University of Florida Investment Policy

1. Purpose, Scope and Definitions

Purpose

The purpose of the UF Investment Policy (“Policy”) is to govern the investment of certain operating funds in accordance with sections 1011.42(5) and 218.415, Florida Statutes. This Policy addresses these requirements in the order as laid out in the Statutes.

Scope

This Policy applies to investable operating funds held for the benefit of the University of Florida (“University”). For the purposes of this Policy, these funds will be designated University Operating Funds (“UOF”). (The Policy shall not apply to funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds.) 

Definitions

UOF – University Operating Funds held for the benefit of the University, which are further designated as either Working Capital, Excess Capital or Reserves.

Working Capital – the portion of UOF required to meet current expenses (in accordance with statute, cash needs and anticipated cash-flow requirements for 6 months) as determined by the CFO.

Reserves – the portion of UOF determined to be long-term operating funds suitable for investment as established by the CFO and UFICO.

Excess Capital – UOF not designated Working Capital or Reserves.

Central Bank – the term used to describe the University’s program for the aggregation, administration and accounting of all University cash.

Central Bank Loan Program – an internal program designed to make short-term (5 to 10 years) loans to departments/units within UF from the Central Bank cash.

UF Strategic Fund – the investment income from the UOF investments which is used for strategic purposes as determined by the UF President, Provost and Vice President for Research.

UFICO Statement of Investment Policy – the Statement of Investment Policy approved by the UFICO Board of Directors as amended from time to time and which serves as an operating document to guide the investment activities of UFICO. 

2. Investment Objectives

1. The primary objective is to place the highest priority on the safety of UOF principal and liquidity. The optimization of investment income shall be secondary to the requirements for safety and liquidity.
2. A secondary objective is to generate an investment return that meets annual strategic initiatives by assuming an appropriate amount of risk while ensuring adequate liquidity to meet cash flow needs.
3. A tertiary objective is to outperform the investment’s pre-specified benchmarks.

3. Roles and Responsibilities

Board of Trustees – Finance, Strategic Planning & Performance Metrics Committee

The Finance, Strategic Planning & Performance Metrics Committee of the UF Board of Trustees will approve the Policy, as well as any future changes. 

University of Florida Investment Corporation (“UFICO”)

UFICO is a Direct Support Organization that oversees the investments of the University and its affiliates. UFICO is governed by a Board of Directors, with appropriate oversight and control by the University Board of Trustees. UFICO’s bylaws require its Board of Directors to include a member of the Board of Trustees, the University Vice President and Chief Financial Officer, and other University representatives. UFICO’s bylaws also require the organization to comply with the University’s Governance Standards, as implemented by the Board of Trustees in December 2018, and as amended thereafter.

UFICO is responsible for implementing the UOF asset allocation as set forth in the Policy as well as recommending to the Board of Trustees changes in the Policy. UFICO typically does not invest in direct securities, but rather pools assets with similar objectives and seeks to partner with specialized third-party investment managers and/or passive investment strategies to implement the UOF asset allocation. UFICO is responsible for manager due diligence and manager selection.

Office of the Vice President and Chief Financial Officer (“CFO”)

The CFO oversees the Central Bank. As part of this oversight, the CFO ensures proper accounting and reporting of investments and maintains accurate records based on information provided by UFICO to monitor compliance with applicable Florida Statutes.

The CFO is responsible for monitoring University cash flow needs and determining the amount of UOF designated as Working Capital. The CFO maintains open communication with UFICO to provide timely information related to the University’s short-term and long-term cash needs.

4. Performance Measurement

• The total portfolio will be evaluated relative to meeting the primary investment objective (safety and liquidity) as well as the secondary investment objective (target funding for strategic initiatives). Additionally, the total portfolio will be benchmarked relative to a policy portfolio constructed using the target allocations and respective allocation benchmarks, as appropriate.
• The Liquidity Allocation (as further outlined below) and Growth Allocation (as further outlined below) will be benchmarked to a pre-specified benchmark as approved by the UFICO Board of Directors.

5. Prudence and Ethical Standards

• Investments shall be made in accordance with the “Prudent Person” rule which states the following: Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived from the investment.
• University employees involved in the investment process shall comply with the University’s financial conflicts of interest policy and refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.
• UFICO shall maintain a compliance and conflict of interest policy covering its employees and board of directors which includes the disclosure of any activity that could conflict with the proper execution of the investment program or which could impair their ability to make impartial investment decisions.

6. UOF Portfolio Authorized Investments

As outlined in 218.415 F.S. authorized investments shall include the following:

• The Local Government Surplus Funds Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act of 1969, as provided in s. 163.01.
• Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency.
• Accounts as outlined in 1011.42, F.S, including interest-bearing time deposits or savings accounts, in qualified public depositories as defined in s. 280.02, F.S. These accounts will be selected through competitive solicitation.
• Direct obligations of the United States Treasury.
• Federal agencies and instrumentalities.
• Rated or unrated bonds, notes, or instruments backed by the full faith and credit of the government of Israel.
• Securities of, or other interests in, any open-end or closed-end management-type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. ss. 80a-1 et seq., as amended from time to time, provided that the portfolio of such investment company or investment trust is limited to obligations of the United States Government or any agency or instrumentality thereof and to repurchase agreements fully collateralized by such United States Government obligations, and provided that such investment company or investment trust takes delivery of such collateral either directly or through an authorized custodian. Other investments authorized by the Board of Trustees shall include the following:

• State Treasury Investment Pool (“SPIA”)
• Such investments authorized by this section include the pooled investment portfolios managed by UFICO and governed by the UFICO Statement of Investment Policy.
• Investments as otherwise authorized by the Board of Trustees.
• University Central Bank Loans: Excess funds may be invested in the operations of university departments, auxiliaries and centers through the University’s Central Bank Loan Program.

7. Maturity and Liquidity Requirements

• The UOF investment portfolio shall be constructed in such manner as to provide sufficient liquidity to pay obligations as they come due. To the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash-flow requirements.
• The Liquidity Allocation, as outlined below, will generally invest in assets that can be readily liquidated to meet University needs. It is expected that this allocation comprises the vast majority of UOF assets.
• The Growth Allocation, as outlined below, will generally invest in return generating strategies that are generally less liquid in nature or require a longer investment horizon. It is expected that this allocation will be limited in size.
• The Central Bank Loans and other direct investments will generally invest in other assets that are less liquid in nature or require a longer investment horizon. It is expected that this allocation will be limited in size.

8. Portfolio Composition

For the purposes of establishing the Portfolio Composition, the CFO will first determine the Working Capital, which currently totals $200 million. At least annually the CFO will review Working Capital needs. UFICO and the CFO will then determine the Reserves, which currently totals $1.5 billion. Annually, UFICO and the CFO will review the size of Reserves. The balance of UOF not determined to be Working Capital or Reserves is designated Excess Capital.

Pursuant to this Policy, funds will be invested according to the following approved ranges,  

1. The Reserve target allocation is as follows:
   

   Allocation	Range of Portfolio Assets	Target Percent of Portfolio Assets
   Liquidity Allocation	65%-100%	70%
   Growth Allocation	0%-35%	25%
   Central Bank Loans & other direct investments	0%-10%	5%

2. The Working Capital & Excess Capital allocation is as follows:
   

   Allocation	Range of Portfolio Assets	Target Percent of Portfolio Assets
   Liquidity Allocation	100%	100%

The Liquidity Allocation will generally be comprised of cash, U.S. Treasuries, the State Treasury Investment Pool, money market instruments and those investments deemed by UFICO to meet the primary safety requirements of UOF principal and liquidity.

The Growth Allocation will generally be comprised of strategies specified in the UFICO Statement of Investment Policy as approved by the UFICO Board of Directors such as the long-term “endowment” pool and any of its sub-portfolios, including public equity, hedged strategies, or private investments as well as other appropriate return generating investments as overseen by UFICO.

The Central Bank Loans and other direct investments include those loans approved as part of the University’s Central Bank Loan Program as well as investments directly made by the University as authorized by the Board of Trustees.

The UFICO Statement of Investment Policy, which is approved by the UFICO Board of Directors, establishes detailed guidelines for investments and limits for UFICO’s underlying investments. 

9. Risk and Diversification

Investments held shall be diversified, in accordance with the guidelines set above, to the extent practicable to control the risk of loss resulting from overconcentration of assets in a specific maturity, issuer, instrument, dealer or bank through which financial instruments are bought and sold. Diversification strategies within these guidelines shall be reviewed and revised periodically, as deemed necessary by UFICO.

The UFICO Statement of Investment Policy, which is approved by the UFICO Board of Directors, establishes detailed risk and diversification guidelines. 

10. Authorized Investment Institutions and Dealers

As stated above, UFICO typically does not invest in direct securities. As part of UFICO’s due diligence process, a review of the execution of underlying managers that directly purchase securities is undertaken to ensure best execution, where applicable. Should UFICO consider the purchase of direct securities, a review will be conducted on the securities dealer, issuer and/or bank to ensure best execution.

11. Third-Party Custodial Agreements

All securities purchased directly by the University shall be properly designated as an asset of the University, and, where applicable, held in safe keeping by a third party custodial bank or other third party custodial institution. Investments managed by UFICO shall be held in safe keeping in accordance with the UFICO Statement of Investment Policy.

No withdrawal of securities, in whole or in part, shall be made from safekeeping except by those designated within the Investment Management and Custodial Agreement, or other applicable document, between the Custodian and the University. 

12. Master Repurchase Agreement

The University will establish and maintain a master repurchase agreement prior to transacting any repurchase agreements and will require all approved institutions and dealers transacting repurchase agreements to adhere to the requirements of the master repurchase agreement. 

13. Bid Requirement

Direct securities purchased on behalf of the University shall require, where feasible and appropriate, purchases and sales to be executed in a competitive bid environment wherein at least three (3) offers or bids are obtained for each security. Exceptions to this approach may be made when (1) prices for purchases/sales are compared to systems providing current market prices and deemed reasonable, (2) when the security to be purchased is unique to one institution or (3) the security has recently been issued and is trading at the same price by all financial institutions.

This requirement does not apply to investments that are managed by UFICO. 

14. Internal Controls

The CFO will establish a system of written internal controls and operational procedures. The controls will be designed to prevent losses of public funds arising from fraud, employee error, and misrepresentation by third parties, or imprudent actions by employees and officers of the University.

UFICO shall maintain internal controls, including written due diligence procedures for the engaging and monitoring of investment managers, designed to prevent losses of funds which might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees.

15. Continuing Education

University staff involved with investments must annually complete eight (8) hours of continuing education in subjects or courses related to investment practices and products.

16. Reporting

Unless otherwise indicated, the following are the responsibilities expected of the University:

1. Monthly reporting of holdings and transactions occurring in the portfolio – This report is to include at least (1) all assets held by the University by class/type, book value, approximate market value, income earned, accrued income and (2) all transactions occurring in the portfolio during the month.
2. Quarterly reporting of the portfolio’s performance – The University will report the portfolio’s total rate of return, which reflects the true earnings of the portfolio and incorporates cash flows, changes in market value and income earned.
3. UFICO will report typically quarterly, and at least annually, to the Board of Trustees on the investment performance.

17. Evaluation and Compliance

This policy shall be reviewed by UFICO and the CFO on an annual basis. Any changes to the policy must be approved by the UF Board of Trustees.

Investments currently held that do not meet the guidelines of this policy shall be exempted from the requirements of the policy until maturity or liquidation. Such monies shall be reinvested only as provided by this policy.