The Endowment is intended to provide a reliable and steadily growing revenue stream to support the mission of KSU into perpetuity. As a result, the Endowment has a long-term orientation. In addition, the withdrawal rate from an Endowment fund is well defined, predictable, and of modest size relative to the total assets. The administration is responsible for managing the liquidity of the portfolio to fund spending distributions and capital calls, while maintaining the appropriate market exposure.
Certain appropriate investment options, particularly in alternative asset classes, involve fund structures with liquidity constraints that align with less liquid portfolio holdings. The tradeoff between return opportunities and liquidity will be considered throughout the portfolio construction process. Sufficient liquidity shall be maintained to fulfill the spending distributions and operating objectives of the Pool.
Portfolio liquidity will be monitored using a three-tier system.
Liquid: available within 90 days
Semi-liquid: available in 90 days or more, but less than 2 years
Illiquid: available only in 2 years or more
| Classification of Asset | Guideline |
|---|
| Liquid | no less than 35% |
|---|
| Combined: | Semi-liquid & Illiquid – no more than 65% |
|---|
| Illiquid | no more than 40% |
|---|
New commitments will be made to illiquid/private capital investments with the intent to keep current market value of liquid holdings above 35% of the total fund. Illiquid percentages will be calculated based on current market value. The administration, assisted by the Investment Management Firm, will complete annual forecasting and make appropriate commitments to reach and maintain the approved policy allocation and liquidity while ensuring diversification across vintage year, strategy, geography, etc.
It is recognized that significant changes in investment market values could cause the portfolio to be positioned outside of these guidelines. If this occurs, staff will communicate this to the Board or its designated Committee and develop a plan to reposition the portfolio consistent with these guidelines over a reasonable time frame.
The Board delegates full authority for proxy voting to the Consultant and investment manager(s) for the securities under their discretionary authority and requires the Consultant and investment managers to vote all proxies in the best interests of the Endowment with input from the administration. In addition, when requested, the Consultant and investment manager(s) will report to the Board regarding their proxy-voting policies and activities behalf of the Endowment.
The Board requires the Consultant and Investment Management firm(s), in their capacity as fiduciaries, to manage the transactions costs they incur on the Endowment's behalf in the best interest of KSU. When