Morrill Memorial and Harris Library Investment Committee

Minutes of June 3, 2021 Meeting

Present via zoom: Cindy Stableford, Betsy Ruml, John Hawkins, Rachel Kurland, Rebecca Seibel

Cindy opened by noting that she has transferred the $760.83 interest earned on the Library’s CD’s from Vanguard to the Library’s account at Mascoma Bank, which is now linked to the Vanguard account making future disbursements simpler.

John and Betsy reported on their research into Vanguard’s ESG (Environmental, Social and Corporate Governance) funds.  They looked at global and domestic funds and found that the global was more middle-of-the-road and more heavily invested in financial services, while the domestic was more growth oriented and more heavily invested in technology.  They prefer global: they like the fact that global is managed by Wellington and that it increases the endowment’s international exposure from 16% to 36%.

Based on this Betsy made the following recommendations:

1.    Swap VLCAX (Vanguard Large-Cap Index Fund), approximately $160,000, into VESGX (Vanguard Global ESG Select Stock Fund)

2.    Sell all VBTLX (Vanguard Total Bond Market), approximately $56,000, to reduce bond exposure)

3.     Buy $38,000 VFSTX (Vanguard Short Term Investment Grade Fund) to bring Fixed Income allocation to 25%

4.    By $2,000 VGSLX (Vanguard Real Estate Index Fund) to bring Real Estate back to 5%

5.    Buy $10,000 VEXAX (Vanguard Extended Market Index Fund) to bring it to 15%

6.    Buy additional VESGX with all remaining funds from the sale of VFSTX, approximately $5,500.

Betsy ran a Morningstar X-ray report on the resulting portfolio that indicated it is 1.3% invested in energy, comparing favorably to the S&P 500 that is 2.6% in energy.

Motion was made to approve these transactions, seconded and approved.

Betsy presented some background on a proposed new approach to determining eligible distributions from the Endowment.  Gen Gibson, a Trustee of Public Funds from 2018 to 2021, created a spreadsheet model showing the approach used by the Trustees which is easy to use and still protects against distributions eating into principal.  For the Library, this spreadsheet would be used to preventthe balance in the Pooled Endowment Fund from falling below an inflation-adjusted balance brought forward from 2017, the year it reached $250,000. Any disbursement request would be assessed against this matrix, using the Pooled Endowment balance at the time of the request and the inflation-adjusted balance based on an appropriate rate of inflation chosen by the Trustees.  

Under the current model annual disbursements can be 3% of the 5-year rolling average year-end balance and can be carried forward indefinitely if unused, requiring complicated calculations and leading to uncertainty in how best to have funds available for a potential request.  The carry-forward element could also potentially lead to eligible disbursements that actually reduce principal.   Betsy agreed to join Rachel at a future Trustees meeting when this is on the Agenda to answer any questions.

Zoom meeting adjourned at 9:40 and a new meeting began at 9:45. Rebecca was unable to join the second meeting.

Rachel asked whether it is appropriate to use endowment money for day-to-day operations.  The Library’s request for funding from the town has held steady for at least 12 years thanks to donations from Friends and its annual fund-raising letter, but it is getting harder and harder to meet the budget this way.  She wonders if it is wrong to keep asking others for money when there is availability in the endowment.  John believes this is a Trustee decision but confirmed that unless there are specific conditions to the Pooled Endowment Fund (which there are not) it can be used for expenses or capital expenditures as the Trustees see fit.  Betsy cautioned that if the Library reduces its funding request from the Town it could be very hard to get it back if need arises.  

A motion was made to approve the new Proposed Distribution Model; it was seconded and approved.

The new model for distributions requires approval by the Trustees via an Amendment to the Investment Committee’s Rules of Operation (last amended in January, 2017). Discussion followed over the draft Amendment wording that had been distributed.  The Committee agreed that Cindy would summarize the changes and distribute a new draft via email for review and eventual approval via email.  Rachel will then take the proposed Amendment to the Trustees for approval with signature.

Meeting was adjourned at 10:15 am

Respectfully submitted,

Cindy Stableford (in Gretchen Rittenhouse’s absence)