Investment Performance and Policies
June 30, 2012
The Portfolio and its Management
At June 30, 2012 the market value for total investments of the University at Buffalo Foundation and Affiliates (UBF) amounted to $736.3 million, as compared to $685.2 million in 2011. Endowment funds included in total investments amounted to $511.0 million at June 30, 2012, as compared to $494.8 million in 2011. These funds are managed under the supervision of UBF’s board investment committee. More than forty professional investment managers currently share in the administration of the portfolio, with performance monitored by the trustees. Included in this total are certain investments, known as the Long-Term Portfolio and having a market value of $657.2 million at June 30, 2012, which are managed and administered on a pooled basis.
Long-Term Portfolio Investment Strategy
The primary investment objective is to maximize total investment return while preserving the inflation-adjusted purchasing power of the portfolio. This should provide a relatively predictable, constant and stable (in real terms) stream of funds for current use. Total investment return is the sum of interest, dividends and capital appreciation.
Long-Term Portfolio Performance Compared to Benchmarks for Fiscal 2012
| Total Return | |
|---|---|
| Long-Term Portfolio | -0.7% |
| Policy Benchmark | -1.2% |
| U.S. Equity | |
| Long-Term Portfolio | 6.5% |
| S&P 500 | 5.4% |
|
Dow Jones US Total Stock Index |
4.0% |
| International Equity | |
| Long-Term Portfolio | -11.2% |
| MSCI AC World ex USA Net | -14.6% |
| Hedge Funds | |
| Long-Term Portfolio | -2.1% |
| HFR Fund of Funds | -4.4% |
| Real Assets | |
| Long-Term Portfolio | -9.8% |
|
S&P North American Natural Resources |
-17.4% |
|
NCREIF Townsend Blended Index |
1.8% |
| Fixed Income | |
| Long-Term Portfolio | 7.4% |
| BC Aggregate | 7.5% |
| Private Equity | |
| Long-Term Portfolio | 5.6% |
|
Venture Economics All Private Equity Index |
10.7% |
*Key to Indices
| Policy Benchmark: | Comprised of 15% S&P 500, 5% MSCI Prime Market Growth, 15% MSCI EAFE Index, 6% MSCI Emerging Markets Index, 6% BC Aggregate, 6% Citi World Govt Bond Index, 5% BC US TIPS, 2% 91 Day T-Bill, 20% HFR Fund of Funds, 5% S&P North American Natural Resources Sector Index, 1.5% NCREIF Townsend Blended Index, 12% Venture Economics All Private Index, 1.5% Mercer Illiquid Natural Resources Index |
|---|---|
| S&P 500 | Standard and Poors 500 Index |
| MSCI | Morgan Stanley Capital International |
| HFR | Hedge Fund Research, Inc. |
| NCREIF | National Council of Real Estate Investment Fiduciaries |
| EAFE | Europe, Australia, Far East |
| BC | Barclays Capital |
| DJ | Dow Jones |
Long-Term Portfolio Performance Compared to Benchmarks for Fiscal 2003-2012
The accompanying chart reflects the ten-year performance for the Long-Term Portfolio in comparison with over 700 other colleges and universities across the country.
| Total Return | NCSE Median* | # of Funds* | UBF Percentile Rank* | |
|---|---|---|---|---|
| 2012 | -0.7% | -0.3% | 784 | 53 |
| 2010-2012 | 9.7% | 10.2% | 704 | 64 |
| 2008-2012 | 0.3% | 1.1% | 665 | 72 |
| 2003-2012 | 5.8% | 6.2% | 492 | 66 |
* Compiled by Mercer Investment Consulting, Inc. using data previously published in the 2012 NACUBO - Commonfund Study of Endowments (NCSE).
Asset Allocation Policy
The proper distribution of investments among various asset classes allows UBF to honor spending policies, maintain risk tolerance and stability, produce appropriate investment returns, and achieve long-term objectives.
Asset allocation at June 30, 2012 was as follows:
| By Manager Type | Long-Term Portfolio | Current Target | Long Term Target |
|---|---|---|---|
| Growth Assets | |||
| •US Equity | |||
| -Large Cap | 16.2% | 15.0% | 12.0% |
| -Large Growth | 5.0% | 5.0% | 5.0% |
| •International Equity | |||
| -Large | 14.7% | 15.0% | 13.0% |
| -Emerging Markets | 5.8% | 6.0% | 5.0% |
| •Private Equity | 12.3% | 12.0% | 15.0% |
| Risk Reduction Assets | |||
| •Cash | 2.0% | 2.0% | ----- |
| •US Fixed Income | 6.1% | 6.0% | 7.0% |
| •Global Fixed Income | 5.7% | 6.0% | 5.0% |
| •Hedge Funds | 19.1% | 20.0% | 20.0% |
| Inflation Protection Assets | |||
| •US Inflation Protected Fixed | 5.1% | 5.0% | 3.0% |
| •Real Assets | 8.0% | 8.0% | 15.0% |
| TOTAL | 100.0% | 100.0% | 100.0% |
NOTE: Long term target is goal for 2015.
Spending Policy
Spending is defined as funds made available from the portfolio for university programs and administrative expenses, exclusive of management, brokerage and custodial fees.
Generally, a formula governs the portion of total return made available each year for spending with an objective of maintaining purchasing power relative to inflation. This formula allows spending to increase by the predetermined annual growth rate of 3% as long as spending stays within 4% and 6% of the three-year average market value of principal. Special spending rules are followed for individual endowments where the value has fallen below historic dollar value.
Long-Term Portfolio Performance -1994 to 2013
A $1,000,000 gift on July 1, 1993 invested in the Long-Term Portfolio would have been worth $1,457,369 as of June 30, 2012, and prior to the fiscal year 2013 distribution. In addition, $1,454,533 would have been distributed for spending needs over the same period.
A $1,000,000 gift on July 1, 1993 invested in the Long-Term Portfolio would have generated $43,377 for spending in Fiscal Year 1995, with the annual distribution growing to $70,726 for Fiscal Year 2013. This annual growth in spending is comparable to inflation rate growth over this same period.
