charitablegiving endowment ipspowerpoint
DESCRIPTION
EndowmentTRANSCRIPT
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!