The Community Foundation of North Central Massachusetts has an important responsibility to its donors and the community to ensure that every gift is invested with diligence and a long-term view. The Board has developed a comprehensive investment strategy to guide its decision making.

The following is a brief overview of the Foundation’s Investment Policy. For the complete policy, please contact Tammy Staal at 978-345-8383 or tstaal@cfncm.org.

The Investment & Finance Committee (Committee) is empowered by the Foundation Board of Trustees (Board) to direct and monitor the investment management of the Community Foundation of North Central Massachusetts (Foundation) funds. The Foundation’s Investment Policy Statement (IPS), issued by the Committee, is designed to cover the assets donated or held for charitable benefits.

It is the intention of the Committee to offer three separate investment objectives to meet the differing needs and missions of various charities. The IPS also prescribes cash management policies for the Foundation’s cash reserves held for near-term needs and contingencies.

The purpose of the IPS is to establish a philosophy and attitude that will guide the investment management of the Foundation’s funds toward the desired results. It is intended to be sufficiently specific to be meaningful, yet flexible enough to be practical.

To assure continued relevance of the guidelines, objectives, financial status, and capital markets expectations as established in the IPS, the Committee periodically reviews the investment policy.

Investment Objectives

The IPS provides for three distinct and separate investment objectives (Funds) to accommodate donors and agencies with differing missions and objectives. Each Fund has a separate asset allocation strategy. For donor-advised funds or funds held on behalf of others, the donor or agency may choose one Fund or a mix of appropriate Funds.

As new gifts are donated to the Foundation, cash gifts will be invested into the appropriate Fund(s) as soon as practical and gifts of liquid securities will be sold as soon as practical and invested into the appropriate Fund(s).

Short Term Fund
The primary investment objective of this Fund is stability of principal. This fund is appropriate for non-endowed funds or other situations where funds can be withdrawn with little or no advance notice, and/or in situations where only minimal fluctuations to principal can be tolerated. Agencies and donors with time horizons under three years should consider this strategy.

Medium Term Fund
The primary investment objective of this Fund is to provide payouts with moderate year to year volatility. This Fund may experience some reduction of purchasing power over time due to inflation. This fund is appropriate for endowed funds that require minimal, or no, nominal growth (before inflation) after payouts, or non-endowed funds that have a time horizon that is between three and five years. This fund will most likely experience moderate fluctuations to principal.

Long Term Fund
The primary investment objective of this Fund is preservation of purchasing power, as defined in Section IX “Definitions”, to provide a relatively stable, inflation adjusted, annual payout to support grant-making or other donor missions. This Fund is appropriate for endowed funds or non-endowed funds with time horizons beyond five years. There will be some inevitable volatility in principal value from this strategy but it may offer the potential for a sustainable payout plus inflation protection, understanding that this may result in a less stable payout from year to year.

The primary investment objective of this Fund is stability of principal. This fund is appropriate for non-endowed funds or other situations where funds can be withdrawn with little or no advance notice, and/or in situations where only minimal fluctuations to principal can be tolerated. Agencies and donors with time horizons under three years should consider this strategy. For performance evaluation purposes, the Committee will track one-, two-, and three-year period trailing returns as compared to money market funds.

The primary investment objective of this Fund is to provide payouts with moderate year-to-year volatility. This Fund may experience some reduction of purchasing power over time, due to inflation. This fund is appropriate for endowed funds that require minimal, or no, nominal growth (before inflation) after payouts, or non-endowed funds that have a time horizon of between three and five years. This fund will most likely experience moderate fluctuations to principal. For performance evaluation purposes, the Committee will track trailing three- and five-year period trailing returns, compared to the “Conservative Allocation” reference point, as compiled by Morningstar and more fully described in the Due Diligence Policy section of the IPS.

The primary investment objective of this Fund is preservation of purchasing power, as defined in Section IX, “Definitions”, to provide a relatively stable, inflation-adjusted, annual payout to support grant-making or other donor missions. This Fund is appropriate for endowed funds or non-endowed funds with time horizons beyond five years. There will be some inevitable volatility in principal value from this strategy, but it may offer the potential for a sustainable payout plus inflation protection, understanding that this may result in a less stable payout from year to year. For performance evaluation purposes, the Committee will track trailing three-, five-, and ten-year period trailing returns, compared to a “Growth and Income Allocation” reference point more fully described in the Due Diligence Policy section of the IPS.

To assist the Foundation in gauging the success of the return on investments, the Foundation shall employ as its investment return goal the following formula:

5 yr Annualized CPI + Grantmaking Rate (4.5%) + Average Administrative Fee (1%)
The Board of Directors shall review this formula on an annual basis.

Spending Policy

For the Community Foundation Endowment Fund and any other board-controlled permanent funds, each year the Foundation shall distribute 4.5% of the fund’s average market value over the prior 20 quarters (except for additional contributions to the Endowment Fund less than five years old).

For additions to the Endowment Fund less than 5 years old and that total $100,000 in new contributions, the Foundation shall distribute 4.5% of the additions’ average quarterly market values as of the end of March each year.

Permanent endowment fund beneficiaries may elect to receive their distributions on either an annual or quarterly basis once the fund has reached the first year anniversary. The selection request must be made in writing to the Foundation upon notification of the distribution cycle. The beneficiary may change this option (in writing) on the annual anniversary of the fund.

This spending policy may be revised by the Finance and Executive committees and submitted to the Board for approval from time to time.