Investment Policy Statement

As approved November 16, 2011.

PURPOSE

The purpose of this policy is to guide the Rockefeller Brothers Fund ("the Fund") Board of Trustees, Investment Committee, and Investment Office (Investure) in effectively and prudently managing, monitoring, and evaluating the Fund's investment portfolio. The investment portfolio consists of all funds managed by the Investment Committee.

DIVISION OF RESPONSIBILITIES

Board of Trustees

• The Board of Trustees is ultimately accountable for the portfolio, but has determined that the portfolio is more likely to achieve return objectives if oversight and management are delegated to the Investment Committee.  As a result, the Board of Trustees has delegated to the Investment Committee “full power and authority to make decisions related to investments of the Fund,” consistent with the investment policy and the statement of perpetuity approved and adopted by the Board.
• The Chair and the President of the Fund shall be ex officio members of the Committee.
• Members of the Committee shall be elected by the Board at the annual meeting each year and shall serve at the pleasure of the Board.
• Members of the Committee who are not trustees shall not be eligible for re-election after serving nine consecutive full one-year terms without an interruption of at least one year, except that any former trustee who was a committee chair at the conclusion of the former trustee’s term as a trustee shall be eligible for re-election to the committee for two additional one-year terms beyond this limit.
• The Chair of the Committee, who shall be a trustee, shall be elected by the Board.

Investment Committee

• The Investment Committee shall consist of not less than six or more than nine persons, at least two of whom shall be trustees.
• The Investment Committee is charged by the Board of Trustees of the RBF with the responsibility of formulating the overall investment policies of the RBF, subject to the approval by the Board; establishing investment guidelines in furtherance of those policies; overseeing the investment assets of the Fund; and monitoring the management of the Fund’s assets for compliance with the investment policies, and guidelines and for meeting performance objectives over time.
• The Committee will annually review the implementation of this Investment Policy and monitor the achievement of its objectives.
• The Committee is responsible for managing the relationship with the Investment Office, to whom it delegates investment and management authority, as may be defined in an investment management agreement between the Foundation and the Investment Office.
• The Committee will act in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances in selecting, continuing or terminating the Investment Office, establishing the scope and terms of the delegation, and monitoring the Investment Office’s performance and compliance with the scope and terms of the delegation.
• The Committee will provide relevant information to the Investment Office concerning the Foundation’s resources and any special considerations pertaining to any particular assets of the Foundation.
• Between meetings of the Committee, the Chair of the Committee and President, acting together, shall have the authority to exercise all such powers, subject to investment policies set by the Board and investment guidelines established by the Committee.
• The Committee shall meet at least three times a year with the Investment Office.
• A majority of the Committee shall constitute a quorum for the transaction of business, and the act of a majority of the members of the Committee present at any meeting at which a quorum is present shall be the act of the Committee.

Investment Office

• The Investment Office assists in the attainment of the investment objectives set forth in this Investment Policy while complying with all Investment Policy guidelines and standards.
• The Investment Office will serve as the primary contact for all money managers and the custodian.
• The Investment Office is responsible for:
  • Determining and reporting on asset allocation for the investment portfolio. 
  • Performing due diligence in the selection of managers and monitoring each manager in accordance with this Investment Policy and his or her or its stated investment strategy.
  • Providing necessary information and cooperating with the Fund’s accounting staff and external auditors in preparing reports and audits as and when required to do so.
  • As soon as it becomes aware, reporting to the Fund in writing any violations of this Investment Policy, any lawsuits, and any findings against any manager or its principals, either by a court, the SEC or any other regulatory authority.

STANDARD OF CARE

• In exercising its responsibilities, the Committee and Investment Office will act in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
• A person with special skills or expertise, or selected in reliance upon his or her representation that he or she has special skills or expertise, will use those skills or that expertise in managing and investing institutional funds.

STANDARDS FOR PRUDENT INVESTING

• In investing and managing the portfolio, the Committee will consider both the purposes of the Fund and the purpose of any specific institutional fund.
• Management and investment decisions about an individual asset will be made not in isolation but rather in the context of the portfolio as a whole and as part of an overall investment strategy having risk and return objectives reasonably suited to the Fund.
• In managing the portfolio, the Committee will incur only those costs that are appropriate and reasonable in relation to the portfolio or any specific institutional fund, the purposes of the Fund, and the skills available to the Fund and use reasonable efforts to verify facts relevant to the management and investment of the portfolio or any specific institutional fund.
• Except as a donor’s gift instrument otherwise requires, the following factors must be considered by the Investment Office, if relevant, in managing and investing the investment portfolio, including any specific institutional funds:

i. general economic conditions;
ii. the possible effect of inflation or deflation;
iii. the expected tax consequences, if any, of investment decisions or strategies;
iv. the role that each investment or course of action plays within the Fund’s overall investment portfolio;
v. the expected total return from income and the appreciation of investments;
vi. other resources of the Fund’s;
vii. the needs of the Fund’s and a given institutional fund to make distributions and to preserve capital; and
viii. an asset’s special relationship or special value, if any, to the purpose of the Fund.

RETURN OBJECTIVE

• The investment portfolio will be managed to maximize annualized returns net of all costs over rolling 10 year periods while adhering to the Fund’s stated risk parameters.
• On an annual basis, portfolio returns will be compared with three benchmarks: spending plus inflation, a composite benchmark, and a peer group mean.

RISK CONSIDERATIONS

• The portfolio will be deployed in a manner that seeks to avoid 25% or greater peak-to-trough declines in inflation adjusted unit value.
• The portfolio will be structured to avoid annualized shortfalls exceeding 3%, relative to the mean return of large endowments (top 50 in assets) reporting to NACUBO, over rolling 10-year periods.

LIQUIDITY

• Under normal circumstances, at least 30% of the investment portfolio’s net assets will be held in vehicles utilizing lockups of 12 months or shorter. As a general rule, at least 60% of the investment portfolio’s net assets will be held in vehicles utilizing lockups of 60 months or shorter, recognizing that private partnership cash flows are unpredictable. Lockup is defined as an expected period until all or substantially all of the value from an investment vehicle can be received in cash in the portfolio.
• Under normal circumstances, private partnership NAV plus private partnership unfunded capital commitments will not exceed 65%.

STRATEGIES

• The long-term horizon of the investment portfolio allows for a large allocation to equity-oriented strategies where the potential for long-term capital appreciation exists. Other assets, including but not limited to hedging, derivative, or diversification strategies, will also be used to reduce risk and overall portfolio volatility.
• The investment portfolio will be diversified across asset classes and managers including, but not limited to, domestic equity, international equity, emerging markets, alternative equity, private equity, and fixed income.

REPORTING

• In order to ensure that the Board of Trustees and the Committee are able to fulfill their duties with respect to prudent management of the portfolio, the Investment Office will provide detailed reports at least monthly to the Committee.  Such reports shall include, though not be limited to, performance of the Fund’s investment portfolio, actions taken with respect to the investment portfolio, and expected changes in investments.
• The Chair of the Committee will report on the status of the investment portfolio and any actions taken to the Board of Trustees at each Board meeting.

APPENDIX A – OTHER POLICIES

Spending Policy

The Fund sets its annual spending policy giving attention to (1) articulating the Fund’s long-term financial objectives; (2) determining a rate of annual spending that would align with those long-term objectives; and (3) choosing a formula that could be used consistently over a period of years to set the annual spending amount.

Each year the Board of Trustees establishes the annual budget considering the following factors:

• A spending model, derived from a three-year average market value base.  This three-year average market base is calculated by looking back over a five-year period, calculating the average market value for each of the twelve month segments in the five-year period, eliminating the highest and lowest twelve month averages, and then averaging the remaining thirty-six months.  This methodology was adopted in an effort to smooth out volatility in the markets as well as in the level of annual spending and,
• Recognizing that the use of historical market values to project a future year’s federally imposed spending requirement is potentially misleading in rising or declining markets, the Board also considers the expected annual payout requirements as mandated by federal regulations, the impact of actual market trends during the year, the need to make adjustments to budget spending as necessary, as well as other relevant considerations.

Use of Derivatives

The Investment Committee authorizes the use of any type of derivative instruments, including, without limitation, over-the-counter and exchange-traded derivative instruments that may exist on the date hereof or that may be created in the future. Such instruments may be employed (i) for hedging purposes, (ii) as an alternative to the underlying direct investments where such derivative instruments offer (A) advantages with respect to timing, flexibility, lower execution costs or improved control or (B) other benefits, or (iii) in any other circumstance in which the Investment Committee believes that the use of such instruments is in the best interest of the Fund.