Difference between revisions of "Investment Fund"
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One of the funds maintained on the books of The Augustan Society, Inc., is the '''Investment Fund'''. This fund is restricted by tradition, and may be restricted by the terms of an original grant. The grant not yet having been found in the files, that point is at present indeterminate. | One of the funds maintained on the books of The Augustan Society, Inc., is the '''Investment Fund'''. This fund is restricted by tradition, and may be restricted by the terms of an original grant. The grant not yet having been found in the files, that point is at present indeterminate. | ||
| − | The Investment Fund monies came | + | The original Investment Fund monies came from the sale of the [[Villa Augusti]] in 2007. The funds to purchase that property came from a grant from the late Cdr. George Balling, OAE, who gave the Society $300,000 with the restriction that it be used for capital purchases only. (The preceding restriction is from living memories, the text of the grant not being available.) Some will argue that the money from the sale (which was less than the original amount) still carries this restriction. Some will further argue that the full amount of the initial grant should be so restricted, thus encumbering contributions to the Fund not yet made. |
| − | It has been the practice that the principal of this fund is restricted to capital purposes; that is to say it is held in reserve for the purchase of a new [[Headquarters]] at some point in the future. It has also been the practice that the interest earned may be withdrawn to as needed to cover deficits in the General Fund | + | It has been the practice that the principal of this fund is restricted to capital purposes; that is to say it is held in reserve for the purchase of a new [[Headquarters]] at some point in the future. It has also been the practice that the interest earned may be withdrawn to as needed to cover deficits in the General Fund. |
Because of the vagaries of the market and the withdrawal of interest, the market value of the fund may at times be lower than the original investment. This is an unavoidable aspect of investing in the market, but does not violate the original intent. | Because of the vagaries of the market and the withdrawal of interest, the market value of the fund may at times be lower than the original investment. This is an unavoidable aspect of investing in the market, but does not violate the original intent. | ||
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The [[Board]] has not seen fit to systematically add to the Investment Fund on an annual basis. As a result, even without the decline in value described above, the purchasing power of the fund has declined significantly. Some will argue that increasing the value of the fund to keep pace with inflation is a necessary obligation. | The [[Board]] has not seen fit to systematically add to the Investment Fund on an annual basis. As a result, even without the decline in value described above, the purchasing power of the fund has declined significantly. Some will argue that increasing the value of the fund to keep pace with inflation is a necessary obligation. | ||
| − | + | One exception to the above was a fundraising campaign in 2013 that generated about $6000, which was added to the fund (bringing the ivested captal to $291,000). This was to be the first year of a ten-year campaign to double the fund value. Given that it fell short by 80% (and thus would take 100 years to reach its goal), the Board elected to discontinue the campaign. | |
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| + | The current contract with the Metcalfs for the rental of space in their home for the Headquarters obliges the Society to add 10% of each year's gross revenues to the capital portion of this fund. Accounting has, at times, delayed such designations. | ||
The investment philosophy is to invest only in investment-grade instruments with the goal of 5% APR growth (4% before 2016). This has not always been possible or easy. Current instructions are to move to riskier investments if that's what is needed to obtain the 5% growth target, while still restricting investments to moderately conservative instruments. | The investment philosophy is to invest only in investment-grade instruments with the goal of 5% APR growth (4% before 2016). This has not always been possible or easy. Current instructions are to move to riskier investments if that's what is needed to obtain the 5% growth target, while still restricting investments to moderately conservative instruments. | ||
| − | The [[Finance Committee]] has been asked to formulate and confirm the investment philosophy, but has not yet | + | The [[Finance Committee]] has been asked to formulate and confirm the investment philosophy, but has not yet begun the task. The [[Treasurer]] has been directed to work with our investment firm to develop and propose such a philosophy. |
Revision as of 13:24, 19 February 2022
One of the funds maintained on the books of The Augustan Society, Inc., is the Investment Fund. This fund is restricted by tradition, and may be restricted by the terms of an original grant. The grant not yet having been found in the files, that point is at present indeterminate.
The original Investment Fund monies came from the sale of the Villa Augusti in 2007. The funds to purchase that property came from a grant from the late Cdr. George Balling, OAE, who gave the Society $300,000 with the restriction that it be used for capital purchases only. (The preceding restriction is from living memories, the text of the grant not being available.) Some will argue that the money from the sale (which was less than the original amount) still carries this restriction. Some will further argue that the full amount of the initial grant should be so restricted, thus encumbering contributions to the Fund not yet made.
It has been the practice that the principal of this fund is restricted to capital purposes; that is to say it is held in reserve for the purchase of a new Headquarters at some point in the future. It has also been the practice that the interest earned may be withdrawn to as needed to cover deficits in the General Fund.
Because of the vagaries of the market and the withdrawal of interest, the market value of the fund may at times be lower than the original investment. This is an unavoidable aspect of investing in the market, but does not violate the original intent.
Some will argue that because such market value cannot be guaranteed, that no withdrawals should be permitted except the balance is over the original investment amount. Others will argue that the balance should be over the original grant amount. Recent cash-flow challenges and the expansion of rented storage units have made these goals infeasible, but long-range plans should address these recommendations.
The Board has not seen fit to systematically add to the Investment Fund on an annual basis. As a result, even without the decline in value described above, the purchasing power of the fund has declined significantly. Some will argue that increasing the value of the fund to keep pace with inflation is a necessary obligation.
One exception to the above was a fundraising campaign in 2013 that generated about $6000, which was added to the fund (bringing the ivested captal to $291,000). This was to be the first year of a ten-year campaign to double the fund value. Given that it fell short by 80% (and thus would take 100 years to reach its goal), the Board elected to discontinue the campaign.
The current contract with the Metcalfs for the rental of space in their home for the Headquarters obliges the Society to add 10% of each year's gross revenues to the capital portion of this fund. Accounting has, at times, delayed such designations.
The investment philosophy is to invest only in investment-grade instruments with the goal of 5% APR growth (4% before 2016). This has not always been possible or easy. Current instructions are to move to riskier investments if that's what is needed to obtain the 5% growth target, while still restricting investments to moderately conservative instruments.
The Finance Committee has been asked to formulate and confirm the investment philosophy, but has not yet begun the task. The Treasurer has been directed to work with our investment firm to develop and propose such a philosophy.
