Virginia Bankers Association
Master Defined Benefit Plan
Statement of
Investment Policy
Revised March 2013
Purpose
This document provides the framework for the management and oversight of the assets of the
Virginia Bankers Association Master Defined Benefit Plan (the Plan) in accordance with ERISA
fiduciary standards. The document is divided into four sections.
1.
2.
3.
4.
Investment Goals;
Investment Responsibilities and Procedures;
Fund Selection and Performance Guidelines; and
Fiduciary Portfolios Allocations and Benchmarks.
Investment Goals
 The overall goal of the Plan is to provide each member bank with prudent investment
alternatives for investing Plan contributions. Contributions to the Plan are determined
actuarially on a bank by bank basis.
 In addition, the Plan’s investment goal is to provide asset allocation models with varying
degrees of investment return and risk consistent with each bank’s funding objectives and
participant demographics utilizing assets in the following approved asset classes:
o
o
o
o
o
o
o
o
o
Large Cap Stocks
S&P 500 Index Fund
Small and Mid Cap Stocks
International Stocks (including emerging markets)
Specialty allocations (e.g. real estate)
Cash Equivalents
GIC/CD Fund/Stable Value Fund
Short Term Bonds
Intermediate and Long Term Bonds
 The Plan’s investment program shall at all times comply with applicable state and federal
laws including, but not limited to, the Employee Retirement Income Security Act of 1974
(ERISA), as may be amended.
 The performance goal for the investments of the Plan is to exceed the investment
benchmarks over the most recent 3 and 5 year periods while taking less risk than the
market.
Investment Responsibilities and Procedures
 The Board of Directors (the Board) of the VBA Benefits Corporation (the Trustee) shall
establish the investment policies of the Plan, which are initially set forth herein, and provide
oversight for the management of the Plan’s assets.
 The Board shall select and engage appropriate professional firms, as needed to assist in
the investment of the Plan’s assets, such as custodian, investment manager, accountants,
benefits consultants, auditors, investment consultants, recordkeepers, and actuaries.
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Statement of Investment Policy
 A Trust (the Trust) shall be established to hold the Plan’s assets. As the Plan Trustee, the
VBA Benefits Corporation shall oversee the safekeeping and accounting of Plan assets
through the work of the Plan’s Custodian.
 The Trustee is responsible for administering the investments of the Trust within reasonable
costs, being careful to avoid sacrificing quality. These costs include, but are not limited to,
management and custodial fees, consulting fees, transaction costs and other
administrative costs chargeable to the Trust.
 Reliance Trust Company (the Investment Manager) as a Plan fiduciary appointed by the
Board, shall determine the specific asset classes and investment alternatives among the
various asset classes that make up the asset allocation models used for the Plan. The
Investment Manager will select investment fund managers with demonstrated experience
and expertise, and funds with demonstrated historical performance, for the Plan’s model
asset allocation investment program. The Investment Manager will consider both actively
and passively managed investment strategies and will allocate funds across the asset
classes to develop an efficient investment structure.
 On an as needed basis, the Board may also appoint an Investment Consultant (the
Consultant) to assist in the development of the Plan’s investment objectives and policies,
and to assist in the review of the Plan’s investment performance.
 The Board may recommend investment benchmarks to reflect the risk tolerance to be used
by the Investment Manager in selecting individual funds for creating the model portfolios.
 The Board shall at least annually review the overall investment program, and each
investment alternative, to ensure the current investment mix will achieve the goals of the
Plan and participating banks, as established for the benefit of plan participants and
beneficiaries.
Fund Selection and Performance Guidelines
In general, the Investment Manager shall consider the following guidelines in the selection of all funds:
 Sector and security diversification should be sufficient to minimize the risk of large losses
in any fund.
 Funds that generally engage in the following transactions are prohibited: purchase of nonnegotiable securities, short sales, selling on margin, puts, calls, straddles, options, other
than covered options, and any “prohibited transactions” as defined in Title 1 of ERISA.
 Funds that use derivative securities or contracts for the specific purpose of leveraging the
portfolio are not permitted.
The fund selection process is based on a detailed understanding of the performance, investment
practices, resources and company incentives of both current and potential mutual fund choices. The
criteria are not centered on simply finding funds that have beaten the market in a given static time
frame. Special consideration is given for consistent, above average returns with below average risk
for each fund as compared to its specific classification. Additional consideration is given to funds that
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Statement of Investment Policy
have a high probability of maintaining their historical track record of consistent and long-term
performance.
Selection:
In order for a mutual fund to be included in the Plan’s Fiduciary Portfolios available to participating
banks it must meet 4 out of 5 of the Investment Manager’s criteria relating to returns, performance
consistency, style, management team, and expense ratio.
In addition, funds for initial consideration must:
 Be open to new investments
 Be daily valued
 Trade through National Securities Clearing Corporation
 Be appropriately registered to trade securities
Retention:
A fund must meet on-going criteria (returns, performance consistency, style, management team, and
expense ratio) established by the Investment Manager appropriate to its peer group in order to remain
on the list of investment options.
Watch List:
The purpose of the Watch List is to identify funds that do not currently meet all of the Retention
criteria, or are meeting the retention criteria but have experienced an unusual negative or adverse
event.
A fund will remain on the Watch List for no more than four full calendar quarters at which time its
possible disposition will be determined. A fund may be removed from the Watch List at any time.
Removal:
A fund may be removed from the Plan’s investment menu for any reason deemed appropriate by the
Investment Manager. The removal and replacement of a fund will take place as soon as
administratively feasible.
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Statement of Investment Policy
Fiduciary Portfolios Allocations and Benchmarks
Based on the financial plan determined by the Investment Manager and approved by the Board to be
in the best interests of the participating banks at the present time, following are the specific asset
allocation strategies and benchmarks for the Fiduciary Portfolios available to participating banks.
Allocations to the equity and fixed income asset classes may vary within a range of + or – 5% of the
noted Target; however, minimum and maximum allocations for each sub-asset class within the equity
and fixed classes are equal to 50% and 150%, respectively, of its long-term strategy target allocation.
The performance of each model portfolio will be measured relative to the market benchmark as set
forth below.
Target Allocations for Fiduciary Portfolios (%)
Fiduciary 25
Target
Fiduciary 40
Target
Fiduciary 50
Target
Fiduciary 60
Target
Fiduciary 75
Target
25
40
50
60
75
11.25
18
22.50
27
33.75
Small-Mid Cap Stocks
7.50
12
15
18
22.50
International Stocks
6.25
10
12.50
15
18.75
75
60
50
40
25
0
0
0
0
0
Short Term Bonds
26.25
21
17.50
14
8.75
Intermediate-Long Term Bonds
48.75
39
32.50
26
16.25
Equity
Large Cap Stocks
Fixed Income
Cash Equivalent/Money Markets
Benchmarks for Fiduciary Portfolios
Fiduciary 25
25% Wilshire 5000/75% Barclays Intermediate Gov’t/Credit Index
Fiduciary 40
40% Wilshire 5000/60% Barclays Intermediate Gov’t/Credit Index
Fiduciary 50
50% Wilshire 5000/50% Barclays Intermediate Gov’t/Credit Index
Fiduciary 60
60% Wilshire 5000/40% Barclays Intermediate Gov’t/Credit Index
Fiduciary 75
75% Wilshire 5000/25% Barclays Intermediate Gov’t/Credit Index
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Statement of Investment Policy