Non-Endowment Funds Investment

I. Purpose

This Investment Policy Statement (“IPS”) is intended to serve as a governing framework for the management of the Non-Endowment assets of Miami University. All University funds derived from the sources enumerated in Ohio Revised Code 3345.05 (A) (hereafter referred to as the “Non-Endowment”), shall for investment purposes be designated into one of three pools:

  1. The University’s Operating Cash (Tier 1)
  2. The University’s Core Cash Sub-Account (Tier 2)
  3. The University’s Long-Term Capital Sub-Account (Tier 3).

In addition, the Board of Trustees of Miami University (the “Board”) may designate some of these funds as quasi-endowments, which for investment purposes shall be invested with the University’s endowment pool according to the Pooled Investment Agreement between the University and the Miami University Foundation and the endowment investment policy (Appendix A).

The investment of the Non-Endowment is subject to and shall be made in accordance with ORC 3345.05 (C) (1), with at least twenty-five percent of the average amount of the investment portfolio over the course of the previous fiscal year invested in securities of the United States government or of its agencies or instrumentalities, the treasurer of state's pooled investment program, obligations of Ohio or any political subdivision of Ohio, certificates of deposit of any national bank located in Ohio, written repurchase agreements with any eligible Ohio financial institution that is a member of the federal reserve system or federal home loan bank, money market funds, or bankers acceptances maturing in two hundred seventy days or less which are eligible for purchase by the federal reserve system, as a reserve. The Non-Endowment assets in excess of the twenty-five percent may be pooled with other University funds and invested in accordance with Ohio Revised Code Section 1715.52 (UPMIFA).

II. Roles and Responsibilities

Board of Trustees

The IPS has been adopted by the Board upon the recommendation of the Board’s Finance and Audit Committee (“Finance & Audit”) which serves as the Investment Committee required by Ohio Revised Code 3345.05.

The Board has delegated implementation of this policy to an investment subcommittee comprised of Board members (the “Committee”). To assist with the investment program the Committee has retained the services of an outsourced Chief Investment Officer (the “OCIO”) which satisfies the requirements of Ohio Revised Code Section 3345.05 (D) (1).

The IPS will guide the activities and decisions of the Board, as well as, the Committee, the staff of Miami University (the “Staff”), and the OCIO in managing the assets of the Non-Endowment.


The Committee shall oversee the investment and administration of the Non-Endowment. The Committee, in conjunction with the OCIO, establishes policies and guidelines consistent with this IPS designed to position the Non-Endowment to achieve its objectives with a prudent level of risk. The Committee delegates its authority to make investment decisions to the OCIO in accordance with the Investment Management Agreement dated May 16, 2018, which is incorporated herein by reference. The Committee shall report at least semi-annually to the Board. Revisions to the IPS may be recommended by the Committee and approved by the Board as necessary. Specific responsibilities of the Committee include:

  • Submitting for Board approval an IPS, setting forth, among other things, the roles and responsibilities of the Board, the Committee, the Staff, the OCIO, and any other advisors or service providers as deemed appropriate by the Committee.
  • Submitting for Board approval, following consultation with the OCIO, investment guidelines and objectives for the investment of the assets, including asset allocation target exposures, permissible ranges (i.e., minimum and maximum allocations to each asset class), and the benchmarks against which the performance of each asset class, and the portfolio as a whole, will be evaluated.
  • Delegating specific administrative and operational responsibilities relating to the investment and reinvestment of the Non-Endowment assets.
  • Monitoring compliance with the IPS.
  • Reviewing periodically the following:
    • Investment performance, including comparisons to objectives and benchmarks.
    • Asset allocation for the Non-Endowment.
    • Fees paid in support of the management of the Non-Endowment.
  • Overseeing the OCIO or other advisor(s) who shall have the responsibility, and may have discretion, for implementing investment strategies in accordance with the guidelines set forth in the IPS.
  • Communicating with the OCIO and any other advisor(s) any changes in the risk profile and characteristics of Miami University that may impact the investment objectives and guidelines of the Non-Endowment.
  • Overseeing other service providers to the Non-Endowment, including the custodian of Non-Endowment assets.
  • Proposing to the Board such amendments to the IPS as it, in consultation with the OCIO and any other advisor, deems appropriate.


The Staff is responsible for overseeing the operations of the Non-Endowment investment program. Specific responsibilities of the Staff include:

  • Directing oversight of the budgeting, investing, forecasting, and monitoring associated with the Tier 1 Operating Cash portfolio.
  • Serving as the day-to-day contact with the OCIO including communicating planned contributions and withdrawals, transfers of funds, and liquidity needs.
  • Specifying the appropriate strategy for the transfer of funds among the Non-Endowment investment tiers.
  • Identifying division carry forward balances, donor gifts, and other unrestricted funds that can be quasi-endowed.
  • Managing constituent relationships.
  • Monitoring third party service providers (e.g., auditors, custodian, consultants).
  • Providing administration, reporting, accounting, audit and tax support for the Non-Endowment operations.
  • Providing support to the Committee.
  • Ensuring compliance with Ohio Revised Code Section 3345.05 (C)(1).
  • Maintaining the official minutes and records of the Committee.

Outsourced Chief Investment Officer

The OCIO will have day-to-day responsibility and discretion for investing a designated portion of the Non-Endowment assets (specifically Tiers 2 and 3). The OCIO will report to the Committee on a regular basis in accordance with the investment management agreement (“Investment Management Agreement”) that governs the relationship. Specific responsibilities include:

  • Advising the Committee on the adoption of, and any amendments to, the IPS.
  • Overseeing the implementation of the investment program on a discretionary basis, including the selection and monitoring of commingled investment vehicles, the appointment of sub-advisers, and the direct management of assets not allocated to investment vehicles or sub-advisers, in accordance with the guidelines and asset allocation ranges as set forth in the Investment Management Agreement.
  • Periodically reviewing and recommending to the Committee any changes or modifications of the IPS, including the investment guidelines and objectives, to the Committee.
  • Taking all necessary actions with respect to the hiring and termination of sub-advisers, and the subscription to and withdrawal from, commingled investment vehicles, including reviewing and executing investment management agreements and subscription documents
  • Setting investment guidelines for sub-advisers and monitoring their compliance therewith.
  • Meeting with sub-advisers and evaluating their investment performance.
  • Meeting with the Committee at least quarterly or at other intervals as reasonably agreed with the Committee.
  • Interacting with the custodian and other relevant service providers to the Non-Endowment, as necessary to perform its investment management services.
  • Assisting the Staff in meeting its reporting and administrative requirements.
  • Providing reporting and performance monitoring as necessary for the Committee to perform its oversight responsibilities.

III. Fiduciary Duties

In fulfilling its responsibilities described herein, each of the Board, the Committee and the OCIO is a fiduciary to the Non-Endowment and shall act in accordance with UPMIFA. Among other things, UPMIFA requires each person managing an institutional portfolio to do so in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.

IV. Objectives: Non-Endowment Investment Program

The primary objective of the Non-Endowment investment program is to ensure adequate operating liquidity for the University. Liquidity needs are actively managed in a three-pool structure that allows for differentiation among investment risks and returns.

For investment strategy purposes, the University’s Non-Endowment and Foundation Endowment portfolios should be considered together. The liquidity, risk, and return characteristics of the combined pools provide the opportunity to more effectively deploy capital and improve the overall risk-adjusted returns of both investment programs.

The investment of Non-Endowment assets will be guided by the objective of earning market rates of return while accepting a low level of market risk. The portfolio's asset allocation will be statistically modeled using historical and projected risk and return characteristics of the portfolio's asset classes. The Tiers are constructed to adequately meet the University’s projected budgetary needs and Ohio Revised Code requirements with low risk and liquid investments in Tier 1, with progressively higher expected returns at higher risk profiles in Tiers 2 and 3.

The Committee has adopted asset allocation targets and permissible ranges, set forth in Exhibit 1, that are designed to meet this objective provided that markets deliver equilibrium returns consistent with normal market conditions. A benchmark index has been assigned to each asset class, as set forth in Exhibit 1. The combination of the benchmark index assigned to each asset class, weighted in accordance with the target allocation to that asset class, forms the “Policy Benchmark” against which the portfolio’s overall performance will be measured. Each Tier seeks to achieve performance (net of management fees) that exceeds the performance of the applicable Policy Benchmark (net of assumed passive management fees and rebalancing costs) over rolling five- and ten-year periods.

V. Investment Objectives: Non-Endowment Tiers

TIER 1 - University Operating Cash


To meet the day-to-day cash obligations of the University, provide a liquid and low investment risk source of funds when needed, and meet Ohio Revised Code requirements for public funds.


Includes bank deposits, other cash vehicles, and eligible investments under ORC 3345.05 (C) (1).

Tier Size

The targeted minimum cash balance held in Tier 1 is budgeted each fiscal year by the University staff and is confirmed every six months. The minimum balance will be two times the average monthly negative cash balance of the preceding fiscal year. 

TIER 2 - University Core Cash Sub-Account


To provide a liquid source of funds in the event the Tier 1 pool is insufficient to meet the University’s operating cash needs, while providing an opportunity for incremental returns with modest volatility. This Sub-Account also houses funds earmarked for specific future disposition by the University that are likely to require target date maturity matching.


Include U.S. Treasury and government agency securities generally with an average weighted maturity of between zero and two years for the baseline allocation. May include eligible investments under ORC 3345.05(C)(1).

Tier Size

The targeted balance within this Sub-Account is confirmed during each fiscal year budgeting cycle and verified every six months. The balance generally should not fall below two times the average monthly negative cash balance of the preceding fiscal year.

TIER 3 - University Long-Term Capital Sub-Account


To provide “endowment-like” long-term risk-adjusted returns on assets that would be expended by the University only in the unlikely event of severe financial exigency.


Include public equity, absolute return and hedged strategies, open-ended real estate funds, futures-based commodity strategies, and diversified global fixed income securities. May include eligible investments under ORC 3345.05(C)(1). While these funds are expected to have less liquid fund structures, private capital investments will be excluded from consideration unless approved by the Committee.

Tier Size

This Sub-Account has no size restrictions and generally receives deposits of residual operating cash not deployed in Tiers 1 and 2.

VI. Asset Allocation

To achieve the investment objectives of this IPS, an asset allocation study was conducted and shared with the Committee. It was used to establish percentage targets and ranges for each asset class eligible for investments within Tiers 2 and 3. The asset allocation study analyzed the expected return, risk, and correlation of several asset classes as well as, the expected return and risk of various hypothetical portfolios comprising these asset classes. The expected return and risk characteristics of various portfolios were evaluated in terms of the future expected efficiency of achieving the investment objectives of the Non-Endowment.

Based upon this analysis, asset allocation policies, including ranges for each asset class, were defined. The asset allocation policies are contained in the investment guidelines set forth in Exhibits 1 and 2.

VII. Risk Management

The Tier 2 Sub-Account will emphasize liquidity and low volatility in keeping with the portfolio’s objective of serving as a cash buffer for the University’s short-term operating cash needs. The appropriate duration target and range will be agreed to by the Committee and OCIO and specified in Exhibit 1.

Investments in the Tier 3 Sub-Account will be broadly diversified across and within asset classes in order to seek to minimize the impact of adverse asset class and security-specific shocks, and to avoid excessive portfolio volatility. An appropriate target range for the annual standard deviation of the Tier 3 policy portfolio will be agreed on by the Committee and OCIO as specified in Exhibit 2. Meeting the “endowment-like” long-term return objectives of the Non-Endowment program requires the OCIO to regularly monitor and manage market risks associated with the overall portfolio as well as individual asset classes. Specific investments will also be reviewed and aggregated, as available from each manager, on a regular basis to ensure that the portfolio does not maintain unwarranted concentration risks with respect to any single factor or security at the manager level, asset class level and portfolio level.

Leverage is also monitored to ensure that the intended exposure is in line with parameters determined by the OCIO to be appropriate for a specific strategy and/or asset class. In addition, the portfolio will seek to maintain sufficient liquidity, at all times, to meet the ongoing distribution needs of the Non-Endowment, to rebalance the portfolio, and to capture tactical opportunities. The source of monies for such liquidity needs will be based on rebalancing and cost considerations.

VIII. Performance Monitoring and Evaluation

The performance of the Non-Endowment, component asset classes, Sub-Advisers and investment vehicles will be monitored by the OCIO on an ongoing basis and reviewed by the Committee at least quarterly. Investment returns are to be measured net of all fees, including investment manager and the OCIO fee. The OCIO will provide a summary of returns versus stated benchmarks for short-term and long-term periods. The OCIO will meet with the Committee regularly to provide a review of performance and risk, a discussion of market conditions and a summary of the current positioning of the portfolio.

IX. Annual Expenditure Policy

A reserve for investment fluctuations will be maintained in order to buffer the portfolio from short-term capital market fluctuations. The target balance of the reserve for future investment fluctuations is determined using the statistical drawdown of the previous fiscal year-end Non-Endowment pool, plus one year of budgeted Non-Endowment investment earnings.

Each year, the University budget office shall budget investment earnings based on a reasonable assessment of the interest rate and capital markets environment and any funding to be added to the reserve for investment fluctuations.

Any earnings in excess of this budgeted level shall be allocated 100% to the reserve for investment fluctuations, unless otherwise determined by the Board of Trustees. In the event the earnings are short of the budgeted amount, the difference shall be drawn from the reserve for investment fluctuations.

The target amount of the reserve for investment fluctuations shall be reviewed at least annually to determine its sufficiency and to establish a future target. The review should include estimated losses modelled at one, two, and three standard deviations of the combined allocations to Tiers 1 and 2.

X. Conflicts of Interest

The Committee shall take reasonable measures to assess the independence of the OCIO, and any other service providers to the Non-Endowment. Any actual or potential conflicts of interest relating to any of the foregoing, or to any member of the Board or Committee, shall be disclosed and addressed in accordance with UPMIFA, Ohio’s Ethics laws as applicable, and any conflict of interest policy adopted by Miami University.

XI. Investment Guidelines

Sub-advisers who are appointed to manage accounts for the Non-Endowment will be provided investment guidelines as determined by the OCIO. In general, the guidelines will stipulate the types of securities in which the account may invest, general characteristics for the portfolio and/or the performance benchmark and objectives. The specific guidelines may vary depending upon the asset class or sub-asset class. Commingled investment vehicles will be governed by their offering memorandum and other constituent documents.