Investment Policy Statement

Background

This Investment Policy Statement (or “IPS”) has been adopted by the Investment Committee of the Fair Harvard Fund (the “Fund”).  The IPS summarizes an investment philosophy and approach thought best to meet the Fund’s long-term return goals and investment principles at an appropriate level of risk.  It is designed to provide a framework to help guide the Committee, investment managers and other parties involved in advising the portfolio, in setting objectives, selecting and monitoring portfolio investments, diversifying assets and evaluating performance.

Investment Beliefs Statement:  The management of the Fund, including all investment decisions, will be consistent with the attached Statement of Investment Beliefs to the extent possible, while maintaining adequate diversification and liquidity as described below.

Liquidity:  Assets should be invested in the securities of publically-owned companies through the use of separately managed accounts, mutual funds and/or other U.S.-domiciled commingled vehicles.  In each case, assets must be accessible in 90 days or less.

Return Objective:  The long term return objective for the Fund is growth after taking into account the effects of inflation, expenses, and distributions.

Risk Tolerance:  Consistent with a long-term growth objective, portfolio level risk is targeted, on average, to fall at or below the volatility and draw-down characteristics associated with an all-equity portfolio as measured specifically by the MSCI World Index. Portfolio risk can be managed through asset diversification including the use of fixed income securities.

Diversification and Asset Allocation:  The fund should be diversified as liquidity and cost constraints allow.  In order to help in managing portfolio-level risk and enable investment opportunity for the portfolio, investments should be diversified, to the extent feasible and appropriate, by asset class, geographic scope, investment style, and maturity (for fixed income).

Transparency:  For separately managed accounts, holdings should be disclosed to the Committee every financial quarter and more frequently upon request.  For mutual funds, holdings should be disclosed publically as outlined in each respective mutual fund’s holdings disclosure policy.

Investment Advisor:  The Investment Committee may delegate an Investment Advisor to manage the Fund in accordance with the Investment Policy Statement, including such duties as selection of investment managers and selection of asset allocation.

Investment Committee:  The Investment Committee maintains ultimate authority for the selection of the Investment Advisor and the development of the Investment Policy Statement.

Investment Manager(s):  The assets in the Fund will be managed by external investment management firms, which, as mentioned, shall be approved by the Investment Advisor.  Each investment manager shall have discretion to manage the assets in its portfolio within the established guidelines in order to achieve the stated investment objectives.  Transactions by investment managers should be made on the basis of best execution.

Fund managers must have a demonstrated commitment to socially responsible investing. Each manager should communicate openly about implementation of environmental, social and governance criteria.  A quarterly line of communication should be maintained with the potential for increased communication should more frequent contact become necessary.

Negative Screens:  Investment managers must avoid investment in companies significantly involved in the production or sale of fossil fuels and tobacco.  To the extent possible while maintaining adequate diversification, investments in companies involved in the production and distribution of the following should also be avoided:

  • Oil, gas, and other fossil fuel sources
  • Nuclear power
  • Pornography
  • Gambling
  • Weapons and/or firearms
  • Genetically modified organisms in agriculture
  • Factory farming of meat or fish

Further, investment managers should seek to exclude investment in companies with a demonstrated record of the following:

  • poor practices with respect to environmental regulation, greenhouse gas emissions, toxins, hazardous waste or environment justice
  • human rights abuse, violations of international law, and/or materially or otherwise supporting repressive regimes
  • endangering rural people’s access to the land, water and other resources on which their livelihoods depend
  • violating labor laws, abusing or otherwise mistreating workers and/or preventing or impeding unionization
  • discrimination based on sexual orientation, gender, race, ethnicity, age or disability
  • practices which have significant negative effects on affected communities, particularly those with minority or low-income residents
  • restriction of access to affordable medicine in the developing world

Positive Screens:  Consistent with a need for adequate liquidity, diversification and investment minimums seek out companies involved in the production of renewable energy and organic food, local food and sustainable agriculture and generally, invest in companies and investments that demonstrate commitment to:

  • environmental sustainability, including reducing greenhouse gas emissions and sustainable forestry
  • community development and/or investment, particularly in communities with minority or low-income residents
  • diversity in hiring, executives and boards with respect to sexual orientation, gender, race, ethnicity
  • living wages for all employees and collective bargaining
  • transparency and accountability in corporate governance

Performance measurement and manager review criteria:  The investment committee, with reports and narrative provided by the Investment Advisor, should review performance results of the Fund portfolio at least quarterly and the individual investment managers at least annually.  Performance of a manager that does not meet expectations over multiple measurement periods shall result in a formal review of that manager’s portfolio and investment approach, which could result in recommendation for manager termination.

Performance will be reviewed along two dimensions:  1) the performance of the aggregate portfolio relative to relevant portfolio benchmarks; and, 2) performance of individual managers relative to appropriate and relevant style-specific indices and universes and the targets of the Fund as they are determined.  Comparisons should be on an after-fee basis whenever possible.

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