NCAA QUASI-ENDOWMENT POLICY
Adopted
August ____, 2004
I. Background
and Purpose.
As part of its strategic planning initiative, the
Executive Committee has established a long-term goal of building a
quasi-endowment for the future funding of the national office and
student-athlete programming. With the
concentration of its revenue from a primary source, the Executive Committee
will build the quasi-endowment to ensure that the current infrastructure,
membership programming and or student programming can be supported
indefinitely. An initial long term goal
of $500,000,000 will be established for the quasi-endowment.
II. Funding.
The quasi-endowment will be initially funded from the
assets of the former NCAA Foundation and the working capital reserve. Annual
contributions will be from unbudgeted revenues and expenditure savings, in
addition to an amount equal to 10% of the total operating budget, in accordance
with the current practice for the working capital reserve. In addition, the
Executive Committee shall annually allocate fifty percent of unplanned revenues
and expenditure savings to the quasi-endowment, unless it takes specific action
to modify the allocation. The remaining
fifty percent shall be available for other allocations, including Division I
supplemental distributions. Fifty
percent of revenues and expenditure savings amounts will be deposited in the
quasi-endowment with the remaining fifty percent available for other
allocations, including Division I supplemental distributions. Distributions from the endowment fund shall
be limited, except for extraordinary instances, until the initial goal is
reached.
III. Endowment
Objectives.
The objective of
the quasi-endowment is to generate an annual total rate of return for the fund
sufficient to produce the following results:
1. Finance
distributions (and cover related operational expenses of the quasi-endowment)
will be limited to $1,000,000, except for extraordinary instances, until the
endowment fund goal is reached, thereafter 4.5%
of the average market value of the quasi-endowment?s 12-quarter moving
average market value will be distributed;
2. Inclusive of the
above, grow the value of the corpus by at least the annual rate of inflation
(CPI) for that year; and
3. Inclusive of 1 and
2, cause the real value of the quasi-endowment to increase.
The above financial results should be sought without
incurring a level of rate-of-return volatility materially greater than that
generally associated with the investment programs of endowed entities. These results if not attainable in any given
year, should be achieved
on average over long periods of time to the extent
allowed by returns in the broad markets.
IV. Distinction
of Responsibilities.
The Executive Committee Investment Subcommittee shall
assume the responsibility for establishing the investment policy that is to
guide the investment of quasi-endowment assets.
The investment policy describes the degree of investment risk that the
subcommittee deems appropriate.
The Executive Committee Finance Committee will monitor
the quasi-endowment including the growth of the fund and the distributions from
the fund in accordance with the policy.
It shall also recommend to the Executive Committee the annual distributions
through the biennial budget process.
The investment managers appointed to execute the
policy will invest the quasi-endowment assets in accordance with the policy and
their judgments concerning relative investment values. In particular, the investment managers are
accorded full discretion, within policy limits, to (1) select individual
securities, (2) adjust the maturity mix, where applicable, and (3) diversify
their portfolios.
The Executive Committee Investment Subcommittee has
the responsibility to monitor the investment managers on an ongoing basis and
to add, replace or eliminate managers when it is deemed appropriate to do
so. The Executive Committee delegates
the day-to-day implementation activities to the NCAA staff.
V. Allocation
of Assets.
It is
the policy of the Executive Committee Investment Subcommittee to invest the
quasi-endowment as follows:
|
Asset
Class |
Target
Allocation |
Allowable
Range |
|
U.S.
Stocks |
48% |
45% - 51% |
|
Non-U.S.
Stocks |
12% |
9% - 15% |
|
Total
Stocks |
60% |
55% - 65% |
|
Fixed
Income |
40% |
35% - 45% |
|
Total
Fund |
100% |
|
Normal cash flows will be used to maintain the
allocation as close as practical to the target allocations. If normal cash flows are insufficient to maintain
the allocation within the permissible ranges as of any calendar quarter-end,
balances should be transferred as necessary between the asset types to bring
the allocation back within the permissible ranges.
VI. Diversification.
The quasi-endowment is to be broadly diversified so as
to limit the impact of large losses in individual investments on the total
portfolio.
VII. Liquidity Needs.
Cash withdrawals should be arranged to meet the fund?s
distribution needs. The source of moneys
for these withdrawals will be based on rebalancing and cost
considerations. Distributions from the
endowment fund shall be limited to the distribution policies, except for
extraordinary instances, until the initial goal is reached.
VIII. Proxy Voting.
The Executive Committee delegates the responsibility
for voting proxies to the individual investment managers. The Executive Committee expects proxies to be
voted vigorously, in the best interests of the quasi-endowment and in
accordance with the investment restrictions described above.
IX. Performance
Evaluation.
Over reasonable measurement periods and net of
investment management fees, the rate of return earned by the quasi-endowment is
to match or exceed:
1. The rate of return of a benchmark comprised of the
Wilshire 5000 Stock Index (48%), the Morgan Stanley Capital International
(MSCI) Europe, Australasia and Far East (EAFE) Index (12%) and the Lehman
Brothers Aggregate Bond Index (40%).
2. The median return of a universe of comparable endowed
funds.
The individual investment managers' rates of return will be
compared with the returns of an appropriate market index.
Each investment manager employed to execute the policy is
expected to maintain an organization of satisfactory nature with regard to
personnel, philosophy, character and responsibility.
XI. Dissolution.
If for any reason the
NCAA ceased to exist, the remaining assets of the quasi-endowment shall be
distributed to the Division I member institutions, that are members at the time
of the dissolution, based on its
respective share of contributions to the endowment.