International Equity – The allocation may consist of International Equity endowments from time to time. This asset category represents global companies outside of the domestic large, mid- and small-capitalization equity allocation asset categories. International indexed funds are preferred.

*Any international index fund with fees no greater than 25 basis point may be accepted unless otherwise approved annually by the Board of Regents.

Fixed Income – The allocation will consist exclusively of US Treasury and Agency Bonds and bills, including US Treasury Inflation Protected Securities (TIPS) (when their returns are attractive, relative to other US Treasury securities.) The primary role of this US Government-issued fixed income portfolio is to provide a partial hedge in the event of an economic contraction, deflation, and/or a severe flight to safety/quality. It is expected that this portion of the portfolio would serve as one of the primary sources of spending during such periods, when the prices of other assets in the portfolio may decline. These bonds should be held in a 10-year laddered structure of individual bonds to assure that there will be a regular and predictable source of cash to meet unexpected needs. This asset class should not include any bond ETFs or bond mutual funds, because of the lack of control over when bond purchases and sales are made within the fund and when cash comes available to the fund holder.

Real Assets – Strategic Real Estate Assets located near the current and projected campuses. No other real estate investments will be permitted (without explicit case-by-case approval by the Board) due to volatility, default, and liquidity risk.

Cash – The cash allocation will be used to provide liquidity for spending distributions and management fees. The cash allocation should never exceed 2.0%, and should be held in a flexible interest-bearing account such as a Money Market Fund.

Monitoring and Reporting

The investment manager will have full discretion to make all investment decisions for the assets placed under its management within the bounds of the above-stated Investment Policy, including the asset allocations and restrictions approved by Kentucky State University. Institutional pooled funds, such as mutual funds and exchange traded funds, and alternative investment managers will be governed by their prospectus and offering memorandums.

Specific responsibilities of the investment manager(s) include the following:

• Discretionary investment management, including decisions to buy, sell, or hold individual securities in line with the investment guidelines enumerated above.
• Reporting, on a timely basis, quarterly investment performance results, including standard measures of risk and volatility, such as beta, Jensen's alpha, and the Sharpe ratio, for 1, 3 and 5 year periods, in addition to specific portfolio attributes as requested by Kentucky State University;
• Communicating any expected major changes in the economic outlook, the specific investment strategy (within the bounds of the guidelines enumerated above, or any other factors that affect implementation of investment process, or the investment objective progress of the fund's investment management;
• Informing Kentucky State University regarding any qualitative change to the investment management organization. Examples include changes in portfolio management personnel, ownership structure, investment philosophy, etc.;
• Voting proxies on behalf of the fund in line with the investment philosophy, management of the portfolio;