Investment Policy for CSU Auxiliary Organizations
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Return Objectives

A well-written investment policy defines and explains the financial and investment goals the chosen investment strategy is expected to accomplish. Return objectives must be specific and measurable, so they can be evaluated as to whether the portfolio is meeting its investment goals. Often specific return objectives, along with the institution's spending-rate policy are included as an appendix to the main investment policy.

Investment objectives, which target endowment returns relative to those achieved by financial markets or peers, also must be weighed and defined. Examples are:

  • "The primary investment objective of the endowment is to attain a total return matching or exceeding the portfolio's composite benchmark." (This benchmark should be explicitly defined in the written policy.)

  • "The secondary investment objective is to earn a total return matching or exceeding the college's peer group." (The appropriate peer group should be defined in the policy.)

The peer benchmark comparison is important since each institution relies on its endowment earnings to support operating costs and scholarships. Lagging investment performance compared to peers weakens an institution's competitive position.

Checklist Questions

  1. Does your policy have specific, measurable investment return goals?
  2. Do your investment return goals relate to your institution's spending-rate policy?
  3. Are performance benchmarks identified, both for the financial markets and for the institution's peer group?

Content Contact:
Lori Redfearn
(562) 951-4815
Technical Contact:
Last Updated: June 07, 2016