AVMA Answers: AVMA investment policy

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In 2004, the Executive Board adopted an investment policy to better manage investment risk and optimize investment return. How have the Association's investments fared under the new policy?

Dr. Bret D. MarshDr. Bret D. Marsh, AVMA treasurer, responds:

We have been very pleased with the results of this new investment policy. Last year, the AVMA's mutual and managed funds had an overall return of 15.28 percent. While we recognize these returns may not occur each year, we believe the investment policy has established a template for investing the AVMA reserves that meets and exceeds the expectations of our members.

What was the reason for spreading out AVMA investable funds into three categories: operating, intermediate, and long-term?

The operating fund is intended to provide resources for day-to-day operations and short-term needs of the AVMA, the intermediate fund is intended for known expenditures within a three-year period and for unexpected expenditures that cannot be fully met by the operating fund, and the long-term fund is structured for the AVMA's needs beyond three years. These asset allocation parameters give the AVMA a broad range of investment opportunities that manage our investment risk and optimize our investment returns while providing sufficient flexibility to respond to extreme conditions in the financial markets.

Have any changes been made to the investment policy since its implementation?

When the Executive Board established the long-term fund, it was funded with $8 million. Because of the returns we have received from this fund over the past two years, the Executive Board voted in April of this year to place an additional $2 million in the fund. The entire AVMA portfolio is periodically rebalanced to make certain we have the appropriate diversification to satisfy our risk tolerance.

Overall, how is the AVMA's financial stability?

The AVMA is financially strong. The 2006 fiscal year, ending Dec. 31, 2006, posted income over expenses of $2 million, and the 2007 fiscal year should be another good one. This year's budget projected investment earnings of $1.5 million, and as of September 30, 2007, the earnings are $1.746 million or 116 percent of the projection. Because of these returns, we have not requested a dues increase, and we have resources to provide improved services to AVMA members.