Investment Policy

G8.04 Investment Policy

Authority

Missouri law authorizes Missouri State University (MSU) to invest monies not needed for the daily operation of the University.  See Mo. Rev. Stat. § 174.457.  The MSU Board of Governors sets policy regarding the investment of University funds. Responsibility for the day-to-day administration of this policy has been assigned by the MSU Board of Governors to the Chief Financial Officer and those persons he/she shall designate to have the authority for investing MSU’s funds.

Prudence

All participants in the investment process shall act responsibly as custodians of the public trust.  The standard of prudence to be applied by the Chief Financial Officer and his/her staff shall be the “prudent investor” rule, which states:  “Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.” 

Ethics and Conflicts of Interest

Personnel involved in the investment process shall refrain from personal business activity that could create an appearance of impropriety or could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.  Employees and investment officials shall disclose to the Board of Governors any material financial interest in financial institutions that conduct business within Missouri, and they shall further disclose any large personal/investment positions that could be related to the performance of the MSU portfolio. 

Objectives

MSU’s primary objectives for managing its investment portfolios are legality, safety, liquidity, appropriateness and yield.  The maturities will be structured to meet the needs of the various fund groups. 

MSU may seek to enhance total portfolio return by means of active portfolio management.  The prohibition of speculative investments precludes pursuit of gain or profit through unusual risk.  However, investment trading in response to changes in market value or market direction is warranted under active portfolio management.

Performance

The portfolio should produce, over a period of time, book yields in excess of a low risk passive benchmark.  For management purposes the total rate of return will be calculated for the portfolio and compared to appropriate security market indexes on an annual basis.

Broker/Dealer Requirements

Investments will be made through banks or securities dealers which have been approved by the Chief Financial Officer.  All purchases and sales will be through a competitive bid process.  Such securities dealers and banks shall have been subjected to an appropriate investigation by the staff of the Chief Financial Officer's office, which shall include, among other things, a written review of the firm’s financial statements and the background of the sales representative.  All approved dealers must be fully licensed and registered FINRA Broker/Dealers or exempt banks.  Criteria used to select securities dealers will include:

• Financial strength and capital adequacy of firm
• Services provided by firm
• Research services available
• Resume, reputation and qualifications of sales representative
• Due diligence and firm references
• State government expertise 

Permissible Investments and Guidelines

1. Only legal investments will be purchased for the investment portfolio. These include:
   Certificates of Deposit
   1. Certificates of deposit shall be collateralized in accordance with Missouri statutes.  All depositories must have a signed depository agreement with MSU.
   2. A financial institution will be eligible to receive total deposits in an amount not to exceed their equity capital.
2. U.S. Treasury and Federal Agency Securities
   1. This includes U.S. Government securities, U.S. Government Agency securities and U.S. Government guaranteed securities, including but not limited to:  all direct obligations of the U.S. Government, Federal Farm Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Resolution Funding Corporation, and Student Loan Marketing Association.
3. Repurchase Agreements.
   1. Repurchase agreements may be entered into for periods of 90 days or less.
   2. Repurchase agreements must be purchased through approved broker/dealers.  All approved broker/dealers must have a signed Public Securities Association Master Repurchase Agreement on file with the Office of the Chief Financial Officer.
   3. All collateral will be delivered to an approved third-party custodian.
   4. Repurchase agreements must be collateralized 101% with approved securities.  The market value of the collateral will be computed and reviewed at least weekly by the staff of the Chief Financial Officer to determine collateral adequacy.
4. Commercial Paper
   1. Commercial paper with credit ratings of A1 and P1 received from Standard & Poor’s Ratings Group and Moody’s Investors Services.
5. Money Market Funds
   1. Money market funds which are SEC 2a-7 compliant and have received the highest possible rating by at least two Nationally Recognized Statistical Ratings Organizations.

Prohibited Investments

The following are not permitted for investments:

• Any investment not explicitly authorized by Missouri law. See Mo. Rev. Stat. § 30.950.4.
• Insured money market accounts, as per State Treasurer’s office.
• Mutual funds, as per State Treasurer’s office. See also Missouri Attorney General Opinion No. 65.95.
• See Mo. Rev. Stat. § 30.950.2(2).

The maximum percentage of the total investment funds held in each instrument listed above shall be:

1. No more than 15% of the total portfolio will be held in any one bank, unless a safekeeping/custody agreement is in place per the provisions below.
2. No restriction on direct obligations of the U. S. Government, U.S. Government Agency issues or U.S. Government guaranteed securities.
3. No restriction for repurchase agreements which are fully collateralized by U.S. Government securities.
4. No more than 30% of the portfolio to be held in commercial paper, with no more than 5% of the portfolio to be held with any one issuer.=
5. Consistent with the State of Missouri Investment Policy for Public Funds, no maturity may be longer than 5 years from the date of purchase.

Safekeeping and Custody

All securities will be held by a third-party providing safekeeping or custodian services in a fiduciary capacity in the name of Missouri State University designated by the Chief Financial Officer and evidenced by appropriate CUSIP documentation. 

Management Investment Services

A qualified professional is responsible for the investment of funds in excess of depository services in accordance with the organization’s policy.  Duties include executing security purchases and sales, providing monthly and quarterly reports, reviewing investment strategies and reviewing the investment policy. The investment managers are expected to pursue their own investment strategies within the general guidelines stated with this policy.

Internal Controls Summary

The Chief Financial Officer has established a framework of internal controls to ensure the secure, compliant, and efficient management of investment activities. It is designed to safeguard assets, promote transparency, and support the organization's financial objectives.  Controls deemed most important include:  separation of duties; custodial safekeeping; clear delegation of authority; minimizing the number of authorized investment officials; documentation of transaction strategies; and code of ethics.  The office of the Chief Financial Officer is responsible for maintaining records, reconciling accounts, and monitoring performance.