EUROQOL | Investment Policy
Investment policy for the EuroQol Foundation
In recent years, the EuroQol Research Foundation was not only scientifically, but also financially successful. This allowed significant investments in research, whilst maintaining sufficient reserves to guarantee the continuity of the Foundation. In times where significant interest was paid on deposits, it made sense to keep these reserves in relatively profitable savings accounts.
Meanwhile interest rates near zero have been reflected in the balance sheet figures of recent years, in which the interest income continued to decline in spite of higher reserves. In 2018, the Board approved a conservative, risk-averse investment policy that was ratified by the EQ membership. With the growing cash reserve and feedback from the bank it was decided to update the investment policy. This memo formulates the revised investment policy for the EuroQol Group and its members.
The revised investment policy is intended to follow the following principles:
1. The safety of the assets has high priority.
This is the most fundamental requirement and follows the recent strategy of the EuroQol Group, in which it is intended to develop new measurement methods for health-related quality of life. The EuroQol Group and the EuroQol Research Foundation will therefore continue to generate revenue primarily through license rights. The aim is to generate a modest return on investment of 2% to 4% higher than the bank interest rates, in line with our conservative policy.
2. The choice of investments should protect the reserves from dramatic losses.
Investments are preferably carried out in Euro bonds, but comparable liquid currencies such as British Pounds and US Dollars are possible to strengthen overall diversification. The investment portfolio might include government bonds and corporate bonds of good investment quality (BBB and better) as well as the purchase of real estate for owner occupation by the EuroQol Office. Shares and derivatives are allowed to a limited extent, but should never exceed 50% of the total investment portfolio. The Group’s cash position is not considered part of this portfolio. The Group should also consider investing in index tracking funds, such as unit trusts or exchange-traded funds (ETFs) with low costs.
3. Investment decisions are taken by the Board
Investment decisions are not part of the daily routine, and therefore are not the responsibility of the Executive Director. Instead, this is a responsibility of the Board. In line with our Articles, the Executive Director has an advisory role. Investment decisions should be regularly on the agenda of the Board in the future. Professional investment expertise may be hired by the Board to manage part of the investment portfolio. The treasurer will make proposals for investment decisions, in cooperation with the Executive Director and with external experts on the basis of the principles described above. The decisions will be made by majority votes of the Board.
4. For investment decisions, there is a strong preference not to consider companies known to be linked with any or all of the following:
- Production or sale of weapons that violate fundamental humanitarian principles through their normal use, including armaments and nuclear weapons
- Production of tobacco
- Serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour and the worst forms of child labour
- Serious violations of the rights of individuals in situations of war or conflict
- Severe environmentally damaging practices
- Gross corruption
5. The cash reserve should, at a minimum, equal the last year’s expenditure.
In order to cover any expected and unforeseen costs, it is wise to keep significant cash reserves.