Student-Managed Fund Investment Policy Statement

Mission (Purpose)

The mission of the St. Mary’s Gold & Blue Fund (GBF) is to: 1) provide undergraduate and graduate students with real-world portfolio management and security analysis experience; 2) provide teaching and research opportunities for St. Mary’s faculty; 3) enhance student/faculty professional development activities (such as attending investments-related conferences), and infrastructure support for managing GBF (such as software).

Organizational Structure and Fund Oversight

The GBF Investment Committee (GBFIC) will consist of the Dean of the Greehey School of Business (GSB) and at least one GSB faculty member. The GBFIC will oversee and coordinate how the management of the fund will be integrated into the curriculum. The students in the Student Managed Portfolio course (Course) will manage the fund assets in a manner consistent with the Investment Policy Statement (IPS). Students enrolled in the Course will monitor GBF holdings and performance. If any student determines that GBF assets are not being invested in a manner consistent with the Investment Policy Statement, they will work, in consultation with the GBFIC, to get the situation corrected. Select students, at the discretion of the GBFIC, will be chosen to prepare an annual report in January of each year for the university Investment Committee and the GBF Advisory Board. The GBFIC may form an Advisory Board consisting of investment professionals outside the St. Mary’s community. The purpose of the Advisory Board would be to provide guidance/suggestions to the GBFIC and students enrolled in the Course. The GBFIC and/or students enrolled in the Course will make presentations to the university Investment Committee upon request.

At the start of each semester and at the discretion of the GBFIC, students enrolled in the course will be assigned to certain Global Industry Classification Standard (GICS) sectors. After thorough research and analysis, students will be required to pitch a certain company within their assigned sector to add to the GBF. New companies added will have a maximum initial weighting of 3% of the total value of the GBF. Students who have enrolled in the course for a second time will be allowed to make two pitches for two different companies. The timing and subsequent approval of the pitches will be determined by the GBFIC.

Investment Objectives: Socially Responsible Parameters

The Fund will be managed in a manner generally consistent with the Socially Responsible Investment Guidelines (November 12, 2003) of the United States Conference of Catholic Bishops. GBF will be what is known as a faith-based fund. Students enrolled in the Course will be required to select companies that have an ESG rating (determined by MSCI) of at least BBB or higher to be included in the GBF. Companies that are rated BB or lower will not be permitted within the portfolio. If a company within the portfolio that was once BBB rated or higher drops to BB or lower, the company must be sold within an appropriate time frame determined by the GBFIC.

Pedagogy and Performance

The primary goal of GBF is to provide an exceptional learning opportunity for students enrolled in the Course. However, students will need to be cognizant of their responsibility to prudently manage GBF assets, which are part of the university’s endowment. The GBFIC will monitor the fund’s diversification across market capitalization, economic sectors, and investment strategies. Since the Fund has a pedagogical purpose, a mix of fundamental, technical, sector rotation, and market timing (within market cap – such as large cap versus small cap) approaches to investing may be used. Fundamental investing will, however, be the primary approach.

The investment objective of GBF is to achieve a long-run return that meets or exceeds an appropriate benchmark portfolio based on the Fund’s asset allocation and ESG parameters.

Payout Policy

Excess returns will result in the ability of students to contribute to student/faculty professional development activities (such as attending investments-related conferences), and infrastructure support for managing GBF (such as software).

The target distribution is $50,000 annually and will be generated from interest, dividends, and capital appreciation, also referred to as a total-return approach. Distributions would not normally be permitted unless the fund experiences positive returns over and above initial and subsequent contributions. Restricted funds will be maintained and distributed accordingly. Students enrolled in the Course will recommend the payout and will require the approval of the GBFIC and the university Investment Committee.

Asset Allocation and Diversification

The GBFIC will monitor the overall GBF asset allocation and diversification. The fund will be an equity fund and will try to maintain as close to 100% equity exposure as possible (other parts of the University’s endowment are invested in other asset classes).

To ensure broad diversification, asset allocation will be set within the following ranges:

Asset Allocation	Range	Target
Cash	0% to 5%	No specific target
International Equities	0% to 30%	No specific target
Domestic Equities	70% to 100%	No specific target

The portfolio shall observe the following diversification guidelines:

• The maximum allocation to any equity sector (as defined by Standard and Poor’s) shall be 30% of equity assets.
• The maximum allocation to any single security, aside from a broad equity index ETF (such as S&P 500 SPDR) shall be 5% of portfolio assets.
• The portfolio may include American Depository Receipts (ADRs); however, the combined investments in ADRs and other foreign securities traded on U.S. exchanges that are not ADRs may not exceed 30% of the equity assets.
• Deviations from the diversification guidelines shall be corrected by the end of each academic semester.

Eligible/Prohibited Securities and Strategies

Cash Equivalents

Money market funds and U.S. Treasury Bills may be used to maintain a minimal level of liquidity and as a temporary parking place for current income and realized capital gains.

Domestic Equities

Domestic common and preferred stock holdings will be the main assets held in the fund. Stocks must be listed on the NYSE, NASDAQ, or AMEX to be included in the portfolio. REITs are considered common stocks and are permissible. The S&P 500 will serve as the primary large cap equity benchmark, S&P 400 for mid-cap, and Russell 2000 for Small Cap.

Foreign Equities

Foreign securities on non-U.S. exchanges are not permitted; however, foreign securities and ADR’s available for purchase on U.S. exchanges are permitted. Emerging market securities are permissible, but should be limited to no more than 25% of the international allocation.

Index Funds and ETFs

The Fund may utilize equity index mutual fund or exchange traded funds (ETFs). The Fund may be 100% in these vehicles during semester breaks and holiday periods, as approved by GBFIC.

Sector and Country ETFs

The Fund may utilize sector ETFs as part of a sector rotation strategy. The Fund may also invest in Country or Region ETFs; this would be counted as part of the Fund’s international equity allocation.

Fixed Income and Credit Markets

Fixed income investments (other than preferred stock) is prohibited.

Margin and Short Selling

Margin purchases and short selling are not permitted.

Trade Execution

All transactions will be executed by one of the faculty members of GBFIC or someone designated by the St. Mary’s University Vice President for Administration and Finance. All trades will need to be documented so that there is an audit trail covering every transaction.