7.13 Board of Regents' Retiree Health Benefit Fund Investment Policy
The Board of Regents’ Retiree Health Benefit Fund (“the Benefit Fund”) is established by Georgia state law to provide a steady stream of support for the mission of the Benefit Fund. As such, its assets are to be invested in a prudent manner that seeks to ensure the Benefit Fund assets grow to support the spending requirements of the Benefit Fund.
The minimum funding requirements of O.C.G.A. 47- 20-10 shall not apply to prefunding, in whole or in part, of anticipated future costs of providing other post-employment benefits as defined by Governmental Accounting Standards Board Statements Number 43 and Number 45 for retired employees of a political subdivision, including those presently retired and those anticipated to retire in the future, as provided in O.C.G.A. 47-20-10.1.
This investment policy provides a set of guidelines that govern the investment of these assets. The guidelines include asset allocation, allowable investments, quarterly standards, and performance standards overall and by specific category.
7.13.2 General Objectives
Investments will be made for the sole benefit of the Board of Regents Retiree Health Insurance Benefit Fund. Specifically, the portfolio should be guided by the following objectives:
- The assets must be invested with the skill, care and diligence that a prudent investor would use in a similar capacity.
- The Benefit Fund should seek to earn the projected spending rate plus inflation over a full market cycle, generally forty-eight (48) to sixty (60) months.
- The Benefit Fund should seek to outperform relevant market indices over a full market cycle.
The Board of Regents has oversight regarding all trust fund decisions. The Board has delegated the oversight role to the Finance and Business Operations Committee, which has the responsibility to ensure that the Benefit Fund assets are managed:
- For the exclusive benefit of the Retiree Health Insurance Benefit Fund;
- Prudently and in compliance with applicable laws and regulation; and,
- Effectively so that the assets will increase over time, on an inflation adopted basis.
- Developing investment goals, objectives and performance measurement standards that are consistent with the needs of the Benefit Fund;
- Determining how the Benefit Fund assets should be allocated among asset classes; and,
- Communicating the investment goals, objectives, and standards to the professional money manager(s), as noted below, including any material changes that may subsequently occur.
The Committee, with the consent of the Board, has the power to appoint professional money manager(s) to execute the Benefit Fund’s investment strategy. The Committee will also review and evaluate the results of the professional money manager(s) in the context of mutually accepted standards of performance.
7.13.4 Monitoring of Objectives
The Retiree Benefit Fund will be monitored for adherence to investment philosophy, returns relative to objectives, and investment risk as measured by asset concentration, exposure to extreme economic conditions, and volatility. The Committee will conduct periodic reviews of the professional money manager in order to confirm that the factors underlying the performance expectations remain in place. The Committee shall meet with the professional money manager(s) at least semi-annually.
7.13.5 Short-term Investment Portfolio
The Benefit Fund’s short-term portfolio should seek to provide preservation and enhancement of capital. The Fund will need liquidity and income annually and therefore will only accept minimal short-term volatility in those assets providing income. However, a portion of short-term assets may be invested for the longer term, and volatility in these asset categories is to be expected and managed.
The short-term investment objective is to consistently outperform selected weighted market indices, and is expected to rank at or above the median when compared to a universe of its peers managing similar portfolios and following a similar investment style such as the Georgia One fund, or the Georgia Extended Asset Pool.
The long-term investment objective for the Fund’s short-term portfolio is to achieve an average annual total rate of return in excess of the inflation rate (as measured by the Consumer Price Index) plus one percent (1%) for the aggregate investments under this investment policy evaluated over rolling three (3) to five (5) year periods, net of investment management and advisory fees. This is based on targeting allocations in fixed income assets and cash equivalents to meet the current period plan obligations, as outlined in the investment statement. A secondary objective to be considered is diversification and risk management. A third objective is to invest principally in liquid and marketable instruments consistent with anticipated cash requirements.
7.13.6 Long-term Investment Portfolio
The Fund’s long-term investment portfolio should seek to provide annual income growing in line with inflation, with the secondary investment objective to seek growth of principal over time. The Fund will need liquidity and income annually and therefore will only accept minimal short-term volatility in those assets providing income. However, the majority of assets are to be invested for the long-term, and some volatility in these asset categories is to be expected and managed.
The long-term investment objective for the Trust’s long-term portfolio is to achieve an average annual total rate of return in excess of the inflation rate (as measured by the Consumer Price Index) plus five percent (5%) for the aggregate investments under this Investment Policy Statement evaluated over rolling three (3) to five (5) year periods. This return, which is to be net of investment management and advisory fees, is based on targeting allocations in equities, fixed income, and other assets and cash equivalents, as outlined in the investment statement.
The short-term investment objective is to consistently outperform selected weighted market indices. The overall short-term objective is the preservation and enhancement of capital. A secondary objective to be considered is diversification and risk management. A third objective is to invest principally in liquid and marketable instruments.
(BoR Minutes, January, 2008).
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