Investment Policy

The primary investment objective for endowment funds is to provide reasonable spending in support of The Lake Forest Library while preserving the purchasing power of the fund over the long term. The investment strategy has been designed to achieve returns sufficient to cover reasonable expenses plus inflation, while minimizing volatility.

The Lake Forest Library Foundation adopted the following policy on February 23, 2022 in order to establish clear principles for managing any and all endowment funds within the Foundation:

1. The LFLF Endowment Fund includes unrestricted, restricted, and named funds received by the Foundation. For purpose of investment efficiency, these funds may be invested together, with separate reporting of each fund as necessary and appropriate.
2. It shall be the intention to retain the principal included in the LFLF Endowment Fund, utilizing only a portion of the net earnings of the fund to support Lake Forest Library activities to be determined from time to time by the Foundation.
3. Upon acceptance of donations and bequests, the received funds will be maintained in the LFLF Endowment Fund unless restricted or designated for specific purposes.
4. It shall be the policy of the Committee to establish a minimum level of funding of $100,000 for each named or restricted part of the LFLF Endowment Fund.
5. All funds received from the annual End-of-Year Annual Mailing will be designated toward supporting the LFLF Endowment Fund.
6. The Foundation has determined that 3-5% of the asset base from the LFLF Endowment Fund may be donated to the Lake Forest Library’s general fund each year beginning in 2023.
7. It shall be the practice of the Committee to inform Foundation Trustees of specific and ongoing fundraising activities which might generate additional resources for the LFLF Endowment Fund.
8. All Planned Giving gifts will support the LFLF Endowment Fund unless otherwise restricted by the donor.
9. The LFLF Endowment Fund shall be managed by a third-party investment firm that adheres to the following mandates:
   
   a. The portfolio may purchase: individual securities; publicly traded REITs and ETFs; mutual funds; investment-grade bonds.
   
   b. The portfolio will not purchase: cryptocurrencies; derivatives; futures; options; commodities.
   
   c. In order to maintain a diverse portfolio, between 2-15% of the LFLF Endowment Fund shall be invested in investment-grade bonds.
   
   d. In order to maintain a diverse portfolio, no more than 5% of the LFLF Endowment Fund shall be invested in the stock of one company.
10. The Committee shall make best efforts to provide the investment firm of the LFLF Endowment Fund with the estimated cashflow needs of the Foundation on an annual basis.
11. This Committee has the power to spend principal from the LFLF Endowment Fund to meet emergency situations. When the Committee spends principal, a reimbursement plan will be established for repayment of the principal, plus interest at a rate equal to the net earnings of the endowment. Repayment will begin the fiscal year following the withdrawal at a rate that will achieve total repayment of the principal and interest within five years. No expenditure of principal in a fiscal year will exceed 10% of the market value of the securities.
12. The Committee shall evaluate the investment firm based on its performance on a 5-year rolling basis and make adjustments as to asset allocation and performance management as deemed appropriate by the Committee.
13. The investment firm shall make itself available to meet with the Committee on a bi-annual basis, during which time they will provide written reports and statistical analysis of how the LFLF Endowment Fund is performing relative to similar funds and the market as a whole.
14. The Foundation will be audited on an annual basis.