charitablegiving endowment ipspowerpoint

CharitableGiving EndowmentInvestment Policy Statement

May 6th, 2015

CharitableGiving Mission

To offer higher education

opportunities to children from low-income families

And enhancing equitable

opportunity for social mobility

By providing a reliable source

of funds for current and

future students

Investment Portfolio

Outflows

• Asset management fee 0.75%

• Scholarship payouts 2.5%

Inflows

• Nominal rate of return 9.0%

• CPI inflation 2.0%

Risks

• Sharpe ratio 0.77

• Standard deviation under 12.0%

Strategic Asset Allocation Optimal Min Max Benchmarks

Equity U.S. 10% 10% 20% Russell 1000 TR USD Equity Global 10% 10% 15% Russell Global 3000 TR USD

Fixed Income 38% 20% 50% Barclays US Agg Bond TR USDReal Estate 20% 5% 20% S&P Global Property TR USDPrivate Equity 20% 10% 20% Cambridge Associates US PELiquid Cash 2% 2% 5% Dreyfus Liquid Assets Class 1

Given the large size of CharitableGiving investment portfolio ($1 bn) the asset allocation favors alternative investments (40%) and fixed income securities (38%). Expense ratio of 2.5% per annum, and low liquidity needs enable the Endowment to accept higher levels of risk.

Comparative Statistics

Source: National Association of College and University Business Officers, Public NCSE Tables

Risk Tolerance

• Endowments of similar size: Equity 40% and Alternatives 44%

• CharitableGiving: Alternatives 40% and Fixed Income 38%• CharitableGiving portfolio allows for high risk tolerance

due to its long-term horizon and low liquidity • Nominal required rate of return of 9% is achievable

under barbell strategy (Alternatives – high risk vs. Bonds – lower risk)

• Equity allocation substantially lower compared to peer group

Efficient Frontier

Optimal Asset AllocationStrategic asset allocation meets investment risk and return parameters:

Simulated Annual Rate of Return

Monte Carlo Simulation

Asset Classes Return And Risk Characteristics

Comparative Statistics

Simulation For Optimal Asset Allocation

DiversificationNegative correlations across asset classes reduce overall risk of the portfolio as illustrated in Fixed Income and Alternative Investments

Comparative Spending Rate

Thank You!