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Policies and Procedures

Policy 404 – Intermediate Investment Pool

Effective
October 1, 2007
Last Updated
January 26, 2010
Responsible University Officer
University Controller
Responsible Unit
Accounting Services

Policy Statement

The Intermediate Investment Pool is open to all participants that are eligible for the UNC- Chapel Hill Temporary Investment Pool.

Investment Terms

  • Minimum Investment: $10 million
  • Minimum subsequent investment/redemption: $1 million (except in the case of full liquidation if an account value is less than $1 million)
  • A unitized accounting and total return approach will be employed in accounting for investment participation in the Intermediate Pool Investment returns and Pool unit values will be computed monthly.
  • Funds can be added or withdrawn at the beginning of each month with ten (10) business days written notice to Accounting Services.
  • Net returns after management fees and expenses and other costs properly allocated to the Intermediate Pool (custody, legal, etc.) will be allocated 85 percent to Intermediate Fund participants and 15 percent to UNC-Chapel Hill. UNC-Chapel Hill’s 15 percent allocation will be computed and paid annually at the end of the fiscal year. The 15% allocation to UNC-Chapel Hill will be adjusted for monthly contributions and withdrawals that occur during the course of the fiscal year.
  • Withdrawal requests made at least ten (10) business days prior to the end of a given month will be paid to the Pool participants no later than the fifth business day of that month with the following exceptions:
      • If collective withdrawal requests by all Pool participants for a given month exceed 20 percent of the total market value of the Intermediate Pool as of the end of the prior month, then the Investment Manager (UNC Management Company) can, at its discretion, pro rate these withdrawal requests, with 50 percent of each withdrawal request paid in the current month and the remaining 50 percent of each request paid in the following month.
      • Up to 10 percent of redemptions to be paid to Intermediate Pool participants during a given month can be delayed, at the Investment Manager’s discretion, until a final monthly Net Asset Value (NAV) is computed for that month, which will occur no more than 20 business days after the beginning of the applicable month.

Investment Guidelines

  • Generally, a minimum of 45 percent and a maximum of 65 percent of the market value of the Intermediate Pool will be invested in The University of North Carolina at Chapel Hill Foundation Investment Fund, Inc., (Investment Fund).
  • The remaining assets of the Intermediate Pool (the “Fixed Income Segment”) will be invested primarily (at least 80 percent) in cash, money market instruments and high quality bonds and other high quality fixed income instruments in accordance with Permitted Investments detailed below. Such investments may be held in a separately managed investment account managed by UNC Management Company, or in one or more separately managed investment accounts managed (an) investment management firm(s) selected by UNC Management Company as long as at least 80 percent of the mutual fund’s holdings are invested in Permitted Investments.
  • Permitted Investments for the Fixed Income Segment of the Intermediate Investment Pool:
      • Money Market instruments, notes, bonds and other securities issued by U.S. Treasury and U.S. governmental agencies
      • Money Market securities issued by banks, corporations or other issuers with an average maturity of one year or less that are rated A2/P2 or higher by Moody’s Investor Service or by Standard & Poor’s Corporation.
      • Investments in high quality, short-and intermediate-term bonds and other fixed income securities with an average maturity of less than 10 years, and with ratings of Baa or Higher by Moody’s Investor Service, or BBB or higher by Standard & Poor’s Corporation.
  • Investment Restrictions for the Fixed Income Segment of the Intermediate Investment Pool:
      • The Fixed Income Segment of the Intermediate Investment Pool will not invest in or hold derivatives including futures contracts, options, swaps or other such instruments in a separately managed account.
  • UNC Management Company will review the Intermediate Pool asset allocation monthly, and will make necessary rebalancing adjustments to ensure that the Pool complies with Paragraph A above. If rebalancing adjustments are needed to bring the Intermediate Pool back into the target allocation range described in Paragraph A above, and recognizing the time lags involved in transferring funds into or out of Investment Fund, such rebalancing adjustments will be completed within a three-month period after the month in which the Pool was determined not to be within the target allocation range. Funds transmitted to Investment Fund are invested effective the first day of the month based on the prior month-end Investment Fund share value. All funds invested in Investment Fund are unitized according to Investment Fund’s policies and procedures.

Reason for Policy

To generate a total investment return that is higher than can be earned on short-term, money market based investments such as T-Bills over one- to three-year time horizons; to provide for the reasonable programmatic liquidity needs of the Pool’s participants on a monthly basis; to earn a rate of return that, over time, at least equals that realized from the investment of State Funds generally (NCGS 116-36. 1 (h)); to provide better downside risk protection and higher relative returns than the UNC Investment Fund during periods of negative equity market returns; to generate few, if any, rolling 12 month periods of negative returns; to provide a long-term expected return, net to investors in the Fund, of between 6 percent and 9 percent based on the blended expected returns of the underlying investments as follows:

  • 3 percent to 5 percent expected return on the fixed income portion of the portfolio and
  • 9 percent to 12 percent expected long-term return on the Investment Fund

Exclusions

None

Special Situations

None

Procedures

  • 404.1 - Intermediate Pool Admittance and Withdrawal

Additional Information

Frequently Asked Questions

None

Related Data

Moody’s Investor Service

Standard and Poor’s Corporation

Contacts

SUBJECT CONTACT TELEPHONE FAX E-MAIL
Investment Accounting (Acct. Serv.) Investment Accountant 919-843-4476 919-962-3306 Investments@unc.edu

History

Revised:
January 26, 2010