Core 101<\/a><\/h2>\n<\/li>\n- \n
Managers<\/a><\/h2>\n<\/li>\n- \n
Performance<\/a><\/h2>\n<\/li>\n- \n
Forms and Sample Documents<\/a><\/h2>\n<\/li>\n- \n
Investment Policy Statement<\/a><\/h2>\n<\/li>\n<\/ul>\n <\/p>\n
<\/p>\n
\n<\/a><\/p>\nCore 101<\/h2>\n
As those with oversight for the investment of Episcopal Church assets consider the options\u00a0available for assets under management, it is good to be clear on the many facets of asset\u00a0administration, and placing them in a prudent structure is a key role of governance. As options are\u00a0considered, including planned giving efforts, The Trustees of the Funds may be an excellent good\u00a0option, as it has proven to be for nearly 150 of the churches, conference centers, schools and\u00a0other organizations in Virginia.<\/p>\n
The core portfolio has roots to October 31, 1754, with the founding of the Widows and Orphans\u00a0Fund, which is still in existence today. This portfolio, like all services of TOTF, is available to any\u00a0Episcopal Church organization in the Commonwealth of Virginia.<\/p>\n
The portfolio is managed according to an Investment Policy Statement (IPS), which can be found here<\/a>. Within this IPS are the guidelines on types of assets and managers which can be\u00a0used. The expectations of the Trustees are outlined for investment managers, investment\u00a0consultant and institutional custodian.<\/p>\nMonthly reporting is sent electronically and is usually comprised of three parts: a summary report\u00a0on Trustee actions, a report on asset performance and a unitization report documenting month to\u00a0month changes for all participant funds. Monthly reporting is usually sent after the third week of\u00a0each successive month.<\/p>\n
A summary of the managers currently utilized by the portfolio is included on a separate tab.\u00a0Understanding the type of investments being used is a key element of the role of the fiduciary.\u00a0TOTF does not generally have a great deal of investment manager turnover.<\/p>\n
The core portfolio is managed as a unitized portfolio, meaning that all participating funds are\u00a0managed exactly the same way in terms of selected investments. The large pooled asset values\u00a0allow TOTF to obtain the services of very strong managers in a very cost effective manner. This\u00a0risk-monitored portfolio therefore is able to benefit all participants.<\/p>\n
Mechanics of Investing<\/h3>\n
To create a new investment with the Trustees of the Funds, the vestry\/board needs to complete\u00a0the New Fund form located in the forms tab. If the vestry\/board has passed a resolution\u00a0authorizing the creation, it would be helpful to receive a copy of that document for corporate\u00a0memory. The New Fund form should be sent to the Trustees of the Funds\u2019 office, as well as a\u00a0check payable to \u201cThe Trustees of the Funds\u201d. We can also arrange for electronic ACH transfers\u00a0from bank to bank.<\/p>\n
If there are any restrictions on the use of the fund, such as scholarships, those should be\u00a0enumerated. A classic, or true, endowment generates unrestricted income for the mission and\u00a0ministry of the underlying entity.<\/p>\n
Please be sure to advise if the fund is to reinvest or to have a calculated disbursement issued (after\u00a0the third quarter). Most funds can usually change these instructions as often as the participating\u00a0institution requires.<\/p>\n
Structure<\/h3>\n
An organizational chart is shown below so that you can see how TOTF functions, including the core\u00a0portfolio.<\/p>\n
![](\"http:\/\/dev.trusteesofthefunds.org\/wp-content\/uploads\/2016\/07\/orgchart.png\")
<\/p>\n
The core portfolio, like the other services offered, is overseen by the Trustees and staff. Key\u00a0external support organizations are:<\/p>\n
\n- Prime Buchholz, Portsmouth, NH, investment consultant<\/li>\n
- SunTrust Bank, Richmond, VA and Atlanta, GA, institutional custodian<\/li>\n
- Cherry Bekaert, Richmond, VA, auditors<\/li>\n
- Armstrong, Bristow, Richmond, VA, legal<\/li>\n<\/ul>\n
The asset alignment of the core portfolio is an 80\/20 split between equities and fixed income\u00a0holdings. Cash is targeted at zero, although TOTF maintains approximately $250,000 in cash at\u00a0any given time for inflows\/outflows so that managers are kept as fully invested as possible.<\/p>\n
Current managers and performance (historical and current) are found on separate tabs.<\/p>\n
Endowment Management<\/span><\/h3>\nThe core portfolio is managed as a perpetual endowment fund. As such, the Trustees establish a\u00a0standard spending policy for the funds under management. Participants can request alternate\u00a0schedules and they have (to date) always been accommodated. TOTF has a spending policy of a\u00a0distribution of 4.5% of average market value for the prior 20 quarters, ending on September 30 th of\u00a0any given year. In any given year, participants receive a letter from TOTF explaining the current\u00a0payout or reinvestment for each named fund. About half of the nearly 700 funds receive a payout\u00a0and about half reinvest until funds are needed. Participants can alter instructions at any point.<\/p>\n
As an example of how a typical annual distribution goes, the trailing 20 quarters market value for\u00a0the entire core portfolio is averaged and that average is multiplied by the 4.5% payout formula.\u00a0This amount is then divided by the number of units outstanding as of 9\/30\/XXXX, and that gets us\u00a0to a \u201cper unit\u201d payout amount. Then, depending on the number of units in any given fund, a check\u00a0is issued to the Episcopal Church entity (fund units x per unit payout). These checks are typically\u00a0issued in October. Each fund is handled separately, so participants receive information on each\u00a0specific fund from TOTF.<\/p>\n
Many churches and organizations have multiple funds placed with the Trustees of the Funds.\u00a0Many do this for ease of reporting funds that have traditionally been held separate by decision of\u00a0the vestry, board, investment committee or by direction of the donor.<\/p>\n
To allow for different investment requirements of their funds, many churches or organizations use\u00a0the reinvestment option as opposed to the annual payout. This allows the church organization to\u00a0have an annual cash flow they can count on (payout) or long-term growth (reinvestment). Having\u00a0the multiple funds accounted for in a distinct manner facilitates record-keeping, audit work, etc.\u00a0While no investment that includes a level of risk can guarantee a specific return, the annual payout\u00a0method using the rolling average market value softens any severe volatility in a distribution model,\u00a0and this provides for manageable cash flow.<\/p>\n
Additions and Withdrawals<\/span><\/h3>\nAdditions<\/em><\/strong> to any fund should be sent to the TOTF office using the form found in the Forms tab,\u00a0and checks made payable to \u201cThe Trustees of the Funds.\u201d The form should state which fund should\u00a0receive what amount if you have more than one account. Additions to funds should arrive at TOTF\u00a0before the last Friday of the month to make sure SunTrust has sufficient time to appropriately\u00a0enter the additional amounts for that month\u2019s unitization report.<\/p>\nIf an individual wishes to make a contribution directly, and that is certainly done very often, I hope\u00a0participant leadership will make that option known. TOTF can acknowledge contributions directly\u00a0for donor tax purposes.<\/p>\n
If a participant needs to make a withdrawal<\/strong><\/em> of a fund (beyond any scheduled distribution), a\u00a0mailed or emailed copy of the standard form is requested. The form should be sent to TOTF, name\u00a0the fund and the amount needed, and to whom the check should be payable. Typically, the\u00a0church entity is the payee, but occasionally we are asked to pay a contractor or a university (such\u00a0as for a scholarship). TOTF can also send withdrawals electronically if that is desired for timing\u00a0purposes.<\/p>\nA long-standing policy of the Trustees is that for any account withdrawal request of 90% or more\u00a0of a fund\u2019s market value (such as a total liquidation) there will be a 10% hold-back to allow for the\u00a0subsequent month-end unitization. Once there has been a new unitization, any balance will be\u00a0released. While we do not have many such cases, with roughly 700 individual funds, it does\u00a0happen from time to time as a building project may be exactly what a fund was created to\u00a0support. This redemption\/holdback process is common practice in trust management.<\/p>\n
In 2011, the Trustees approved a formal withdrawal policy for large scale withdrawals that may\u00a0adversely impact the ability of TOTF and the investment managers to make prudent investment\u00a0commitments in accordance with the investment policy. The Trustees have considered the proper\u00a0threshold on two separate occasions and the current policy for the core portfolio is under the\u00a0Forms tab.<\/p>\n
Fees<\/span><\/h3>\nTOTF is run at cost for the benefit of the Episcopal Church in Virginia. All reported returns for the\u00a0core portfolio are always shown as net of fees, so you do not see a dollar-based charge at any\u00a0time. This is common trust management practice. The actual expenses of the portfolio\u00a0(management fees, custodial fees, and administrative fees) are about 56 basis points in total\u00a0(0.56%). This is reflected in the annual audit of TOTF.<\/p>\n
<\/p>\n
<\/p>\n
\n<\/a><\/p>\nManagers<\/h2>\n<\/h3>\nEquities<\/strong><\/h3>\nDomestic Equities<\/em><\/p>\n\n- Davenport & Company<\/strong>, an \u201cactive\u201d domestic large-cap stock manager, target weighting of 10.0%, the\u00a0benchmark for performance is the S&P 500.<\/li>\n
- Vanguard<\/strong>, Total Stock Market Fund. A \u201cpassive\u201d domestic equity blend, target weighting of 10%, the\u00a0benchmark is the Spliced Total Stock Market Composite Index.<\/li>\n<\/ul>\n
<\/p>\n
Global Equities<\/em><\/p>\n\n- Dodge and Cox<\/strong>, Global Stock Fund. A \u201cpassive\u201d global equity manager, target weighting of 4.5%, the\u00a0benchmark is the MSCI World Index.<\/li>\n
- Lansdowne Partners<\/strong>, Developed Markets Long-Only Fund. A \u201cpassive\u201d long-only global equity\u00a0manager with concentrated holdings, target weighting of 3.0% and the benchmark is the Dow Jones\u00a0Titans 50 Index.<\/li>\n
- Vanguard<\/strong>, FTSE All-World Ex-US Index Fund. A \u201cpassive\u201d global equity blend, target weighting of 9%,\u00a0the benchmark is the FTSE All-World Ex-US All Cap Index.<\/li>\n<\/ul>\n
<\/p>\n
International Equities<\/em><\/p>\n\n- Silchester<\/strong>, International Value. A \u201cpassive\u201d international equity manager, target weighting of 9%, the\u00a0benchmark is the MSCI EAFE. Due to the success of this Silchester strategy, this fund is currently closed\u00a0to new investment.<\/li>\n
- Aberdeen<\/strong>, Emerging Markets Institutional Fund. A \u201cpassive emerging markets manager, target\u00a0weighting of 3%, the benchmark is the MSCI Emerging Markets Index.<\/li>\n
- Vanguard<\/strong>, Emerging Markets Stock Index Fund (Institutional). A \u201cpassive emerging markets manager,\u00a0added as a complement to Aberdeen, target weighting is 1.5%, the benchmark is the FTSE Emerging\u00a0Markets Index.<\/li>\n<\/ul>\n
Equity Alternatives<\/em><\/p>\n\n- AEW Capital Management<\/strong>, AEW Global Property Securities Fund<\/span>. An \u201cactive\u201d global REIT manager, 2%\u00a0allocation, the benchmark is the FTSE EPRA\/NAREIT Developed Index.<\/li>\n
- Commonfund<\/strong>\n
\n- Distressed Debt Partners II<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary\u00a0acquisition and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is\u00a0the 91-day Treasury Bill plus 5%.<\/li>\n
- Natural Resources Fund VIII<\/span>. An \u201cactive blended natural resources fund, with a higher than peer level\u00a0of alternative energy assets, contracted in late 2009 for $1.75M, the current weighting is just under\u00a01%, the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Drake Capital<\/strong>, An \u201cactive\u201d multi-strategy hedge fund, Drake complements Forester, with Drake being\u00a0smaller and more nimble in terms of underlying portfolio holdings. This fund has a portfolio weighting\u00a0of 10.0% once fully invested and the benchmark used for Drake Capital is the HFRI Fund of Funds:\u00a0Diversified Index.<\/li>\n
- Forester Capital<\/strong>, Forester Diversified Fund<\/span>. An \u201cactive\u201d multi-strategy hedge fund, Forester\u00a0complements Drake. This fund has a portfolio weighting of 10.0% once fully invested and the\u00a0benchmark used for Forester is the HFRI Fund of Funds: Diversified Index.<\/li>\n
- GMO<\/strong>, Forestry Fund 7<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary acquisition\u00a0and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is the 91-day\u00a0Treasury Bill plus 5%.<\/li>\n
- Gresham Investment Management<\/strong>, The TAP Fund<\/span>. A \u201cpassive\u201d commodities futures fund, target\u00a0weighting is 2.0% of the portfolio, the Bloomberg Commodity Index is the benchmark.<\/li>\n
- Mangham Associates<\/strong>, Resources Fund<\/span> I. An \u201cactive\u201d real assets fund acquired in late 2014 as a\u00a0secondary acquisition and as this fund has matured it is now targeted at zero percent (0.0%), the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan<\/strong>\n
\n- Metropolitan Real Estate Equity Management Fund IV<\/span>. An \u201cactive\u201d real assets fund, this fund has\u00a0reached maturity, is disbursing capital back to the portfolio and now has a target weighting of zero\u00a0percent. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan Distressed Real Estate Fund 2008<\/span>. An \u201cactive\u201d real assets fund, this fund has reached\u00a0maturity, is disbursing capital back to the portfolio and now has a target weighting of zero percent.\u00a0The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- MIT<\/strong>, Private Equity Fund II, III and IV<\/span>. These are a series of \u201cactive\u201d private equity funds and each has\u00a0reached maturity and is returning capital to the portfolio. These are funds of Massachusetts Institute\u00a0of Technology and deal in global venture and private capital projects. These funds now have a current\u00a0target weighting of zero percent (0.0%). The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Park Street Capital<\/strong>, Natural Resources Fund V<\/span>. An \u201cactive\u201d real assets fund of funds, the contracted\u00a0amount of $1.35M is about 1% of the portfolio, and it is almost fully funded. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Private Advisors<\/strong><\/span>, Small Company Buyout Fund<\/span>. An \u201cactive\u201d fund acquired in late 2009 as a secondary\u00a0acquisition, this fund has matured and is distributing capital. It is now targeted at zero percent (0.0%)\u00a0and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Property Investment Advisors<\/strong>, Property Holdings \u2013 Fund IV<\/span>. An \u201cactive\u201d real assets fund that has\u00a0matured and it is in the process of disbursing capital. The benchmark is the 91-day Treasury Bill plus\u00a05%.<\/li>\n
- RS Investments<\/strong>, Global Natural Resources Fund<\/span>. A \u201cpassive\u201d real assets fund added to the portfolio in\u00a0July 2013, the target weighting is 2.0% of the portfolio, the S&P North American Natural Resources\u00a0Sector Index is the benchmark.<\/li>\n
- The Investment Fund for Foundations (TIFF)<\/strong>\n
\n- Realty and Resources Fund II<\/span>. A \u201cpassive real assets fund, acquired in late 2014 as a secondary\u00a0acquisition, the fund has matured, is now targeted at zero percent (0.0%) and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Secondary Partners II<\/span>. A \u201cpassive\u201d private equity fund acquired in late 2014 as a secondary acquisition,\u00a0this fund has matured and is well into distributing capital, is targeted at zero percent (0.0%) and the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Vanguard<\/strong>, Inflation Protected Bond Fund<\/span>. A \u201cpassive\u201d \u201cTIPS\u201d fund , target investment is 2.0% of the\u00a0portfolio. The benchmark is the Barclay\u2019s US Inflation-Protected Index.<\/li>\n<\/ul>\n
Bonds<\/em><\/p>\n\n- Agincourt<\/strong>, An \u201cactive\u201d domestic bond manager, this manager has a current target weighing of 9.0% of\u00a0the portfolio. The benchmark for this active fund is the Barclay\u2019s US Aggregate index.<\/li>\n<\/ul>\n
\n- Colchester<\/strong>, Global Bond Fund. A \u201cpassive\u201d global bond fund, the target weighting is 4.0% of the\u00a0portfolio, the benchmark is the Citigroup World Government Bond Index.<\/li>\n<\/ul>\n
\n- Vanguard<\/strong>, Total Bond Market Index Fund. A \u201cpassive\u201d domestic bond fund to complement Agincourt,\u00a0target weighting is 7%, the benchmark is the Spliced Total Bond Market Index.<\/li>\n<\/ul>\n
Cash<\/em><\/p>\n\n\n- SunTrust Bank –\u00a0<\/strong>Our cash management account is used to provide the highest flexibility possible to our \u201cclient\u201d\u00a0churches and institutions. There is a zero percent allocation to cash, but in keeping approximately\u00a0$250,000 in this account, the investment managers are kept very close to 100% invested. These funds\u00a0are managed in a fee-free SunTrust cash management account to generate some income (a fixed\u00a0+0.15% on an annual basis) while providing instant liquidity. This account is benchmarked against the\u00a091-day Treasury bill.<\/li>\n<\/ul>\n<\/ul>\n
<\/p>\n
\n<\/a><\/p>\nPerformance<\/h2>\n
As of June 30, 2016, periodic returns were:<\/p>\n
June<\/strong>\u00a0 \u00a0 +0.1%<\/p>\nTrailing three-month \u00a0\u00a0<\/strong> +1.7%<\/p>\nYear to date<\/strong>\u00a0 \u00a0 +2.3%<\/p>\nOne year \u00a0\u00a0<\/strong> -2.2%<\/p>\nThree year \u00a0\u00a0<\/strong> +3.4%<\/p>\nFive year<\/strong>\u00a0 \u00a0 +4.2%<\/p>\n <\/p>\n
The total return at 12\/31\/xxxx, net of fees, for the core portfolio for prior years since 1995 was:<\/p>\n
1995 \u00a0\u00a0<\/strong> 20.3%<\/p>\n1996<\/strong>\u00a0 \u00a0 22.60%<\/p>\n1997 \u00a0\u00a0<\/strong> 26.09%<\/p>\n1998<\/strong>\u00a0 \u00a0 15.36%<\/p>\n1999 \u00a0\u00a0<\/strong> 10.38%<\/p>\n<\/div>2000<\/strong> \u00a0 \u00a01.42%<\/p>\n2001<\/strong> \u00a0 \u00a0-1.64%<\/p>\n2002<\/strong> \u00a0 \u00a0-5.02%<\/p>\n2003<\/strong> \u00a0 \u00a020.61%<\/p>\n2004<\/strong> \u00a0 \u00a011.89%<\/p>\n<\/div>2005<\/strong> \u00a0 \u00a07.97%<\/p>\n2006<\/strong> \u00a0 \u00a013.68%<\/p>\n2007<\/strong> \u00a0 \u00a010.76%<\/p>\n2008<\/strong> \u00a0 \u00a0-21.52%<\/p>\n2009<\/strong> \u00a0 \u00a017.09%<\/p>\n<\/div>2010<\/strong> \u00a0 \u00a010.50%<\/p>\n2011<\/strong> \u00a0 \u00a00.30%<\/p>\n2012<\/strong> \u00a0 \u00a010.9%<\/p>\n2013<\/strong> \u00a0 \u00a012.8%<\/p>\n2014<\/strong> \u00a0 \u00a01.3%<\/p>\n<\/div>
<\/p>\n
2015 had a return of -2.6%, just behind the global blend of -2.4%. The core portfolio, however,\u00a0does so at about 65% of the same risk as that global portfolio. Please keep in mind that the core\u00a0portfolio reports returns net of fees.<\/p>\n
Performance is reported on monthly by the TOTF office. If your church organization is not\u00a0receiving these reports on a monthly basis and would like to, please send the request form below.<\/p>\n
<\/p>\n
\n
Managers<\/a><\/h2>\n<\/li>\n- \n
Performance<\/a><\/h2>\n<\/li>\n- \n
Forms and Sample Documents<\/a><\/h2>\n<\/li>\n- \n
Investment Policy Statement<\/a><\/h2>\n<\/li>\n<\/ul>\n <\/p>\n
<\/p>\n
\n<\/a><\/p>\nCore 101<\/h2>\n
As those with oversight for the investment of Episcopal Church assets consider the options\u00a0available for assets under management, it is good to be clear on the many facets of asset\u00a0administration, and placing them in a prudent structure is a key role of governance. As options are\u00a0considered, including planned giving efforts, The Trustees of the Funds may be an excellent good\u00a0option, as it has proven to be for nearly 150 of the churches, conference centers, schools and\u00a0other organizations in Virginia.<\/p>\n
The core portfolio has roots to October 31, 1754, with the founding of the Widows and Orphans\u00a0Fund, which is still in existence today. This portfolio, like all services of TOTF, is available to any\u00a0Episcopal Church organization in the Commonwealth of Virginia.<\/p>\n
The portfolio is managed according to an Investment Policy Statement (IPS), which can be found here<\/a>. Within this IPS are the guidelines on types of assets and managers which can be\u00a0used. The expectations of the Trustees are outlined for investment managers, investment\u00a0consultant and institutional custodian.<\/p>\nMonthly reporting is sent electronically and is usually comprised of three parts: a summary report\u00a0on Trustee actions, a report on asset performance and a unitization report documenting month to\u00a0month changes for all participant funds. Monthly reporting is usually sent after the third week of\u00a0each successive month.<\/p>\n
A summary of the managers currently utilized by the portfolio is included on a separate tab.\u00a0Understanding the type of investments being used is a key element of the role of the fiduciary.\u00a0TOTF does not generally have a great deal of investment manager turnover.<\/p>\n
The core portfolio is managed as a unitized portfolio, meaning that all participating funds are\u00a0managed exactly the same way in terms of selected investments. The large pooled asset values\u00a0allow TOTF to obtain the services of very strong managers in a very cost effective manner. This\u00a0risk-monitored portfolio therefore is able to benefit all participants.<\/p>\n
Mechanics of Investing<\/h3>\n
To create a new investment with the Trustees of the Funds, the vestry\/board needs to complete\u00a0the New Fund form located in the forms tab. If the vestry\/board has passed a resolution\u00a0authorizing the creation, it would be helpful to receive a copy of that document for corporate\u00a0memory. The New Fund form should be sent to the Trustees of the Funds\u2019 office, as well as a\u00a0check payable to \u201cThe Trustees of the Funds\u201d. We can also arrange for electronic ACH transfers\u00a0from bank to bank.<\/p>\n
If there are any restrictions on the use of the fund, such as scholarships, those should be\u00a0enumerated. A classic, or true, endowment generates unrestricted income for the mission and\u00a0ministry of the underlying entity.<\/p>\n
Please be sure to advise if the fund is to reinvest or to have a calculated disbursement issued (after\u00a0the third quarter). Most funds can usually change these instructions as often as the participating\u00a0institution requires.<\/p>\n
Structure<\/h3>\n
An organizational chart is shown below so that you can see how TOTF functions, including the core\u00a0portfolio.<\/p>\n
<\/p>\n
The core portfolio, like the other services offered, is overseen by the Trustees and staff. Key\u00a0external support organizations are:<\/p>\n
\n- Prime Buchholz, Portsmouth, NH, investment consultant<\/li>\n
- SunTrust Bank, Richmond, VA and Atlanta, GA, institutional custodian<\/li>\n
- Cherry Bekaert, Richmond, VA, auditors<\/li>\n
- Armstrong, Bristow, Richmond, VA, legal<\/li>\n<\/ul>\n
The asset alignment of the core portfolio is an 80\/20 split between equities and fixed income\u00a0holdings. Cash is targeted at zero, although TOTF maintains approximately $250,000 in cash at\u00a0any given time for inflows\/outflows so that managers are kept as fully invested as possible.<\/p>\n
Current managers and performance (historical and current) are found on separate tabs.<\/p>\n
Endowment Management<\/span><\/h3>\nThe core portfolio is managed as a perpetual endowment fund. As such, the Trustees establish a\u00a0standard spending policy for the funds under management. Participants can request alternate\u00a0schedules and they have (to date) always been accommodated. TOTF has a spending policy of a\u00a0distribution of 4.5% of average market value for the prior 20 quarters, ending on September 30 th of\u00a0any given year. In any given year, participants receive a letter from TOTF explaining the current\u00a0payout or reinvestment for each named fund. About half of the nearly 700 funds receive a payout\u00a0and about half reinvest until funds are needed. Participants can alter instructions at any point.<\/p>\n
As an example of how a typical annual distribution goes, the trailing 20 quarters market value for\u00a0the entire core portfolio is averaged and that average is multiplied by the 4.5% payout formula.\u00a0This amount is then divided by the number of units outstanding as of 9\/30\/XXXX, and that gets us\u00a0to a \u201cper unit\u201d payout amount. Then, depending on the number of units in any given fund, a check\u00a0is issued to the Episcopal Church entity (fund units x per unit payout). These checks are typically\u00a0issued in October. Each fund is handled separately, so participants receive information on each\u00a0specific fund from TOTF.<\/p>\n
Many churches and organizations have multiple funds placed with the Trustees of the Funds.\u00a0Many do this for ease of reporting funds that have traditionally been held separate by decision of\u00a0the vestry, board, investment committee or by direction of the donor.<\/p>\n
To allow for different investment requirements of their funds, many churches or organizations use\u00a0the reinvestment option as opposed to the annual payout. This allows the church organization to\u00a0have an annual cash flow they can count on (payout) or long-term growth (reinvestment). Having\u00a0the multiple funds accounted for in a distinct manner facilitates record-keeping, audit work, etc.\u00a0While no investment that includes a level of risk can guarantee a specific return, the annual payout\u00a0method using the rolling average market value softens any severe volatility in a distribution model,\u00a0and this provides for manageable cash flow.<\/p>\n
Additions and Withdrawals<\/span><\/h3>\nAdditions<\/em><\/strong> to any fund should be sent to the TOTF office using the form found in the Forms tab,\u00a0and checks made payable to \u201cThe Trustees of the Funds.\u201d The form should state which fund should\u00a0receive what amount if you have more than one account. Additions to funds should arrive at TOTF\u00a0before the last Friday of the month to make sure SunTrust has sufficient time to appropriately\u00a0enter the additional amounts for that month\u2019s unitization report.<\/p>\nIf an individual wishes to make a contribution directly, and that is certainly done very often, I hope\u00a0participant leadership will make that option known. TOTF can acknowledge contributions directly\u00a0for donor tax purposes.<\/p>\n
If a participant needs to make a withdrawal<\/strong><\/em> of a fund (beyond any scheduled distribution), a\u00a0mailed or emailed copy of the standard form is requested. The form should be sent to TOTF, name\u00a0the fund and the amount needed, and to whom the check should be payable. Typically, the\u00a0church entity is the payee, but occasionally we are asked to pay a contractor or a university (such\u00a0as for a scholarship). TOTF can also send withdrawals electronically if that is desired for timing\u00a0purposes.<\/p>\nA long-standing policy of the Trustees is that for any account withdrawal request of 90% or more\u00a0of a fund\u2019s market value (such as a total liquidation) there will be a 10% hold-back to allow for the\u00a0subsequent month-end unitization. Once there has been a new unitization, any balance will be\u00a0released. While we do not have many such cases, with roughly 700 individual funds, it does\u00a0happen from time to time as a building project may be exactly what a fund was created to\u00a0support. This redemption\/holdback process is common practice in trust management.<\/p>\n
In 2011, the Trustees approved a formal withdrawal policy for large scale withdrawals that may\u00a0adversely impact the ability of TOTF and the investment managers to make prudent investment\u00a0commitments in accordance with the investment policy. The Trustees have considered the proper\u00a0threshold on two separate occasions and the current policy for the core portfolio is under the\u00a0Forms tab.<\/p>\n
Fees<\/span><\/h3>\nTOTF is run at cost for the benefit of the Episcopal Church in Virginia. All reported returns for the\u00a0core portfolio are always shown as net of fees, so you do not see a dollar-based charge at any\u00a0time. This is common trust management practice. The actual expenses of the portfolio\u00a0(management fees, custodial fees, and administrative fees) are about 56 basis points in total\u00a0(0.56%). This is reflected in the annual audit of TOTF.<\/p>\n
<\/p>\n
<\/p>\n
\n<\/a><\/p>\nManagers<\/h2>\n<\/h3>\nEquities<\/strong><\/h3>\nDomestic Equities<\/em><\/p>\n\n- Davenport & Company<\/strong>, an \u201cactive\u201d domestic large-cap stock manager, target weighting of 10.0%, the\u00a0benchmark for performance is the S&P 500.<\/li>\n
- Vanguard<\/strong>, Total Stock Market Fund. A \u201cpassive\u201d domestic equity blend, target weighting of 10%, the\u00a0benchmark is the Spliced Total Stock Market Composite Index.<\/li>\n<\/ul>\n
<\/p>\n
Global Equities<\/em><\/p>\n\n- Dodge and Cox<\/strong>, Global Stock Fund. A \u201cpassive\u201d global equity manager, target weighting of 4.5%, the\u00a0benchmark is the MSCI World Index.<\/li>\n
- Lansdowne Partners<\/strong>, Developed Markets Long-Only Fund. A \u201cpassive\u201d long-only global equity\u00a0manager with concentrated holdings, target weighting of 3.0% and the benchmark is the Dow Jones\u00a0Titans 50 Index.<\/li>\n
- Vanguard<\/strong>, FTSE All-World Ex-US Index Fund. A \u201cpassive\u201d global equity blend, target weighting of 9%,\u00a0the benchmark is the FTSE All-World Ex-US All Cap Index.<\/li>\n<\/ul>\n
<\/p>\n
International Equities<\/em><\/p>\n\n- Silchester<\/strong>, International Value. A \u201cpassive\u201d international equity manager, target weighting of 9%, the\u00a0benchmark is the MSCI EAFE. Due to the success of this Silchester strategy, this fund is currently closed\u00a0to new investment.<\/li>\n
- Aberdeen<\/strong>, Emerging Markets Institutional Fund. A \u201cpassive emerging markets manager, target\u00a0weighting of 3%, the benchmark is the MSCI Emerging Markets Index.<\/li>\n
- Vanguard<\/strong>, Emerging Markets Stock Index Fund (Institutional). A \u201cpassive emerging markets manager,\u00a0added as a complement to Aberdeen, target weighting is 1.5%, the benchmark is the FTSE Emerging\u00a0Markets Index.<\/li>\n<\/ul>\n
Equity Alternatives<\/em><\/p>\n\n- AEW Capital Management<\/strong>, AEW Global Property Securities Fund<\/span>. An \u201cactive\u201d global REIT manager, 2%\u00a0allocation, the benchmark is the FTSE EPRA\/NAREIT Developed Index.<\/li>\n
- Commonfund<\/strong>\n
\n- Distressed Debt Partners II<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary\u00a0acquisition and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is\u00a0the 91-day Treasury Bill plus 5%.<\/li>\n
- Natural Resources Fund VIII<\/span>. An \u201cactive blended natural resources fund, with a higher than peer level\u00a0of alternative energy assets, contracted in late 2009 for $1.75M, the current weighting is just under\u00a01%, the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Drake Capital<\/strong>, An \u201cactive\u201d multi-strategy hedge fund, Drake complements Forester, with Drake being\u00a0smaller and more nimble in terms of underlying portfolio holdings. This fund has a portfolio weighting\u00a0of 10.0% once fully invested and the benchmark used for Drake Capital is the HFRI Fund of Funds:\u00a0Diversified Index.<\/li>\n
- Forester Capital<\/strong>, Forester Diversified Fund<\/span>. An \u201cactive\u201d multi-strategy hedge fund, Forester\u00a0complements Drake. This fund has a portfolio weighting of 10.0% once fully invested and the\u00a0benchmark used for Forester is the HFRI Fund of Funds: Diversified Index.<\/li>\n
- GMO<\/strong>, Forestry Fund 7<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary acquisition\u00a0and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is the 91-day\u00a0Treasury Bill plus 5%.<\/li>\n
- Gresham Investment Management<\/strong>, The TAP Fund<\/span>. A \u201cpassive\u201d commodities futures fund, target\u00a0weighting is 2.0% of the portfolio, the Bloomberg Commodity Index is the benchmark.<\/li>\n
- Mangham Associates<\/strong>, Resources Fund<\/span> I. An \u201cactive\u201d real assets fund acquired in late 2014 as a\u00a0secondary acquisition and as this fund has matured it is now targeted at zero percent (0.0%), the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan<\/strong>\n
\n- Metropolitan Real Estate Equity Management Fund IV<\/span>. An \u201cactive\u201d real assets fund, this fund has\u00a0reached maturity, is disbursing capital back to the portfolio and now has a target weighting of zero\u00a0percent. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan Distressed Real Estate Fund 2008<\/span>. An \u201cactive\u201d real assets fund, this fund has reached\u00a0maturity, is disbursing capital back to the portfolio and now has a target weighting of zero percent.\u00a0The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- MIT<\/strong>, Private Equity Fund II, III and IV<\/span>. These are a series of \u201cactive\u201d private equity funds and each has\u00a0reached maturity and is returning capital to the portfolio. These are funds of Massachusetts Institute\u00a0of Technology and deal in global venture and private capital projects. These funds now have a current\u00a0target weighting of zero percent (0.0%). The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Park Street Capital<\/strong>, Natural Resources Fund V<\/span>. An \u201cactive\u201d real assets fund of funds, the contracted\u00a0amount of $1.35M is about 1% of the portfolio, and it is almost fully funded. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Private Advisors<\/strong><\/span>, Small Company Buyout Fund<\/span>. An \u201cactive\u201d fund acquired in late 2009 as a secondary\u00a0acquisition, this fund has matured and is distributing capital. It is now targeted at zero percent (0.0%)\u00a0and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Property Investment Advisors<\/strong>, Property Holdings \u2013 Fund IV<\/span>. An \u201cactive\u201d real assets fund that has\u00a0matured and it is in the process of disbursing capital. The benchmark is the 91-day Treasury Bill plus\u00a05%.<\/li>\n
- RS Investments<\/strong>, Global Natural Resources Fund<\/span>. A \u201cpassive\u201d real assets fund added to the portfolio in\u00a0July 2013, the target weighting is 2.0% of the portfolio, the S&P North American Natural Resources\u00a0Sector Index is the benchmark.<\/li>\n
- The Investment Fund for Foundations (TIFF)<\/strong>\n
\n- Realty and Resources Fund II<\/span>. A \u201cpassive real assets fund, acquired in late 2014 as a secondary\u00a0acquisition, the fund has matured, is now targeted at zero percent (0.0%) and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Secondary Partners II<\/span>. A \u201cpassive\u201d private equity fund acquired in late 2014 as a secondary acquisition,\u00a0this fund has matured and is well into distributing capital, is targeted at zero percent (0.0%) and the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Vanguard<\/strong>, Inflation Protected Bond Fund<\/span>. A \u201cpassive\u201d \u201cTIPS\u201d fund , target investment is 2.0% of the\u00a0portfolio. The benchmark is the Barclay\u2019s US Inflation-Protected Index.<\/li>\n<\/ul>\n
Bonds<\/em><\/p>\n\n- Agincourt<\/strong>, An \u201cactive\u201d domestic bond manager, this manager has a current target weighing of 9.0% of\u00a0the portfolio. The benchmark for this active fund is the Barclay\u2019s US Aggregate index.<\/li>\n<\/ul>\n
\n- Colchester<\/strong>, Global Bond Fund. A \u201cpassive\u201d global bond fund, the target weighting is 4.0% of the\u00a0portfolio, the benchmark is the Citigroup World Government Bond Index.<\/li>\n<\/ul>\n
\n- Vanguard<\/strong>, Total Bond Market Index Fund. A \u201cpassive\u201d domestic bond fund to complement Agincourt,\u00a0target weighting is 7%, the benchmark is the Spliced Total Bond Market Index.<\/li>\n<\/ul>\n
Cash<\/em><\/p>\n\n\n- SunTrust Bank –\u00a0<\/strong>Our cash management account is used to provide the highest flexibility possible to our \u201cclient\u201d\u00a0churches and institutions. There is a zero percent allocation to cash, but in keeping approximately\u00a0$250,000 in this account, the investment managers are kept very close to 100% invested. These funds\u00a0are managed in a fee-free SunTrust cash management account to generate some income (a fixed\u00a0+0.15% on an annual basis) while providing instant liquidity. This account is benchmarked against the\u00a091-day Treasury bill.<\/li>\n<\/ul>\n<\/ul>\n
<\/p>\n
\n<\/a><\/p>\nPerformance<\/h2>\n
As of June 30, 2016, periodic returns were:<\/p>\n
June<\/strong>\u00a0 \u00a0 +0.1%<\/p>\nTrailing three-month \u00a0\u00a0<\/strong> +1.7%<\/p>\nYear to date<\/strong>\u00a0 \u00a0 +2.3%<\/p>\nOne year \u00a0\u00a0<\/strong> -2.2%<\/p>\nThree year \u00a0\u00a0<\/strong> +3.4%<\/p>\nFive year<\/strong>\u00a0 \u00a0 +4.2%<\/p>\n <\/p>\n
The total return at 12\/31\/xxxx, net of fees, for the core portfolio for prior years since 1995 was:<\/p>\n
1995 \u00a0\u00a0<\/strong> 20.3%<\/p>\n1996<\/strong>\u00a0 \u00a0 22.60%<\/p>\n1997 \u00a0\u00a0<\/strong> 26.09%<\/p>\n1998<\/strong>\u00a0 \u00a0 15.36%<\/p>\n1999 \u00a0\u00a0<\/strong> 10.38%<\/p>\n<\/div>2000<\/strong> \u00a0 \u00a01.42%<\/p>\n2001<\/strong> \u00a0 \u00a0-1.64%<\/p>\n2002<\/strong> \u00a0 \u00a0-5.02%<\/p>\n2003<\/strong> \u00a0 \u00a020.61%<\/p>\n2004<\/strong> \u00a0 \u00a011.89%<\/p>\n<\/div>2005<\/strong> \u00a0 \u00a07.97%<\/p>\n2006<\/strong> \u00a0 \u00a013.68%<\/p>\n2007<\/strong> \u00a0 \u00a010.76%<\/p>\n2008<\/strong> \u00a0 \u00a0-21.52%<\/p>\n2009<\/strong> \u00a0 \u00a017.09%<\/p>\n<\/div>2010<\/strong> \u00a0 \u00a010.50%<\/p>\n2011<\/strong> \u00a0 \u00a00.30%<\/p>\n2012<\/strong> \u00a0 \u00a010.9%<\/p>\n2013<\/strong> \u00a0 \u00a012.8%<\/p>\n2014<\/strong> \u00a0 \u00a01.3%<\/p>\n<\/div>
<\/p>\n
2015 had a return of -2.6%, just behind the global blend of -2.4%. The core portfolio, however,\u00a0does so at about 65% of the same risk as that global portfolio. Please keep in mind that the core\u00a0portfolio reports returns net of fees.<\/p>\n
Performance is reported on monthly by the TOTF office. If your church organization is not\u00a0receiving these reports on a monthly basis and would like to, please send the request form below.<\/p>\n
<\/p>\n
\n
Performance<\/a><\/h2>\n<\/li>\n- \n
Forms and Sample Documents<\/a><\/h2>\n<\/li>\n- \n
Investment Policy Statement<\/a><\/h2>\n<\/li>\n<\/ul>\n <\/p>\n
<\/p>\n
\n<\/a><\/p>\nCore 101<\/h2>\n
As those with oversight for the investment of Episcopal Church assets consider the options\u00a0available for assets under management, it is good to be clear on the many facets of asset\u00a0administration, and placing them in a prudent structure is a key role of governance. As options are\u00a0considered, including planned giving efforts, The Trustees of the Funds may be an excellent good\u00a0option, as it has proven to be for nearly 150 of the churches, conference centers, schools and\u00a0other organizations in Virginia.<\/p>\n
The core portfolio has roots to October 31, 1754, with the founding of the Widows and Orphans\u00a0Fund, which is still in existence today. This portfolio, like all services of TOTF, is available to any\u00a0Episcopal Church organization in the Commonwealth of Virginia.<\/p>\n
The portfolio is managed according to an Investment Policy Statement (IPS), which can be found here<\/a>. Within this IPS are the guidelines on types of assets and managers which can be\u00a0used. The expectations of the Trustees are outlined for investment managers, investment\u00a0consultant and institutional custodian.<\/p>\nMonthly reporting is sent electronically and is usually comprised of three parts: a summary report\u00a0on Trustee actions, a report on asset performance and a unitization report documenting month to\u00a0month changes for all participant funds. Monthly reporting is usually sent after the third week of\u00a0each successive month.<\/p>\n
A summary of the managers currently utilized by the portfolio is included on a separate tab.\u00a0Understanding the type of investments being used is a key element of the role of the fiduciary.\u00a0TOTF does not generally have a great deal of investment manager turnover.<\/p>\n
The core portfolio is managed as a unitized portfolio, meaning that all participating funds are\u00a0managed exactly the same way in terms of selected investments. The large pooled asset values\u00a0allow TOTF to obtain the services of very strong managers in a very cost effective manner. This\u00a0risk-monitored portfolio therefore is able to benefit all participants.<\/p>\n
Mechanics of Investing<\/h3>\n
To create a new investment with the Trustees of the Funds, the vestry\/board needs to complete\u00a0the New Fund form located in the forms tab. If the vestry\/board has passed a resolution\u00a0authorizing the creation, it would be helpful to receive a copy of that document for corporate\u00a0memory. The New Fund form should be sent to the Trustees of the Funds\u2019 office, as well as a\u00a0check payable to \u201cThe Trustees of the Funds\u201d. We can also arrange for electronic ACH transfers\u00a0from bank to bank.<\/p>\n
If there are any restrictions on the use of the fund, such as scholarships, those should be\u00a0enumerated. A classic, or true, endowment generates unrestricted income for the mission and\u00a0ministry of the underlying entity.<\/p>\n
Please be sure to advise if the fund is to reinvest or to have a calculated disbursement issued (after\u00a0the third quarter). Most funds can usually change these instructions as often as the participating\u00a0institution requires.<\/p>\n
Structure<\/h3>\n
An organizational chart is shown below so that you can see how TOTF functions, including the core\u00a0portfolio.<\/p>\n
<\/p>\n
The core portfolio, like the other services offered, is overseen by the Trustees and staff. Key\u00a0external support organizations are:<\/p>\n
\n- Prime Buchholz, Portsmouth, NH, investment consultant<\/li>\n
- SunTrust Bank, Richmond, VA and Atlanta, GA, institutional custodian<\/li>\n
- Cherry Bekaert, Richmond, VA, auditors<\/li>\n
- Armstrong, Bristow, Richmond, VA, legal<\/li>\n<\/ul>\n
The asset alignment of the core portfolio is an 80\/20 split between equities and fixed income\u00a0holdings. Cash is targeted at zero, although TOTF maintains approximately $250,000 in cash at\u00a0any given time for inflows\/outflows so that managers are kept as fully invested as possible.<\/p>\n
Current managers and performance (historical and current) are found on separate tabs.<\/p>\n
Endowment Management<\/span><\/h3>\nThe core portfolio is managed as a perpetual endowment fund. As such, the Trustees establish a\u00a0standard spending policy for the funds under management. Participants can request alternate\u00a0schedules and they have (to date) always been accommodated. TOTF has a spending policy of a\u00a0distribution of 4.5% of average market value for the prior 20 quarters, ending on September 30 th of\u00a0any given year. In any given year, participants receive a letter from TOTF explaining the current\u00a0payout or reinvestment for each named fund. About half of the nearly 700 funds receive a payout\u00a0and about half reinvest until funds are needed. Participants can alter instructions at any point.<\/p>\n
As an example of how a typical annual distribution goes, the trailing 20 quarters market value for\u00a0the entire core portfolio is averaged and that average is multiplied by the 4.5% payout formula.\u00a0This amount is then divided by the number of units outstanding as of 9\/30\/XXXX, and that gets us\u00a0to a \u201cper unit\u201d payout amount. Then, depending on the number of units in any given fund, a check\u00a0is issued to the Episcopal Church entity (fund units x per unit payout). These checks are typically\u00a0issued in October. Each fund is handled separately, so participants receive information on each\u00a0specific fund from TOTF.<\/p>\n
Many churches and organizations have multiple funds placed with the Trustees of the Funds.\u00a0Many do this for ease of reporting funds that have traditionally been held separate by decision of\u00a0the vestry, board, investment committee or by direction of the donor.<\/p>\n
To allow for different investment requirements of their funds, many churches or organizations use\u00a0the reinvestment option as opposed to the annual payout. This allows the church organization to\u00a0have an annual cash flow they can count on (payout) or long-term growth (reinvestment). Having\u00a0the multiple funds accounted for in a distinct manner facilitates record-keeping, audit work, etc.\u00a0While no investment that includes a level of risk can guarantee a specific return, the annual payout\u00a0method using the rolling average market value softens any severe volatility in a distribution model,\u00a0and this provides for manageable cash flow.<\/p>\n
Additions and Withdrawals<\/span><\/h3>\nAdditions<\/em><\/strong> to any fund should be sent to the TOTF office using the form found in the Forms tab,\u00a0and checks made payable to \u201cThe Trustees of the Funds.\u201d The form should state which fund should\u00a0receive what amount if you have more than one account. Additions to funds should arrive at TOTF\u00a0before the last Friday of the month to make sure SunTrust has sufficient time to appropriately\u00a0enter the additional amounts for that month\u2019s unitization report.<\/p>\nIf an individual wishes to make a contribution directly, and that is certainly done very often, I hope\u00a0participant leadership will make that option known. TOTF can acknowledge contributions directly\u00a0for donor tax purposes.<\/p>\n
If a participant needs to make a withdrawal<\/strong><\/em> of a fund (beyond any scheduled distribution), a\u00a0mailed or emailed copy of the standard form is requested. The form should be sent to TOTF, name\u00a0the fund and the amount needed, and to whom the check should be payable. Typically, the\u00a0church entity is the payee, but occasionally we are asked to pay a contractor or a university (such\u00a0as for a scholarship). TOTF can also send withdrawals electronically if that is desired for timing\u00a0purposes.<\/p>\nA long-standing policy of the Trustees is that for any account withdrawal request of 90% or more\u00a0of a fund\u2019s market value (such as a total liquidation) there will be a 10% hold-back to allow for the\u00a0subsequent month-end unitization. Once there has been a new unitization, any balance will be\u00a0released. While we do not have many such cases, with roughly 700 individual funds, it does\u00a0happen from time to time as a building project may be exactly what a fund was created to\u00a0support. This redemption\/holdback process is common practice in trust management.<\/p>\n
In 2011, the Trustees approved a formal withdrawal policy for large scale withdrawals that may\u00a0adversely impact the ability of TOTF and the investment managers to make prudent investment\u00a0commitments in accordance with the investment policy. The Trustees have considered the proper\u00a0threshold on two separate occasions and the current policy for the core portfolio is under the\u00a0Forms tab.<\/p>\n
Fees<\/span><\/h3>\nTOTF is run at cost for the benefit of the Episcopal Church in Virginia. All reported returns for the\u00a0core portfolio are always shown as net of fees, so you do not see a dollar-based charge at any\u00a0time. This is common trust management practice. The actual expenses of the portfolio\u00a0(management fees, custodial fees, and administrative fees) are about 56 basis points in total\u00a0(0.56%). This is reflected in the annual audit of TOTF.<\/p>\n
<\/p>\n
<\/p>\n
\n<\/a><\/p>\nManagers<\/h2>\n<\/h3>\nEquities<\/strong><\/h3>\nDomestic Equities<\/em><\/p>\n\n- Davenport & Company<\/strong>, an \u201cactive\u201d domestic large-cap stock manager, target weighting of 10.0%, the\u00a0benchmark for performance is the S&P 500.<\/li>\n
- Vanguard<\/strong>, Total Stock Market Fund. A \u201cpassive\u201d domestic equity blend, target weighting of 10%, the\u00a0benchmark is the Spliced Total Stock Market Composite Index.<\/li>\n<\/ul>\n
<\/p>\n
Global Equities<\/em><\/p>\n\n- Dodge and Cox<\/strong>, Global Stock Fund. A \u201cpassive\u201d global equity manager, target weighting of 4.5%, the\u00a0benchmark is the MSCI World Index.<\/li>\n
- Lansdowne Partners<\/strong>, Developed Markets Long-Only Fund. A \u201cpassive\u201d long-only global equity\u00a0manager with concentrated holdings, target weighting of 3.0% and the benchmark is the Dow Jones\u00a0Titans 50 Index.<\/li>\n
- Vanguard<\/strong>, FTSE All-World Ex-US Index Fund. A \u201cpassive\u201d global equity blend, target weighting of 9%,\u00a0the benchmark is the FTSE All-World Ex-US All Cap Index.<\/li>\n<\/ul>\n
<\/p>\n
International Equities<\/em><\/p>\n\n- Silchester<\/strong>, International Value. A \u201cpassive\u201d international equity manager, target weighting of 9%, the\u00a0benchmark is the MSCI EAFE. Due to the success of this Silchester strategy, this fund is currently closed\u00a0to new investment.<\/li>\n
- Aberdeen<\/strong>, Emerging Markets Institutional Fund. A \u201cpassive emerging markets manager, target\u00a0weighting of 3%, the benchmark is the MSCI Emerging Markets Index.<\/li>\n
- Vanguard<\/strong>, Emerging Markets Stock Index Fund (Institutional). A \u201cpassive emerging markets manager,\u00a0added as a complement to Aberdeen, target weighting is 1.5%, the benchmark is the FTSE Emerging\u00a0Markets Index.<\/li>\n<\/ul>\n
Equity Alternatives<\/em><\/p>\n\n- AEW Capital Management<\/strong>, AEW Global Property Securities Fund<\/span>. An \u201cactive\u201d global REIT manager, 2%\u00a0allocation, the benchmark is the FTSE EPRA\/NAREIT Developed Index.<\/li>\n
- Commonfund<\/strong>\n
\n- Distressed Debt Partners II<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary\u00a0acquisition and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is\u00a0the 91-day Treasury Bill plus 5%.<\/li>\n
- Natural Resources Fund VIII<\/span>. An \u201cactive blended natural resources fund, with a higher than peer level\u00a0of alternative energy assets, contracted in late 2009 for $1.75M, the current weighting is just under\u00a01%, the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Drake Capital<\/strong>, An \u201cactive\u201d multi-strategy hedge fund, Drake complements Forester, with Drake being\u00a0smaller and more nimble in terms of underlying portfolio holdings. This fund has a portfolio weighting\u00a0of 10.0% once fully invested and the benchmark used for Drake Capital is the HFRI Fund of Funds:\u00a0Diversified Index.<\/li>\n
- Forester Capital<\/strong>, Forester Diversified Fund<\/span>. An \u201cactive\u201d multi-strategy hedge fund, Forester\u00a0complements Drake. This fund has a portfolio weighting of 10.0% once fully invested and the\u00a0benchmark used for Forester is the HFRI Fund of Funds: Diversified Index.<\/li>\n
- GMO<\/strong>, Forestry Fund 7<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary acquisition\u00a0and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is the 91-day\u00a0Treasury Bill plus 5%.<\/li>\n
- Gresham Investment Management<\/strong>, The TAP Fund<\/span>. A \u201cpassive\u201d commodities futures fund, target\u00a0weighting is 2.0% of the portfolio, the Bloomberg Commodity Index is the benchmark.<\/li>\n
- Mangham Associates<\/strong>, Resources Fund<\/span> I. An \u201cactive\u201d real assets fund acquired in late 2014 as a\u00a0secondary acquisition and as this fund has matured it is now targeted at zero percent (0.0%), the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan<\/strong>\n
\n- Metropolitan Real Estate Equity Management Fund IV<\/span>. An \u201cactive\u201d real assets fund, this fund has\u00a0reached maturity, is disbursing capital back to the portfolio and now has a target weighting of zero\u00a0percent. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan Distressed Real Estate Fund 2008<\/span>. An \u201cactive\u201d real assets fund, this fund has reached\u00a0maturity, is disbursing capital back to the portfolio and now has a target weighting of zero percent.\u00a0The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- MIT<\/strong>, Private Equity Fund II, III and IV<\/span>. These are a series of \u201cactive\u201d private equity funds and each has\u00a0reached maturity and is returning capital to the portfolio. These are funds of Massachusetts Institute\u00a0of Technology and deal in global venture and private capital projects. These funds now have a current\u00a0target weighting of zero percent (0.0%). The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Park Street Capital<\/strong>, Natural Resources Fund V<\/span>. An \u201cactive\u201d real assets fund of funds, the contracted\u00a0amount of $1.35M is about 1% of the portfolio, and it is almost fully funded. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Private Advisors<\/strong><\/span>, Small Company Buyout Fund<\/span>. An \u201cactive\u201d fund acquired in late 2009 as a secondary\u00a0acquisition, this fund has matured and is distributing capital. It is now targeted at zero percent (0.0%)\u00a0and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Property Investment Advisors<\/strong>, Property Holdings \u2013 Fund IV<\/span>. An \u201cactive\u201d real assets fund that has\u00a0matured and it is in the process of disbursing capital. The benchmark is the 91-day Treasury Bill plus\u00a05%.<\/li>\n
- RS Investments<\/strong>, Global Natural Resources Fund<\/span>. A \u201cpassive\u201d real assets fund added to the portfolio in\u00a0July 2013, the target weighting is 2.0% of the portfolio, the S&P North American Natural Resources\u00a0Sector Index is the benchmark.<\/li>\n
- The Investment Fund for Foundations (TIFF)<\/strong>\n
\n- Realty and Resources Fund II<\/span>. A \u201cpassive real assets fund, acquired in late 2014 as a secondary\u00a0acquisition, the fund has matured, is now targeted at zero percent (0.0%) and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Secondary Partners II<\/span>. A \u201cpassive\u201d private equity fund acquired in late 2014 as a secondary acquisition,\u00a0this fund has matured and is well into distributing capital, is targeted at zero percent (0.0%) and the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Vanguard<\/strong>, Inflation Protected Bond Fund<\/span>. A \u201cpassive\u201d \u201cTIPS\u201d fund , target investment is 2.0% of the\u00a0portfolio. The benchmark is the Barclay\u2019s US Inflation-Protected Index.<\/li>\n<\/ul>\n
Bonds<\/em><\/p>\n\n- Agincourt<\/strong>, An \u201cactive\u201d domestic bond manager, this manager has a current target weighing of 9.0% of\u00a0the portfolio. The benchmark for this active fund is the Barclay\u2019s US Aggregate index.<\/li>\n<\/ul>\n
\n- Colchester<\/strong>, Global Bond Fund. A \u201cpassive\u201d global bond fund, the target weighting is 4.0% of the\u00a0portfolio, the benchmark is the Citigroup World Government Bond Index.<\/li>\n<\/ul>\n
\n- Vanguard<\/strong>, Total Bond Market Index Fund. A \u201cpassive\u201d domestic bond fund to complement Agincourt,\u00a0target weighting is 7%, the benchmark is the Spliced Total Bond Market Index.<\/li>\n<\/ul>\n
Cash<\/em><\/p>\n\n\n- SunTrust Bank –\u00a0<\/strong>Our cash management account is used to provide the highest flexibility possible to our \u201cclient\u201d\u00a0churches and institutions. There is a zero percent allocation to cash, but in keeping approximately\u00a0$250,000 in this account, the investment managers are kept very close to 100% invested. These funds\u00a0are managed in a fee-free SunTrust cash management account to generate some income (a fixed\u00a0+0.15% on an annual basis) while providing instant liquidity. This account is benchmarked against the\u00a091-day Treasury bill.<\/li>\n<\/ul>\n<\/ul>\n
<\/p>\n
\n<\/a><\/p>\nPerformance<\/h2>\n
As of June 30, 2016, periodic returns were:<\/p>\n
June<\/strong>\u00a0 \u00a0 +0.1%<\/p>\nTrailing three-month \u00a0\u00a0<\/strong> +1.7%<\/p>\nYear to date<\/strong>\u00a0 \u00a0 +2.3%<\/p>\nOne year \u00a0\u00a0<\/strong> -2.2%<\/p>\nThree year \u00a0\u00a0<\/strong> +3.4%<\/p>\nFive year<\/strong>\u00a0 \u00a0 +4.2%<\/p>\n <\/p>\n
The total return at 12\/31\/xxxx, net of fees, for the core portfolio for prior years since 1995 was:<\/p>\n
1995 \u00a0\u00a0<\/strong> 20.3%<\/p>\n1996<\/strong>\u00a0 \u00a0 22.60%<\/p>\n1997 \u00a0\u00a0<\/strong> 26.09%<\/p>\n1998<\/strong>\u00a0 \u00a0 15.36%<\/p>\n1999 \u00a0\u00a0<\/strong> 10.38%<\/p>\n<\/div>2000<\/strong> \u00a0 \u00a01.42%<\/p>\n2001<\/strong> \u00a0 \u00a0-1.64%<\/p>\n2002<\/strong> \u00a0 \u00a0-5.02%<\/p>\n2003<\/strong> \u00a0 \u00a020.61%<\/p>\n2004<\/strong> \u00a0 \u00a011.89%<\/p>\n<\/div>2005<\/strong> \u00a0 \u00a07.97%<\/p>\n2006<\/strong> \u00a0 \u00a013.68%<\/p>\n2007<\/strong> \u00a0 \u00a010.76%<\/p>\n2008<\/strong> \u00a0 \u00a0-21.52%<\/p>\n2009<\/strong> \u00a0 \u00a017.09%<\/p>\n<\/div>2010<\/strong> \u00a0 \u00a010.50%<\/p>\n2011<\/strong> \u00a0 \u00a00.30%<\/p>\n2012<\/strong> \u00a0 \u00a010.9%<\/p>\n2013<\/strong> \u00a0 \u00a012.8%<\/p>\n2014<\/strong> \u00a0 \u00a01.3%<\/p>\n<\/div>
<\/p>\n
2015 had a return of -2.6%, just behind the global blend of -2.4%. The core portfolio, however,\u00a0does so at about 65% of the same risk as that global portfolio. Please keep in mind that the core\u00a0portfolio reports returns net of fees.<\/p>\n
Performance is reported on monthly by the TOTF office. If your church organization is not\u00a0receiving these reports on a monthly basis and would like to, please send the request form below.<\/p>\n
<\/p>\n
\n
Forms and Sample Documents<\/a><\/h2>\n<\/li>\n- \n
Investment Policy Statement<\/a><\/h2>\n<\/li>\n<\/ul>\n <\/p>\n
<\/p>\n
\n<\/a><\/p>\nCore 101<\/h2>\n
As those with oversight for the investment of Episcopal Church assets consider the options\u00a0available for assets under management, it is good to be clear on the many facets of asset\u00a0administration, and placing them in a prudent structure is a key role of governance. As options are\u00a0considered, including planned giving efforts, The Trustees of the Funds may be an excellent good\u00a0option, as it has proven to be for nearly 150 of the churches, conference centers, schools and\u00a0other organizations in Virginia.<\/p>\n
The core portfolio has roots to October 31, 1754, with the founding of the Widows and Orphans\u00a0Fund, which is still in existence today. This portfolio, like all services of TOTF, is available to any\u00a0Episcopal Church organization in the Commonwealth of Virginia.<\/p>\n
The portfolio is managed according to an Investment Policy Statement (IPS), which can be found here<\/a>. Within this IPS are the guidelines on types of assets and managers which can be\u00a0used. The expectations of the Trustees are outlined for investment managers, investment\u00a0consultant and institutional custodian.<\/p>\nMonthly reporting is sent electronically and is usually comprised of three parts: a summary report\u00a0on Trustee actions, a report on asset performance and a unitization report documenting month to\u00a0month changes for all participant funds. Monthly reporting is usually sent after the third week of\u00a0each successive month.<\/p>\n
A summary of the managers currently utilized by the portfolio is included on a separate tab.\u00a0Understanding the type of investments being used is a key element of the role of the fiduciary.\u00a0TOTF does not generally have a great deal of investment manager turnover.<\/p>\n
The core portfolio is managed as a unitized portfolio, meaning that all participating funds are\u00a0managed exactly the same way in terms of selected investments. The large pooled asset values\u00a0allow TOTF to obtain the services of very strong managers in a very cost effective manner. This\u00a0risk-monitored portfolio therefore is able to benefit all participants.<\/p>\n
Mechanics of Investing<\/h3>\n
To create a new investment with the Trustees of the Funds, the vestry\/board needs to complete\u00a0the New Fund form located in the forms tab. If the vestry\/board has passed a resolution\u00a0authorizing the creation, it would be helpful to receive a copy of that document for corporate\u00a0memory. The New Fund form should be sent to the Trustees of the Funds\u2019 office, as well as a\u00a0check payable to \u201cThe Trustees of the Funds\u201d. We can also arrange for electronic ACH transfers\u00a0from bank to bank.<\/p>\n
If there are any restrictions on the use of the fund, such as scholarships, those should be\u00a0enumerated. A classic, or true, endowment generates unrestricted income for the mission and\u00a0ministry of the underlying entity.<\/p>\n
Please be sure to advise if the fund is to reinvest or to have a calculated disbursement issued (after\u00a0the third quarter). Most funds can usually change these instructions as often as the participating\u00a0institution requires.<\/p>\n
Structure<\/h3>\n
An organizational chart is shown below so that you can see how TOTF functions, including the core\u00a0portfolio.<\/p>\n
<\/p>\n
The core portfolio, like the other services offered, is overseen by the Trustees and staff. Key\u00a0external support organizations are:<\/p>\n
\n- Prime Buchholz, Portsmouth, NH, investment consultant<\/li>\n
- SunTrust Bank, Richmond, VA and Atlanta, GA, institutional custodian<\/li>\n
- Cherry Bekaert, Richmond, VA, auditors<\/li>\n
- Armstrong, Bristow, Richmond, VA, legal<\/li>\n<\/ul>\n
The asset alignment of the core portfolio is an 80\/20 split between equities and fixed income\u00a0holdings. Cash is targeted at zero, although TOTF maintains approximately $250,000 in cash at\u00a0any given time for inflows\/outflows so that managers are kept as fully invested as possible.<\/p>\n
Current managers and performance (historical and current) are found on separate tabs.<\/p>\n
Endowment Management<\/span><\/h3>\nThe core portfolio is managed as a perpetual endowment fund. As such, the Trustees establish a\u00a0standard spending policy for the funds under management. Participants can request alternate\u00a0schedules and they have (to date) always been accommodated. TOTF has a spending policy of a\u00a0distribution of 4.5% of average market value for the prior 20 quarters, ending on September 30 th of\u00a0any given year. In any given year, participants receive a letter from TOTF explaining the current\u00a0payout or reinvestment for each named fund. About half of the nearly 700 funds receive a payout\u00a0and about half reinvest until funds are needed. Participants can alter instructions at any point.<\/p>\n
As an example of how a typical annual distribution goes, the trailing 20 quarters market value for\u00a0the entire core portfolio is averaged and that average is multiplied by the 4.5% payout formula.\u00a0This amount is then divided by the number of units outstanding as of 9\/30\/XXXX, and that gets us\u00a0to a \u201cper unit\u201d payout amount. Then, depending on the number of units in any given fund, a check\u00a0is issued to the Episcopal Church entity (fund units x per unit payout). These checks are typically\u00a0issued in October. Each fund is handled separately, so participants receive information on each\u00a0specific fund from TOTF.<\/p>\n
Many churches and organizations have multiple funds placed with the Trustees of the Funds.\u00a0Many do this for ease of reporting funds that have traditionally been held separate by decision of\u00a0the vestry, board, investment committee or by direction of the donor.<\/p>\n
To allow for different investment requirements of their funds, many churches or organizations use\u00a0the reinvestment option as opposed to the annual payout. This allows the church organization to\u00a0have an annual cash flow they can count on (payout) or long-term growth (reinvestment). Having\u00a0the multiple funds accounted for in a distinct manner facilitates record-keeping, audit work, etc.\u00a0While no investment that includes a level of risk can guarantee a specific return, the annual payout\u00a0method using the rolling average market value softens any severe volatility in a distribution model,\u00a0and this provides for manageable cash flow.<\/p>\n
Additions and Withdrawals<\/span><\/h3>\nAdditions<\/em><\/strong> to any fund should be sent to the TOTF office using the form found in the Forms tab,\u00a0and checks made payable to \u201cThe Trustees of the Funds.\u201d The form should state which fund should\u00a0receive what amount if you have more than one account. Additions to funds should arrive at TOTF\u00a0before the last Friday of the month to make sure SunTrust has sufficient time to appropriately\u00a0enter the additional amounts for that month\u2019s unitization report.<\/p>\nIf an individual wishes to make a contribution directly, and that is certainly done very often, I hope\u00a0participant leadership will make that option known. TOTF can acknowledge contributions directly\u00a0for donor tax purposes.<\/p>\n
If a participant needs to make a withdrawal<\/strong><\/em> of a fund (beyond any scheduled distribution), a\u00a0mailed or emailed copy of the standard form is requested. The form should be sent to TOTF, name\u00a0the fund and the amount needed, and to whom the check should be payable. Typically, the\u00a0church entity is the payee, but occasionally we are asked to pay a contractor or a university (such\u00a0as for a scholarship). TOTF can also send withdrawals electronically if that is desired for timing\u00a0purposes.<\/p>\nA long-standing policy of the Trustees is that for any account withdrawal request of 90% or more\u00a0of a fund\u2019s market value (such as a total liquidation) there will be a 10% hold-back to allow for the\u00a0subsequent month-end unitization. Once there has been a new unitization, any balance will be\u00a0released. While we do not have many such cases, with roughly 700 individual funds, it does\u00a0happen from time to time as a building project may be exactly what a fund was created to\u00a0support. This redemption\/holdback process is common practice in trust management.<\/p>\n
In 2011, the Trustees approved a formal withdrawal policy for large scale withdrawals that may\u00a0adversely impact the ability of TOTF and the investment managers to make prudent investment\u00a0commitments in accordance with the investment policy. The Trustees have considered the proper\u00a0threshold on two separate occasions and the current policy for the core portfolio is under the\u00a0Forms tab.<\/p>\n
Fees<\/span><\/h3>\nTOTF is run at cost for the benefit of the Episcopal Church in Virginia. All reported returns for the\u00a0core portfolio are always shown as net of fees, so you do not see a dollar-based charge at any\u00a0time. This is common trust management practice. The actual expenses of the portfolio\u00a0(management fees, custodial fees, and administrative fees) are about 56 basis points in total\u00a0(0.56%). This is reflected in the annual audit of TOTF.<\/p>\n
<\/p>\n
<\/p>\n
\n<\/a><\/p>\nManagers<\/h2>\n<\/h3>\nEquities<\/strong><\/h3>\nDomestic Equities<\/em><\/p>\n\n- Davenport & Company<\/strong>, an \u201cactive\u201d domestic large-cap stock manager, target weighting of 10.0%, the\u00a0benchmark for performance is the S&P 500.<\/li>\n
- Vanguard<\/strong>, Total Stock Market Fund. A \u201cpassive\u201d domestic equity blend, target weighting of 10%, the\u00a0benchmark is the Spliced Total Stock Market Composite Index.<\/li>\n<\/ul>\n
<\/p>\n
Global Equities<\/em><\/p>\n\n- Dodge and Cox<\/strong>, Global Stock Fund. A \u201cpassive\u201d global equity manager, target weighting of 4.5%, the\u00a0benchmark is the MSCI World Index.<\/li>\n
- Lansdowne Partners<\/strong>, Developed Markets Long-Only Fund. A \u201cpassive\u201d long-only global equity\u00a0manager with concentrated holdings, target weighting of 3.0% and the benchmark is the Dow Jones\u00a0Titans 50 Index.<\/li>\n
- Vanguard<\/strong>, FTSE All-World Ex-US Index Fund. A \u201cpassive\u201d global equity blend, target weighting of 9%,\u00a0the benchmark is the FTSE All-World Ex-US All Cap Index.<\/li>\n<\/ul>\n
<\/p>\n
International Equities<\/em><\/p>\n\n- Silchester<\/strong>, International Value. A \u201cpassive\u201d international equity manager, target weighting of 9%, the\u00a0benchmark is the MSCI EAFE. Due to the success of this Silchester strategy, this fund is currently closed\u00a0to new investment.<\/li>\n
- Aberdeen<\/strong>, Emerging Markets Institutional Fund. A \u201cpassive emerging markets manager, target\u00a0weighting of 3%, the benchmark is the MSCI Emerging Markets Index.<\/li>\n
- Vanguard<\/strong>, Emerging Markets Stock Index Fund (Institutional). A \u201cpassive emerging markets manager,\u00a0added as a complement to Aberdeen, target weighting is 1.5%, the benchmark is the FTSE Emerging\u00a0Markets Index.<\/li>\n<\/ul>\n
Equity Alternatives<\/em><\/p>\n\n- AEW Capital Management<\/strong>, AEW Global Property Securities Fund<\/span>. An \u201cactive\u201d global REIT manager, 2%\u00a0allocation, the benchmark is the FTSE EPRA\/NAREIT Developed Index.<\/li>\n
- Commonfund<\/strong>\n
\n- Distressed Debt Partners II<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary\u00a0acquisition and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is\u00a0the 91-day Treasury Bill plus 5%.<\/li>\n
- Natural Resources Fund VIII<\/span>. An \u201cactive blended natural resources fund, with a higher than peer level\u00a0of alternative energy assets, contracted in late 2009 for $1.75M, the current weighting is just under\u00a01%, the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Drake Capital<\/strong>, An \u201cactive\u201d multi-strategy hedge fund, Drake complements Forester, with Drake being\u00a0smaller and more nimble in terms of underlying portfolio holdings. This fund has a portfolio weighting\u00a0of 10.0% once fully invested and the benchmark used for Drake Capital is the HFRI Fund of Funds:\u00a0Diversified Index.<\/li>\n
- Forester Capital<\/strong>, Forester Diversified Fund<\/span>. An \u201cactive\u201d multi-strategy hedge fund, Forester\u00a0complements Drake. This fund has a portfolio weighting of 10.0% once fully invested and the\u00a0benchmark used for Forester is the HFRI Fund of Funds: Diversified Index.<\/li>\n
- GMO<\/strong>, Forestry Fund 7<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary acquisition\u00a0and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is the 91-day\u00a0Treasury Bill plus 5%.<\/li>\n
- Gresham Investment Management<\/strong>, The TAP Fund<\/span>. A \u201cpassive\u201d commodities futures fund, target\u00a0weighting is 2.0% of the portfolio, the Bloomberg Commodity Index is the benchmark.<\/li>\n
- Mangham Associates<\/strong>, Resources Fund<\/span> I. An \u201cactive\u201d real assets fund acquired in late 2014 as a\u00a0secondary acquisition and as this fund has matured it is now targeted at zero percent (0.0%), the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan<\/strong>\n
\n- Metropolitan Real Estate Equity Management Fund IV<\/span>. An \u201cactive\u201d real assets fund, this fund has\u00a0reached maturity, is disbursing capital back to the portfolio and now has a target weighting of zero\u00a0percent. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan Distressed Real Estate Fund 2008<\/span>. An \u201cactive\u201d real assets fund, this fund has reached\u00a0maturity, is disbursing capital back to the portfolio and now has a target weighting of zero percent.\u00a0The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- MIT<\/strong>, Private Equity Fund II, III and IV<\/span>. These are a series of \u201cactive\u201d private equity funds and each has\u00a0reached maturity and is returning capital to the portfolio. These are funds of Massachusetts Institute\u00a0of Technology and deal in global venture and private capital projects. These funds now have a current\u00a0target weighting of zero percent (0.0%). The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Park Street Capital<\/strong>, Natural Resources Fund V<\/span>. An \u201cactive\u201d real assets fund of funds, the contracted\u00a0amount of $1.35M is about 1% of the portfolio, and it is almost fully funded. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Private Advisors<\/strong><\/span>, Small Company Buyout Fund<\/span>. An \u201cactive\u201d fund acquired in late 2009 as a secondary\u00a0acquisition, this fund has matured and is distributing capital. It is now targeted at zero percent (0.0%)\u00a0and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Property Investment Advisors<\/strong>, Property Holdings \u2013 Fund IV<\/span>. An \u201cactive\u201d real assets fund that has\u00a0matured and it is in the process of disbursing capital. The benchmark is the 91-day Treasury Bill plus\u00a05%.<\/li>\n
- RS Investments<\/strong>, Global Natural Resources Fund<\/span>. A \u201cpassive\u201d real assets fund added to the portfolio in\u00a0July 2013, the target weighting is 2.0% of the portfolio, the S&P North American Natural Resources\u00a0Sector Index is the benchmark.<\/li>\n
- The Investment Fund for Foundations (TIFF)<\/strong>\n
\n- Realty and Resources Fund II<\/span>. A \u201cpassive real assets fund, acquired in late 2014 as a secondary\u00a0acquisition, the fund has matured, is now targeted at zero percent (0.0%) and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Secondary Partners II<\/span>. A \u201cpassive\u201d private equity fund acquired in late 2014 as a secondary acquisition,\u00a0this fund has matured and is well into distributing capital, is targeted at zero percent (0.0%) and the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Vanguard<\/strong>, Inflation Protected Bond Fund<\/span>. A \u201cpassive\u201d \u201cTIPS\u201d fund , target investment is 2.0% of the\u00a0portfolio. The benchmark is the Barclay\u2019s US Inflation-Protected Index.<\/li>\n<\/ul>\n
Bonds<\/em><\/p>\n\n- Agincourt<\/strong>, An \u201cactive\u201d domestic bond manager, this manager has a current target weighing of 9.0% of\u00a0the portfolio. The benchmark for this active fund is the Barclay\u2019s US Aggregate index.<\/li>\n<\/ul>\n
\n- Colchester<\/strong>, Global Bond Fund. A \u201cpassive\u201d global bond fund, the target weighting is 4.0% of the\u00a0portfolio, the benchmark is the Citigroup World Government Bond Index.<\/li>\n<\/ul>\n
\n- Vanguard<\/strong>, Total Bond Market Index Fund. A \u201cpassive\u201d domestic bond fund to complement Agincourt,\u00a0target weighting is 7%, the benchmark is the Spliced Total Bond Market Index.<\/li>\n<\/ul>\n
Cash<\/em><\/p>\n\n\n- SunTrust Bank –\u00a0<\/strong>Our cash management account is used to provide the highest flexibility possible to our \u201cclient\u201d\u00a0churches and institutions. There is a zero percent allocation to cash, but in keeping approximately\u00a0$250,000 in this account, the investment managers are kept very close to 100% invested. These funds\u00a0are managed in a fee-free SunTrust cash management account to generate some income (a fixed\u00a0+0.15% on an annual basis) while providing instant liquidity. This account is benchmarked against the\u00a091-day Treasury bill.<\/li>\n<\/ul>\n<\/ul>\n
<\/p>\n
\n<\/a><\/p>\nPerformance<\/h2>\n
As of June 30, 2016, periodic returns were:<\/p>\n
June<\/strong>\u00a0 \u00a0 +0.1%<\/p>\nTrailing three-month \u00a0\u00a0<\/strong> +1.7%<\/p>\nYear to date<\/strong>\u00a0 \u00a0 +2.3%<\/p>\nOne year \u00a0\u00a0<\/strong> -2.2%<\/p>\nThree year \u00a0\u00a0<\/strong> +3.4%<\/p>\nFive year<\/strong>\u00a0 \u00a0 +4.2%<\/p>\n <\/p>\n
The total return at 12\/31\/xxxx, net of fees, for the core portfolio for prior years since 1995 was:<\/p>\n
1995 \u00a0\u00a0<\/strong> 20.3%<\/p>\n1996<\/strong>\u00a0 \u00a0 22.60%<\/p>\n1997 \u00a0\u00a0<\/strong> 26.09%<\/p>\n1998<\/strong>\u00a0 \u00a0 15.36%<\/p>\n1999 \u00a0\u00a0<\/strong> 10.38%<\/p>\n<\/div>2000<\/strong> \u00a0 \u00a01.42%<\/p>\n2001<\/strong> \u00a0 \u00a0-1.64%<\/p>\n2002<\/strong> \u00a0 \u00a0-5.02%<\/p>\n2003<\/strong> \u00a0 \u00a020.61%<\/p>\n2004<\/strong> \u00a0 \u00a011.89%<\/p>\n<\/div>2005<\/strong> \u00a0 \u00a07.97%<\/p>\n2006<\/strong> \u00a0 \u00a013.68%<\/p>\n2007<\/strong> \u00a0 \u00a010.76%<\/p>\n2008<\/strong> \u00a0 \u00a0-21.52%<\/p>\n2009<\/strong> \u00a0 \u00a017.09%<\/p>\n<\/div>2010<\/strong> \u00a0 \u00a010.50%<\/p>\n2011<\/strong> \u00a0 \u00a00.30%<\/p>\n2012<\/strong> \u00a0 \u00a010.9%<\/p>\n2013<\/strong> \u00a0 \u00a012.8%<\/p>\n2014<\/strong> \u00a0 \u00a01.3%<\/p>\n<\/div>
<\/p>\n
2015 had a return of -2.6%, just behind the global blend of -2.4%. The core portfolio, however,\u00a0does so at about 65% of the same risk as that global portfolio. Please keep in mind that the core\u00a0portfolio reports returns net of fees.<\/p>\n
Performance is reported on monthly by the TOTF office. If your church organization is not\u00a0receiving these reports on a monthly basis and would like to, please send the request form below.<\/p>\n
<\/p>\n
\n
Investment Policy Statement<\/a><\/h2>\n<\/li>\n<\/ul>\n <\/p>\n
<\/p>\n
\n<\/a><\/p>\nCore 101<\/h2>\n
As those with oversight for the investment of Episcopal Church assets consider the options\u00a0available for assets under management, it is good to be clear on the many facets of asset\u00a0administration, and placing them in a prudent structure is a key role of governance. As options are\u00a0considered, including planned giving efforts, The Trustees of the Funds may be an excellent good\u00a0option, as it has proven to be for nearly 150 of the churches, conference centers, schools and\u00a0other organizations in Virginia.<\/p>\n
The core portfolio has roots to October 31, 1754, with the founding of the Widows and Orphans\u00a0Fund, which is still in existence today. This portfolio, like all services of TOTF, is available to any\u00a0Episcopal Church organization in the Commonwealth of Virginia.<\/p>\n
The portfolio is managed according to an Investment Policy Statement (IPS), which can be found here<\/a>. Within this IPS are the guidelines on types of assets and managers which can be\u00a0used. The expectations of the Trustees are outlined for investment managers, investment\u00a0consultant and institutional custodian.<\/p>\nMonthly reporting is sent electronically and is usually comprised of three parts: a summary report\u00a0on Trustee actions, a report on asset performance and a unitization report documenting month to\u00a0month changes for all participant funds. Monthly reporting is usually sent after the third week of\u00a0each successive month.<\/p>\n
A summary of the managers currently utilized by the portfolio is included on a separate tab.\u00a0Understanding the type of investments being used is a key element of the role of the fiduciary.\u00a0TOTF does not generally have a great deal of investment manager turnover.<\/p>\n
The core portfolio is managed as a unitized portfolio, meaning that all participating funds are\u00a0managed exactly the same way in terms of selected investments. The large pooled asset values\u00a0allow TOTF to obtain the services of very strong managers in a very cost effective manner. This\u00a0risk-monitored portfolio therefore is able to benefit all participants.<\/p>\n
Mechanics of Investing<\/h3>\n
To create a new investment with the Trustees of the Funds, the vestry\/board needs to complete\u00a0the New Fund form located in the forms tab. If the vestry\/board has passed a resolution\u00a0authorizing the creation, it would be helpful to receive a copy of that document for corporate\u00a0memory. The New Fund form should be sent to the Trustees of the Funds\u2019 office, as well as a\u00a0check payable to \u201cThe Trustees of the Funds\u201d. We can also arrange for electronic ACH transfers\u00a0from bank to bank.<\/p>\n
If there are any restrictions on the use of the fund, such as scholarships, those should be\u00a0enumerated. A classic, or true, endowment generates unrestricted income for the mission and\u00a0ministry of the underlying entity.<\/p>\n
Please be sure to advise if the fund is to reinvest or to have a calculated disbursement issued (after\u00a0the third quarter). Most funds can usually change these instructions as often as the participating\u00a0institution requires.<\/p>\n
Structure<\/h3>\n
An organizational chart is shown below so that you can see how TOTF functions, including the core\u00a0portfolio.<\/p>\n
<\/p>\n
The core portfolio, like the other services offered, is overseen by the Trustees and staff. Key\u00a0external support organizations are:<\/p>\n
\n- Prime Buchholz, Portsmouth, NH, investment consultant<\/li>\n
- SunTrust Bank, Richmond, VA and Atlanta, GA, institutional custodian<\/li>\n
- Cherry Bekaert, Richmond, VA, auditors<\/li>\n
- Armstrong, Bristow, Richmond, VA, legal<\/li>\n<\/ul>\n
The asset alignment of the core portfolio is an 80\/20 split between equities and fixed income\u00a0holdings. Cash is targeted at zero, although TOTF maintains approximately $250,000 in cash at\u00a0any given time for inflows\/outflows so that managers are kept as fully invested as possible.<\/p>\n
Current managers and performance (historical and current) are found on separate tabs.<\/p>\n
Endowment Management<\/span><\/h3>\nThe core portfolio is managed as a perpetual endowment fund. As such, the Trustees establish a\u00a0standard spending policy for the funds under management. Participants can request alternate\u00a0schedules and they have (to date) always been accommodated. TOTF has a spending policy of a\u00a0distribution of 4.5% of average market value for the prior 20 quarters, ending on September 30 th of\u00a0any given year. In any given year, participants receive a letter from TOTF explaining the current\u00a0payout or reinvestment for each named fund. About half of the nearly 700 funds receive a payout\u00a0and about half reinvest until funds are needed. Participants can alter instructions at any point.<\/p>\n
As an example of how a typical annual distribution goes, the trailing 20 quarters market value for\u00a0the entire core portfolio is averaged and that average is multiplied by the 4.5% payout formula.\u00a0This amount is then divided by the number of units outstanding as of 9\/30\/XXXX, and that gets us\u00a0to a \u201cper unit\u201d payout amount. Then, depending on the number of units in any given fund, a check\u00a0is issued to the Episcopal Church entity (fund units x per unit payout). These checks are typically\u00a0issued in October. Each fund is handled separately, so participants receive information on each\u00a0specific fund from TOTF.<\/p>\n
Many churches and organizations have multiple funds placed with the Trustees of the Funds.\u00a0Many do this for ease of reporting funds that have traditionally been held separate by decision of\u00a0the vestry, board, investment committee or by direction of the donor.<\/p>\n
To allow for different investment requirements of their funds, many churches or organizations use\u00a0the reinvestment option as opposed to the annual payout. This allows the church organization to\u00a0have an annual cash flow they can count on (payout) or long-term growth (reinvestment). Having\u00a0the multiple funds accounted for in a distinct manner facilitates record-keeping, audit work, etc.\u00a0While no investment that includes a level of risk can guarantee a specific return, the annual payout\u00a0method using the rolling average market value softens any severe volatility in a distribution model,\u00a0and this provides for manageable cash flow.<\/p>\n
Additions and Withdrawals<\/span><\/h3>\nAdditions<\/em><\/strong> to any fund should be sent to the TOTF office using the form found in the Forms tab,\u00a0and checks made payable to \u201cThe Trustees of the Funds.\u201d The form should state which fund should\u00a0receive what amount if you have more than one account. Additions to funds should arrive at TOTF\u00a0before the last Friday of the month to make sure SunTrust has sufficient time to appropriately\u00a0enter the additional amounts for that month\u2019s unitization report.<\/p>\nIf an individual wishes to make a contribution directly, and that is certainly done very often, I hope\u00a0participant leadership will make that option known. TOTF can acknowledge contributions directly\u00a0for donor tax purposes.<\/p>\n
If a participant needs to make a withdrawal<\/strong><\/em> of a fund (beyond any scheduled distribution), a\u00a0mailed or emailed copy of the standard form is requested. The form should be sent to TOTF, name\u00a0the fund and the amount needed, and to whom the check should be payable. Typically, the\u00a0church entity is the payee, but occasionally we are asked to pay a contractor or a university (such\u00a0as for a scholarship). TOTF can also send withdrawals electronically if that is desired for timing\u00a0purposes.<\/p>\nA long-standing policy of the Trustees is that for any account withdrawal request of 90% or more\u00a0of a fund\u2019s market value (such as a total liquidation) there will be a 10% hold-back to allow for the\u00a0subsequent month-end unitization. Once there has been a new unitization, any balance will be\u00a0released. While we do not have many such cases, with roughly 700 individual funds, it does\u00a0happen from time to time as a building project may be exactly what a fund was created to\u00a0support. This redemption\/holdback process is common practice in trust management.<\/p>\n
In 2011, the Trustees approved a formal withdrawal policy for large scale withdrawals that may\u00a0adversely impact the ability of TOTF and the investment managers to make prudent investment\u00a0commitments in accordance with the investment policy. The Trustees have considered the proper\u00a0threshold on two separate occasions and the current policy for the core portfolio is under the\u00a0Forms tab.<\/p>\n
Fees<\/span><\/h3>\nTOTF is run at cost for the benefit of the Episcopal Church in Virginia. All reported returns for the\u00a0core portfolio are always shown as net of fees, so you do not see a dollar-based charge at any\u00a0time. This is common trust management practice. The actual expenses of the portfolio\u00a0(management fees, custodial fees, and administrative fees) are about 56 basis points in total\u00a0(0.56%). This is reflected in the annual audit of TOTF.<\/p>\n
<\/p>\n
<\/p>\n
\n<\/a><\/p>\nManagers<\/h2>\n<\/h3>\nEquities<\/strong><\/h3>\nDomestic Equities<\/em><\/p>\n\n- Davenport & Company<\/strong>, an \u201cactive\u201d domestic large-cap stock manager, target weighting of 10.0%, the\u00a0benchmark for performance is the S&P 500.<\/li>\n
- Vanguard<\/strong>, Total Stock Market Fund. A \u201cpassive\u201d domestic equity blend, target weighting of 10%, the\u00a0benchmark is the Spliced Total Stock Market Composite Index.<\/li>\n<\/ul>\n
<\/p>\n
Global Equities<\/em><\/p>\n\n- Dodge and Cox<\/strong>, Global Stock Fund. A \u201cpassive\u201d global equity manager, target weighting of 4.5%, the\u00a0benchmark is the MSCI World Index.<\/li>\n
- Lansdowne Partners<\/strong>, Developed Markets Long-Only Fund. A \u201cpassive\u201d long-only global equity\u00a0manager with concentrated holdings, target weighting of 3.0% and the benchmark is the Dow Jones\u00a0Titans 50 Index.<\/li>\n
- Vanguard<\/strong>, FTSE All-World Ex-US Index Fund. A \u201cpassive\u201d global equity blend, target weighting of 9%,\u00a0the benchmark is the FTSE All-World Ex-US All Cap Index.<\/li>\n<\/ul>\n
<\/p>\n
International Equities<\/em><\/p>\n\n- Silchester<\/strong>, International Value. A \u201cpassive\u201d international equity manager, target weighting of 9%, the\u00a0benchmark is the MSCI EAFE. Due to the success of this Silchester strategy, this fund is currently closed\u00a0to new investment.<\/li>\n
- Aberdeen<\/strong>, Emerging Markets Institutional Fund. A \u201cpassive emerging markets manager, target\u00a0weighting of 3%, the benchmark is the MSCI Emerging Markets Index.<\/li>\n
- Vanguard<\/strong>, Emerging Markets Stock Index Fund (Institutional). A \u201cpassive emerging markets manager,\u00a0added as a complement to Aberdeen, target weighting is 1.5%, the benchmark is the FTSE Emerging\u00a0Markets Index.<\/li>\n<\/ul>\n
Equity Alternatives<\/em><\/p>\n\n- AEW Capital Management<\/strong>, AEW Global Property Securities Fund<\/span>. An \u201cactive\u201d global REIT manager, 2%\u00a0allocation, the benchmark is the FTSE EPRA\/NAREIT Developed Index.<\/li>\n
- Commonfund<\/strong>\n
\n- Distressed Debt Partners II<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary\u00a0acquisition and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is\u00a0the 91-day Treasury Bill plus 5%.<\/li>\n
- Natural Resources Fund VIII<\/span>. An \u201cactive blended natural resources fund, with a higher than peer level\u00a0of alternative energy assets, contracted in late 2009 for $1.75M, the current weighting is just under\u00a01%, the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Drake Capital<\/strong>, An \u201cactive\u201d multi-strategy hedge fund, Drake complements Forester, with Drake being\u00a0smaller and more nimble in terms of underlying portfolio holdings. This fund has a portfolio weighting\u00a0of 10.0% once fully invested and the benchmark used for Drake Capital is the HFRI Fund of Funds:\u00a0Diversified Index.<\/li>\n
- Forester Capital<\/strong>, Forester Diversified Fund<\/span>. An \u201cactive\u201d multi-strategy hedge fund, Forester\u00a0complements Drake. This fund has a portfolio weighting of 10.0% once fully invested and the\u00a0benchmark used for Forester is the HFRI Fund of Funds: Diversified Index.<\/li>\n
- GMO<\/strong>, Forestry Fund 7<\/span>. An \u201cactive\u201d real assets fund acquired in late 2014 as a secondary acquisition\u00a0and as this fund has matured, it is now targeted at zero percent (0.0%). The benchmark is the 91-day\u00a0Treasury Bill plus 5%.<\/li>\n
- Gresham Investment Management<\/strong>, The TAP Fund<\/span>. A \u201cpassive\u201d commodities futures fund, target\u00a0weighting is 2.0% of the portfolio, the Bloomberg Commodity Index is the benchmark.<\/li>\n
- Mangham Associates<\/strong>, Resources Fund<\/span> I. An \u201cactive\u201d real assets fund acquired in late 2014 as a\u00a0secondary acquisition and as this fund has matured it is now targeted at zero percent (0.0%), the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan<\/strong>\n
\n- Metropolitan Real Estate Equity Management Fund IV<\/span>. An \u201cactive\u201d real assets fund, this fund has\u00a0reached maturity, is disbursing capital back to the portfolio and now has a target weighting of zero\u00a0percent. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Metropolitan Distressed Real Estate Fund 2008<\/span>. An \u201cactive\u201d real assets fund, this fund has reached\u00a0maturity, is disbursing capital back to the portfolio and now has a target weighting of zero percent.\u00a0The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- MIT<\/strong>, Private Equity Fund II, III and IV<\/span>. These are a series of \u201cactive\u201d private equity funds and each has\u00a0reached maturity and is returning capital to the portfolio. These are funds of Massachusetts Institute\u00a0of Technology and deal in global venture and private capital projects. These funds now have a current\u00a0target weighting of zero percent (0.0%). The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Park Street Capital<\/strong>, Natural Resources Fund V<\/span>. An \u201cactive\u201d real assets fund of funds, the contracted\u00a0amount of $1.35M is about 1% of the portfolio, and it is almost fully funded. The benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Private Advisors<\/strong><\/span>, Small Company Buyout Fund<\/span>. An \u201cactive\u201d fund acquired in late 2009 as a secondary\u00a0acquisition, this fund has matured and is distributing capital. It is now targeted at zero percent (0.0%)\u00a0and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Property Investment Advisors<\/strong>, Property Holdings \u2013 Fund IV<\/span>. An \u201cactive\u201d real assets fund that has\u00a0matured and it is in the process of disbursing capital. The benchmark is the 91-day Treasury Bill plus\u00a05%.<\/li>\n
- RS Investments<\/strong>, Global Natural Resources Fund<\/span>. A \u201cpassive\u201d real assets fund added to the portfolio in\u00a0July 2013, the target weighting is 2.0% of the portfolio, the S&P North American Natural Resources\u00a0Sector Index is the benchmark.<\/li>\n
- The Investment Fund for Foundations (TIFF)<\/strong>\n
\n- Realty and Resources Fund II<\/span>. A \u201cpassive real assets fund, acquired in late 2014 as a secondary\u00a0acquisition, the fund has matured, is now targeted at zero percent (0.0%) and the benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n
- Secondary Partners II<\/span>. A \u201cpassive\u201d private equity fund acquired in late 2014 as a secondary acquisition,\u00a0this fund has matured and is well into distributing capital, is targeted at zero percent (0.0%) and the\u00a0benchmark is the 91-day Treasury Bill plus 5%.<\/li>\n<\/ul>\n<\/li>\n
- Vanguard<\/strong>, Inflation Protected Bond Fund<\/span>. A \u201cpassive\u201d \u201cTIPS\u201d fund , target investment is 2.0% of the\u00a0portfolio. The benchmark is the Barclay\u2019s US Inflation-Protected Index.<\/li>\n<\/ul>\n
Bonds<\/em><\/p>\n\n- Agincourt<\/strong>, An \u201cactive\u201d domestic bond manager, this manager has a current target weighing of 9.0% of\u00a0the portfolio. The benchmark for this active fund is the Barclay\u2019s US Aggregate index.<\/li>\n<\/ul>\n
\n- Colchester<\/strong>, Global Bond Fund. A \u201cpassive\u201d global bond fund, the target weighting is 4.0% of the\u00a0portfolio, the benchmark is the Citigroup World Government Bond Index.<\/li>\n<\/ul>\n
\n- Vanguard<\/strong>, Total Bond Market Index Fund. A \u201cpassive\u201d domestic bond fund to complement Agincourt,\u00a0target weighting is 7%, the benchmark is the Spliced Total Bond Market Index.<\/li>\n<\/ul>\n
Cash<\/em><\/p>\n\n\n- SunTrust Bank –\u00a0<\/strong>Our cash management account is used to provide the highest flexibility possible to our \u201cclient\u201d\u00a0churches and institutions. There is a zero percent allocation to cash, but in keeping approximately\u00a0$250,000 in this account, the investment managers are kept very close to 100% invested. These funds\u00a0are managed in a fee-free SunTrust cash management account to generate some income (a fixed\u00a0+0.15% on an annual basis) while providing instant liquidity. This account is benchmarked against the\u00a091-day Treasury bill.<\/li>\n<\/ul>\n<\/ul>\n
<\/p>\n
\n<\/a><\/p>\nPerformance<\/h2>\n
As of June 30, 2016, periodic returns were:<\/p>\n
June<\/strong>\u00a0 \u00a0 +0.1%<\/p>\nTrailing three-month \u00a0\u00a0<\/strong> +1.7%<\/p>\nYear to date<\/strong>\u00a0 \u00a0 +2.3%<\/p>\nOne year \u00a0\u00a0<\/strong> -2.2%<\/p>\nThree year \u00a0\u00a0<\/strong> +3.4%<\/p>\nFive year<\/strong>\u00a0 \u00a0 +4.2%<\/p>\n <\/p>\n
The total return at 12\/31\/xxxx, net of fees, for the core portfolio for prior years since 1995 was:<\/p>\n
1995 \u00a0\u00a0<\/strong> 20.3%<\/p>\n1996<\/strong>\u00a0 \u00a0 22.60%<\/p>\n1997 \u00a0\u00a0<\/strong> 26.09%<\/p>\n1998<\/strong>\u00a0 \u00a0 15.36%<\/p>\n1999 \u00a0\u00a0<\/strong> 10.38%<\/p>\n<\/div>2000<\/strong> \u00a0 \u00a01.42%<\/p>\n2001<\/strong> \u00a0 \u00a0-1.64%<\/p>\n2002<\/strong> \u00a0 \u00a0-5.02%<\/p>\n2003<\/strong> \u00a0 \u00a020.61%<\/p>\n2004<\/strong> \u00a0 \u00a011.89%<\/p>\n<\/div>2005<\/strong> \u00a0 \u00a07.97%<\/p>\n2006<\/strong> \u00a0 \u00a013.68%<\/p>\n2007<\/strong> \u00a0 \u00a010.76%<\/p>\n2008<\/strong> \u00a0 \u00a0-21.52%<\/p>\n2009<\/strong> \u00a0 \u00a017.09%<\/p>\n<\/div>2010<\/strong> \u00a0 \u00a010.50%<\/p>\n2011<\/strong> \u00a0 \u00a00.30%<\/p>\n2012<\/strong> \u00a0 \u00a010.9%<\/p>\n2013<\/strong> \u00a0 \u00a012.8%<\/p>\n2014<\/strong> \u00a0 \u00a01.3%<\/p>\n<\/div>
<\/p>\n
2015 had a return of -2.6%, just behind the global blend of -2.4%. The core portfolio, however,\u00a0does so at about 65% of the same risk as that global portfolio. Please keep in mind that the core\u00a0portfolio reports returns net of fees.<\/p>\n
Performance is reported on monthly by the TOTF office. If your church organization is not\u00a0receiving these reports on a monthly basis and would like to, please send the request form below.<\/p>\n
<\/p>\n
\n
Core 101<\/h2>\n
As those with oversight for the investment of Episcopal Church assets consider the options\u00a0available for assets under management, it is good to be clear on the many facets of asset\u00a0administration, and placing them in a prudent structure is a key role of governance. As options are\u00a0considered, including planned giving efforts, The Trustees of the Funds may be an excellent good\u00a0option, as it has proven to be for nearly 150 of the churches, conference centers, schools and\u00a0other organizations in Virginia.<\/p>\n
The core portfolio has roots to October 31, 1754, with the founding of the Widows and Orphans\u00a0Fund, which is still in existence today. This portfolio, like all services of TOTF, is available to any\u00a0Episcopal Church organization in the Commonwealth of Virginia.<\/p>\n
The portfolio is managed according to an Investment Policy Statement (IPS), which can be found here<\/a>. Within this IPS are the guidelines on types of assets and managers which can be\u00a0used. The expectations of the Trustees are outlined for investment managers, investment\u00a0consultant and institutional custodian.<\/p>\n Monthly reporting is sent electronically and is usually comprised of three parts: a summary report\u00a0on Trustee actions, a report on asset performance and a unitization report documenting month to\u00a0month changes for all participant funds. Monthly reporting is usually sent after the third week of\u00a0each successive month.<\/p>\n A summary of the managers currently utilized by the portfolio is included on a separate tab.\u00a0Understanding the type of investments being used is a key element of the role of the fiduciary.\u00a0TOTF does not generally have a great deal of investment manager turnover.<\/p>\n The core portfolio is managed as a unitized portfolio, meaning that all participating funds are\u00a0managed exactly the same way in terms of selected investments. The large pooled asset values\u00a0allow TOTF to obtain the services of very strong managers in a very cost effective manner. This\u00a0risk-monitored portfolio therefore is able to benefit all participants.<\/p>\n To create a new investment with the Trustees of the Funds, the vestry\/board needs to complete\u00a0the New Fund form located in the forms tab. If the vestry\/board has passed a resolution\u00a0authorizing the creation, it would be helpful to receive a copy of that document for corporate\u00a0memory. The New Fund form should be sent to the Trustees of the Funds\u2019 office, as well as a\u00a0check payable to \u201cThe Trustees of the Funds\u201d. We can also arrange for electronic ACH transfers\u00a0from bank to bank.<\/p>\n If there are any restrictions on the use of the fund, such as scholarships, those should be\u00a0enumerated. A classic, or true, endowment generates unrestricted income for the mission and\u00a0ministry of the underlying entity.<\/p>\n Please be sure to advise if the fund is to reinvest or to have a calculated disbursement issued (after\u00a0the third quarter). Most funds can usually change these instructions as often as the participating\u00a0institution requires.<\/p>\n An organizational chart is shown below so that you can see how TOTF functions, including the core\u00a0portfolio.<\/p>\n The core portfolio, like the other services offered, is overseen by the Trustees and staff. Key\u00a0external support organizations are:<\/p>\n The asset alignment of the core portfolio is an 80\/20 split between equities and fixed income\u00a0holdings. Cash is targeted at zero, although TOTF maintains approximately $250,000 in cash at\u00a0any given time for inflows\/outflows so that managers are kept as fully invested as possible.<\/p>\n Current managers and performance (historical and current) are found on separate tabs.<\/p>\n The core portfolio is managed as a perpetual endowment fund. As such, the Trustees establish a\u00a0standard spending policy for the funds under management. Participants can request alternate\u00a0schedules and they have (to date) always been accommodated. TOTF has a spending policy of a\u00a0distribution of 4.5% of average market value for the prior 20 quarters, ending on September 30 th of\u00a0any given year. In any given year, participants receive a letter from TOTF explaining the current\u00a0payout or reinvestment for each named fund. About half of the nearly 700 funds receive a payout\u00a0and about half reinvest until funds are needed. Participants can alter instructions at any point.<\/p>\n As an example of how a typical annual distribution goes, the trailing 20 quarters market value for\u00a0the entire core portfolio is averaged and that average is multiplied by the 4.5% payout formula.\u00a0This amount is then divided by the number of units outstanding as of 9\/30\/XXXX, and that gets us\u00a0to a \u201cper unit\u201d payout amount. Then, depending on the number of units in any given fund, a check\u00a0is issued to the Episcopal Church entity (fund units x per unit payout). These checks are typically\u00a0issued in October. Each fund is handled separately, so participants receive information on each\u00a0specific fund from TOTF.<\/p>\n Many churches and organizations have multiple funds placed with the Trustees of the Funds.\u00a0Many do this for ease of reporting funds that have traditionally been held separate by decision of\u00a0the vestry, board, investment committee or by direction of the donor.<\/p>\n To allow for different investment requirements of their funds, many churches or organizations use\u00a0the reinvestment option as opposed to the annual payout. This allows the church organization to\u00a0have an annual cash flow they can count on (payout) or long-term growth (reinvestment). Having\u00a0the multiple funds accounted for in a distinct manner facilitates record-keeping, audit work, etc.\u00a0While no investment that includes a level of risk can guarantee a specific return, the annual payout\u00a0method using the rolling average market value softens any severe volatility in a distribution model,\u00a0and this provides for manageable cash flow.<\/p>\n Additions<\/em><\/strong> to any fund should be sent to the TOTF office using the form found in the Forms tab,\u00a0and checks made payable to \u201cThe Trustees of the Funds.\u201d The form should state which fund should\u00a0receive what amount if you have more than one account. Additions to funds should arrive at TOTF\u00a0before the last Friday of the month to make sure SunTrust has sufficient time to appropriately\u00a0enter the additional amounts for that month\u2019s unitization report.<\/p>\n If an individual wishes to make a contribution directly, and that is certainly done very often, I hope\u00a0participant leadership will make that option known. TOTF can acknowledge contributions directly\u00a0for donor tax purposes.<\/p>\n If a participant needs to make a withdrawal<\/strong><\/em> of a fund (beyond any scheduled distribution), a\u00a0mailed or emailed copy of the standard form is requested. The form should be sent to TOTF, name\u00a0the fund and the amount needed, and to whom the check should be payable. Typically, the\u00a0church entity is the payee, but occasionally we are asked to pay a contractor or a university (such\u00a0as for a scholarship). TOTF can also send withdrawals electronically if that is desired for timing\u00a0purposes.<\/p>\n A long-standing policy of the Trustees is that for any account withdrawal request of 90% or more\u00a0of a fund\u2019s market value (such as a total liquidation) there will be a 10% hold-back to allow for the\u00a0subsequent month-end unitization. Once there has been a new unitization, any balance will be\u00a0released. While we do not have many such cases, with roughly 700 individual funds, it does\u00a0happen from time to time as a building project may be exactly what a fund was created to\u00a0support. This redemption\/holdback process is common practice in trust management.<\/p>\n In 2011, the Trustees approved a formal withdrawal policy for large scale withdrawals that may\u00a0adversely impact the ability of TOTF and the investment managers to make prudent investment\u00a0commitments in accordance with the investment policy. The Trustees have considered the proper\u00a0threshold on two separate occasions and the current policy for the core portfolio is under the\u00a0Forms tab.<\/p>\n TOTF is run at cost for the benefit of the Episcopal Church in Virginia. All reported returns for the\u00a0core portfolio are always shown as net of fees, so you do not see a dollar-based charge at any\u00a0time. This is common trust management practice. The actual expenses of the portfolio\u00a0(management fees, custodial fees, and administrative fees) are about 56 basis points in total\u00a0(0.56%). This is reflected in the annual audit of TOTF.<\/p>\n <\/p>\n <\/p>\n <\/a><\/p>\n Domestic Equities<\/em><\/p>\n <\/p>\n Global Equities<\/em><\/p>\n <\/p>\n International Equities<\/em><\/p>\n Equity Alternatives<\/em><\/p>\n Bonds<\/em><\/p>\n Cash<\/em><\/p>\n <\/p>\n <\/a><\/p>\n As of June 30, 2016, periodic returns were:<\/p>\n June<\/strong>\u00a0 \u00a0 +0.1%<\/p>\n Trailing three-month \u00a0\u00a0<\/strong> +1.7%<\/p>\n Year to date<\/strong>\u00a0 \u00a0 +2.3%<\/p>\n One year \u00a0\u00a0<\/strong> -2.2%<\/p>\n Three year \u00a0\u00a0<\/strong> +3.4%<\/p>\n Five year<\/strong>\u00a0 \u00a0 +4.2%<\/p>\n <\/p>\n The total return at 12\/31\/xxxx, net of fees, for the core portfolio for prior years since 1995 was:<\/p>\n 1995 \u00a0\u00a0<\/strong> 20.3%<\/p>\n 1996<\/strong>\u00a0 \u00a0 22.60%<\/p>\n 1997 \u00a0\u00a0<\/strong> 26.09%<\/p>\n 1998<\/strong>\u00a0 \u00a0 15.36%<\/p>\n 1999 \u00a0\u00a0<\/strong> 10.38%<\/p>\n<\/div> 2000<\/strong> \u00a0 \u00a01.42%<\/p>\n 2001<\/strong> \u00a0 \u00a0-1.64%<\/p>\n 2002<\/strong> \u00a0 \u00a0-5.02%<\/p>\n 2003<\/strong> \u00a0 \u00a020.61%<\/p>\n 2004<\/strong> \u00a0 \u00a011.89%<\/p>\n<\/div> 2005<\/strong> \u00a0 \u00a07.97%<\/p>\n 2006<\/strong> \u00a0 \u00a013.68%<\/p>\n 2007<\/strong> \u00a0 \u00a010.76%<\/p>\n 2008<\/strong> \u00a0 \u00a0-21.52%<\/p>\n 2009<\/strong> \u00a0 \u00a017.09%<\/p>\n<\/div> 2010<\/strong> \u00a0 \u00a010.50%<\/p>\n 2011<\/strong> \u00a0 \u00a00.30%<\/p>\n 2012<\/strong> \u00a0 \u00a010.9%<\/p>\n 2013<\/strong> \u00a0 \u00a012.8%<\/p>\n 2014<\/strong> \u00a0 \u00a01.3%<\/p>\n<\/div> <\/p>\n 2015 had a return of -2.6%, just behind the global blend of -2.4%. The core portfolio, however,\u00a0does so at about 65% of the same risk as that global portfolio. Please keep in mind that the core\u00a0portfolio reports returns net of fees.<\/p>\n Performance is reported on monthly by the TOTF office. If your church organization is not\u00a0receiving these reports on a monthly basis and would like to, please send the request form below.<\/p>\n <\/p>\nMechanics of Investing<\/h3>\n
Structure<\/h3>\n
<\/p>\n\n
Endowment Management<\/span><\/h3>\n
Additions and Withdrawals<\/span><\/h3>\n
Fees<\/span><\/h3>\n
\nManagers<\/h2>\n
<\/h3>\n
Equities<\/strong><\/h3>\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\nPerformance<\/h2>\n
\n
![](\"http:\/\/dev.trusteesofthefunds.org\/wp-content\/uploads\/2016\/07\/COREAppendix.png\")
<\/center>(1) Real Assets and TIPS Custom Benchmark will be a composite index comprised of a blend of\u00a0appropriate benchmarks that includes, but is not limited to, investments in private real estate, publicly-traded real estate, publicly-traded energy-related equities, commodities, and inflation-indexed bonds.<\/p>\n