Learning Objectives:

  • Understand the fundamentals of equity securities.

  • Explain alternative investment classes.

  • Understand the role of equities and alternatives in treasury portfolios.

5.1 Equity Securities

Equities represent ownership shares in a company. The ICAI materials note that banks with separate forex operations will have dealers for forex operations, and a Research Department is common for “Money Market, Debt, Equities and Forex” .

Common Stock: Ownership with voting rights and a residual claim on earnings.

Preferred Stock: A class of stock with priority claim on dividends but typically no voting rights.

5.2 Alternative Investments

Alternative investments are asset classes beyond traditional stocks and bonds. Loughborough University’s endowment funds are managed by external investment managers, with asset allocation “based on a medium risk strategy, designed to increase the value of the portfolio over the longer term” .

Real Estate: Investment properties are “residential and commercial properties, or land, which are not in operational use, and are either rented out for a return to a third party and/or held for future development potential” . Loughborough University’s Ethical Investment Policy covers “Short Term Deposits” and “Endowed Funds” as distinct investment categories .

Private Equity: Investment in private companies. Loughborough University’s policy notes that the University may make investments in “wholly owned subsidiary companies, spin-out companies and other related parties” .

5.3 ESG and Responsible Investment

Loughborough University’s Ethical Investment Policy states: “In deciding on counterparties and companies in which to invest, the University aims to remain consistent with its ethical values. The University will not directly invest in companies whose activities could be seen to endanger individuals or groups of people” .

ESG Factors Assessed:

  • Environmental: Climate emergency, fossil fuel exposure.

  • Social: Human rights, community impact.

  • Governance: Corporate governance, transparency.

The University of Reading’s policy includes explicit exclusionary screens for “weaponry and armaments, pornography, tobacco, gambling, high interest rate lending, alcohol, oil and gas (extraction, production and refining), tar sands and thermal coal, and non-medicinal animal testing” .

 

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