Investment Philosophy
Managing Foundation Investments | Investment Policy | Payout | Investment Management | Investment Allocation and Performance |
The University of New Hampshire Foundation, Inc. is committed to prudent, time-tested investment strategies and fiscal policies. The Investment and Finance Committee is charged with overseeing these funds and measuring the returns they produce against nationally recognized standards for investment performance. In managing the Pooled Income Fund and the trusts created by UNH donors, our goal is to provide a consistent level of annual income for fund beneficiaries, while also seeking long-term growth of principal. Since 1989, the University and its Foundation have received more than $204.4 million in contributions. The Foundation's endowment and similar funds have grown to $130.9 million at the end of fiscal year 2007. This growth is due not only to the generosity of thousands of alumni, parents, and friends, but also to the careful stewardship provided by a group of knowledgeable Foundation Board members who have invested these gifts wisely.
Edward K. Roundy
Vice President and Treasurer
Managing Foundation Investments
Careful management of the UNH Foundation endowment assets ensures a total return necessary to preserve and enhance the real-dollar principal of the funds, while providing a dependable source of income for current Foundation and University operations and programs.
Investment Policy
The Foundation's investment policies are intended to preserve or increase the real principle value of its endowment, while providing a dependable stream of income for the University. Portfolio management follows guidelines recommended by the Investment and Finance Committee and approved by the UNH Foundation Board. While the endowment has a long time horizon (perpetuity), stability of payout over shorter periods is desirable. The Board, therefore, carefully weighs risk/return characteristics in its asset allocation decisions. The Foundation's portfolio is diversified so as to keep volatility within acceptable limits for the portfolio as a whole. It consists of:
Equity Investments
These are intended to provide current income, growth of income, and
appreciation of principal, with the recognition that this asset class
requires the assumption of greater market volatility and, at least in
the short term, risk of loss. Under guidelines set by the Investment Committee,
these may account for between 40 percent and 70 percent of total assets
at market value. International equities are included in this figure and
may account for up to 14 percent. Alternative investments, private equity,
and real estate may comprise up to 20% of total assets
Bonds and Short-Term Securities
These provide a highly predictable and dependable source of income that
reduces the volatility of the total portfolio market value. They may also
provide a source of funds for alternative investments. Bonds may account
for 15 to 40 percent of total assets at market value, while
cash/intermediate investments may account for up to 20 percent.
Other classes of investments may be used to provide opportunities for higher rates of return, but only when the endowment pool has reached a size that the Investment Committee feels can support higher risk and/or reduced marketability.
The endowment is managed for total return, with a stated portion of total valuation applied annually toward donor and Foundation-designated purposes.
Payout
Currently, total payout is calculated on an annual basis at 5.30 percent of a 12-quarter retrospective moving average of unit value of the endowed fund, with 3.8 percent going to program purpose and 1.50 percent to program management expenses. Raising the level of payout and reducing expenses remains a goal of the UNH Foundation. All remaining gains (or losses) in value are attributed back to the unit values. The fund is managed under a total return concept within New Hampshire's Uniform Management of Institutional Funds Act.
Investment Management
The Investment and Finance Committee engages investment managers for the management of the Foundation's endowment assets. Because this management remains consistent despite periodic personnel changes in Board or Investment and Finance Committee composition, it permits the achievement of longer-term objectives.
The investment managers have discretion with regard to portfolio
composition and individual asset selection, within guidelines and
constraints established by the committee. The committee oversees the
activities and results of the managers through regular meetings, as well as
written and oral communication.
The Foundation employs a combination of active and passive managers. Active investment managers are expected to provide an appropriate excess return, net of fees, over a normal portfolio or a relevant index, e.g., the S&P 500. Their performance should place them well into the second quartile of managers with similar objectives over a market cycle. Passive managers are expected to track the performance of the appropriate normal portfolio or index within agreed tolerances.
Investment Allocation and Performance
As of June 30, 2007, the Foundation had $125.3 million in endowment assets, not counting non-cash assets and the endowment interest/dividend accounts. The money was allocated as follows:
Index Plus Fund: 21.7%
Managed State Street Global Advisors, this fund is structured to outperform the S&P 500 by quantitatively choosing the best stocks and the best industries from the universe.
Fiscal 2007 performance was 20.5% versus the S&P 500 at 20.6%.
Large Value Index Plus Fund: 9.3%
Managed by State Street Global Advisors, this fund seeks to outperform the Russell 1000 Value Index by quantitatively choosing the best stocks and the best industries from the universe.
Fiscal 2007 performance was 22.3% versus the index, of 21.9%.
Small Cap Index Plus Fund: 5.0%
Also managed by State Street Global Advisors, this fund is structured to track the Russell 2000 Index, which comprises Russell 2000 securities. Investment decisions are made on the basis of tracking the index, and industry weighting remains consistent with it.
Fiscal 2007 performance: This fund was 16.6%, as compared with a 16.4% return in the Russell 2000.
SPDR's: 2.4%
SPDR's are held as a representation of the US S+P 500 Market.
International equities: 16.2%
International equities are managed by Vanguard and SSqA and invested in the Emerging Markets and and the SSqA International Alpha Fund. These funds use sampling to attempt to match the Select Emerging Markets and MSCI EAFE indexes. A large sampling of stocks is used that match key characteristics of the index such as country and industry weightings.
Fiscal 2007 performance: Vanguard Emerging Markets gained 42.3 percent. SSqA International Alpha returned 28.2%. All funds performed in line with comparable indexes.
Bonds: 12.3%
The Foundation uses the Pacific Investment Management Co.(PIMCO) Total Return Bond Fund. This fund is a multi-strategy fixed income investment program that invests in the major segments of the broad fixed-income market. The primary objective is to add value above the return of the broad US bond market. The fund reduces risk by diversified strategy allocations.
Fiscal 2007 performance: The fund gained 5.2 percent, as compared with a 6.1 percent increase for the Lehman Aggregate Bond Index, which it uses as a benchmark.
Cash: 20.0%
Cash investments are in the Commonfund Short Term Fund. This fund is a multi-advisor, multi-strategy fund acting like a money market fund, although it is a bank common trust fund. It is allowed to use a reserve account to provide a return equal to or greater than the 90-day Treasury bill rate. Commercial paper is also utilized.
Fiscal 2007 performance: With the T-bill rate up 5.1 percent for the year, the Communfund Short Term Fund also returned 5.3 percent.
Fixed Income, Intermediate Term: 0.8%
This money is invested in the Commonfund Intermediate Term Fund, a multi-manager, multi-strategy domestic fixed income program with an objective of providing a return in excess of the Merrill Lynch 1-3 Year Treasury Index and a higher current return than short-term money market funds. The neutral position of the fund matches the average maturity and duration of the Merrill Lynch index.
Fiscal 2007 performance: The fund was up 5.7 percent, as compared with 5.1 percent for the Merrill Lynch benchmark index.
Alternative Investments: 12.3%
An allocation to alternative investments, private equity was made late
in 2001. The funds selected are the Morgan Stanley Dean Witter Alternative
Investments Liquid Markets Fund and the Private Markets Fund. Goldman
Sachs Capital Partners 2000 Fund and Omega Advisers will also be used.
