% and have the following characteristics:
    • Permitted investments will include publicly traded investment grade and high yield fixed income, dollar-and non-dollar denominated global bonds, and emerging market bonds.
    • The portfolio will be well diversified as to issuer and maturity.
    • Average maturities will generally be intermediate term, but may periodically emphasize shorter or longer maturities depending on yield differentials and market conditions.
    • The maximum maturity of any individual issue shall not exceed thirty (30) years at the time of purchase.
    • The average duration of the total fixed income portfolio will not exceed the duration of the Bloomberg Barclays Aggregate Bond Index by more than 20%.
    • The total fixed income portfolio will have an average credit quality rating of at least A.
  3. The Fund may utilize certain alternative asset classes to gain further diversification. A primary purpose for investing in these asset classes is to obtain return characteristics with lower correlation to traditional equity and fixed income asset classes. The alternative investment allocation typically shall range between 0% - 30%, with a target of 15%. The following alternative asset classes are permitted investments:
    • Hedge Funds – the Fund’s approach for investing in this asset class is to use liquid alternative strategy commingled funds registered under the Investment Company Act of 1940, including multi-strategy, multi-manager fund of hedge funds which provide the best access to a highly diversified pool of hedge fund strategies and managers.
    • Commodities – the return characteristics of this asset class are largely uncorrelated with stock and bond returns. Tactically, adding commodity exposure can improve diversification, lower the portfolio’s risk profile and potentially enhance return. The Fund will only invest in liquid, registered commingled funds that passively track a broad range of commodities.
  4. Cash reserves for scheduled distributions and other contingencies are expected to comprise the balance of the Fund.
    • Cash reserves will be invested at all times in SEC registered money market funds that meet the highest NAV rating classification or other principal stable overnight investment vehicles, such as U.S. Treasury collateralized repurchase agreements.

      All cash reserve investments will have daily liquidity.
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