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1. Independent Members

This policy sets out the principles of SGUL’s asset investment practices. It ensures compliance with the Trustee Act 2000 and satisfies the guidance laid out by the Charities Commission (CC14). 

In line with SGUL’s Financial Regulations, the overall investment strategy is set by Finance Committee and reviewed annually. This review will be based on the short to medium outlook, recognising that a proportion of the investment portfolio will effectively be treated as an endowment and invested to support SGUL’s long term ambitions.

2. Risk attitude

 SGUL’s attitude to risk is that it should be minimised wherever possible. It would like to maintain its capital investment whilst providing income to sustain the value of the investment. It recognises, however, that there is an element of risk inherent in any investment, and more so where a return can be achieved in excess of that available from bank deposits. SGUL also recognises that it is possible to minimise the risk in these areas by diversifying the type of asset class in which the investment is made. 

3. Basis of investment

Under the terms of this policy, investment funds will be held under the management of external fund managers, as SGUL recognises that it does not have the in-house expertise or capacity to enable it to effectively manage these funds.

Under the terms of any agreement with SGUL, the fund managers will take appropriate actions to ensure that all investments comply with the rules regarding Qualifying Investments in respect of charity investments.

4. Socially Responsible Investment

The basic premise of any asset investment is that the returns on the investment provide sustainability to the asset class. The aim must be to provide as high a return as possible, in any given market conditions, whilst having due regard to the risk attitude, social, environmental and governance considerations.

Whilst the investments will be managed by external independent fund manager(s), SGUL will ensure that the appointed manager(s) encourage good behaviour or discourage poor behaviour through their own investment screening processes. These processes should take into account SGUL’s own investment preferences in respect of social, environmental and governance issues, as well as considering good practice. We would expect the investment managers to support the Paris Agreement on Climate Change by reducing total portfolio carbon emissions and funding carbon offsets.

SGUL considers that the appointed manager(s) should consider the following criteria when assessing the appropriateness of any investments they undertake on behalf of SGUL:

• SGUL would expect its investment portfolio to seek to minimise or ideally eliminate investment in any company/fund where income is derived from any of the following activities:
  • Gambling
  • tobacco
  • pornography/sex industry
  • child labour
  • forced labour
  • the manufacture of weapons
  • the extraction of thermal coal or oil/gas from tar sands
  • fossil fuels. 

Or where corporate behaviours lead to:

• • human rights violations (as defined by the United nations)
• SGUL – through the Director of Finance - will also consider expressions of concern, where it is indicated that an investment is wholly contrary to SGUL’s objects. To be properly considered, the complaint has to be received from a representative body – e.g. trade union, student union – with clear evidence as to why it is being brought to the attention of the Director of Finance. All amendments to the prohibited investments noted above will be notified to the fund managers in writing.

5. Taxation

When considering the appropriateness of any investment and measuring the returns thereon, the fund manager(s) should take into account the fact that SGUL is exempt from Corporation Tax for Qualifying Investments, under the definition of the Income and Corporation Taxes Act 1988. This means that the tax deducted from dividends is not recoverable, whereas interest and gains can be received on a gross basis. Additionally, SGUL will not be able to recover VAT on any taxable charges made by the fund manager(s).

6. Funds Liquidity

Any funds must be held in a form which enables liquidity and settlement of the investment within a minimum of 4 weeks, unless otherwise indicated to the fund manager(s) in writing.

7. Performance target

SGUL benchmark for its investment assets will be determined by the asset allocation strategy (see Appendix 1). This will be reviewed and approved by the Finance Committee as part of the periodic reporting process (but at least annually).

8. Selection of fund manager(s)

The performance of the fund manager(s) will be independently reviewed by the Finance Committee at least every five years following their appointment to determine whether the role should be re-tendered, or more frequently should Finance Committee decide that the current fund manager(s) are underperforming.

Fund manager(s) will be selected by Finance Committee. The number of fund managers used is at the discretion of the Director of Finance, and is dependent upon the value of the fund at the time of the review.

The fund manager(s) selection process is provided in detail in appendix 2.

9. External reporting

Fund manager(s) will be expected to report quarterly to SGUL as follows:

• Investment returns – a summary of the performance against agreed benchmarking for the quarter, the previous 12 months and the previous 5 years or since appointment (as appropriate).
• Investment criteria – an outline of the selection decisions in relation to the investment criteria agreed with them on appointment and as summarised in this policy.
• Transaction reporting – a schedule detailing purchases, sales, rights issues, non-market transactions, capitalisations or any other transactions. This should include details of all cash transactions.

An annual report should be provided, co-terminus with the SGUL year end of 31 July, which provides details of the investment asset valuation, annual returns and a review of the performance by the fund manager(s). Any negative variance of more than 25% from the agreed benchmark must be fully discussed. 

In all cases, these reports should be available within 14 days of the quarter or year-end date.

SGUL will expect to review the fund managers’ performance in a meeting at the minimum on an annual basis. This review will be undertaken by Finance Committee.

10. Internal reporting

The Director of Finance shall report on the performance of the portfolio to Council on an annual basis.

Where there are significant issues during the year, this will be reported to the Director of Finance, who will consider presentation to Finance Committee.

11. Remuneration

The basis of the fund manager’s remuneration will be that detailed at the time of the appointment. One month notice should be provided to SGUL in the event of any changes to the fee and commission regime of the fund manager.

12. Discretionary Powers of Director of Finance

If, at any time, the investments are found to be in breach of SGUL policy, the Director of Finance, upon being made aware of the breach, can either request rectification or, if immediate rectification will cause financial loss, temporarily allow the breach by identifying this acceptance in writing. 

Asset Allocation

A benchmark asset allocation is set by Finance Committee and reviewed annually. The current benchmark allocation is:

On selection of the fund manager(s), SGUL will discuss the options available in respect of risk diversification. The purpose of this attitude to risk is to enable the fund manager(s) and SGUL to manage its investment assets in such a manner which allows flexibility to react to changes in the market conditions from time to time.

Any change in asset class diversification in excess of that noted above must be authorised by the Director of Finance, or, in the event of their unavailability, and where it is considered appropriate, the Deputy Director of Finance.

Fund Manager Selection

Where it is deemed appropriate to either replace an existing fund manager or increase the number of fund managers used, the following selection process will be adhered to.

1. Public procurement tendering procedures will be followed if advised by the Head of Procurement as appropriate.
2. If Public procurement tendering is not appropriate, the Director of Finance will, along with the Head of Procurement, conduct a formal tender process and produce a shortlist of providers to take forward to Finance Committee.
3. Finance Committee and the Director of Finance will, with independent advisors if necessary, undertake interviews with shortlisted fund managers.
4. Finance Committee and the Director of Finance will be responsible for the selection of the provider.