Board of Trustees of the Endowment Fund of UNCW

January 19, 2017

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Agenda: Thursday, January 19, 2017

Welcome Ms. Wilma Daniels

Approve Minutes of July 21, 2016 Ms. Wilma Daniels

Endowment Board Authority and Structure Ms. Roberta LaSure

Portfolio Profile and Fund Managers Ms. Roberta LaSure

Portfolio Investment Performance Ms. Roberta LaSure

FY 2017-18 Endowment Spending Ms. Roberta LaSure

Conflict of Interest forms Ms. Roberta LaSure

Adjournment Ms. Wilma Daniels

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Statutory Authority for Endowments

North Carolina General Statutes (G.S.)116-36 requires each constituent institution to establish an endowment fund.

G.S. 116-36 highlights:

Establishment of investment board known as “Board of Trustees of the Endowment Fund of ______ (name of institution)

1. Authority to receive and administer gifts and property of any kind from any source, excepting State appropriations, tuition and fees

2. Responsibility of trustees for prudent investment of endowment fund

3. Authority to expend principal or interest consistent with any restrictions imposed by original donor

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UNC Policy for Endowments

The UNC Board of Governors established regulations to assist with creation and operation of Endowment Fund (EF) under N.C G.S. 116-36. Guidelines include:

Board of Trustees of EF shall consist of no fewer than six and no more than nine members

Three members designated as ex officio are the Chancellor, the chair of the board of trustees and an additional trustee

Remaining three to six members may be trustees or members at large

Any real property coming to endowment board may be placed into endowment fund without reference to N.C.G.S. Chapter 143 and 146:

Not subject to Executive Budget Act, Capital Planning and Improvement Act, State Procurement Rules, Public Contracts, Personal Services Contracts, Open Public Meetings, State Property Act and Department of Administration rules and requirements

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UNCW Endowment Board Membership

• Chair, UNCW Board of Trustees

• Vice Chair, UNCW Board of Trustees

• Immediate Past Chair, UNCW Board of Trustees

• Chancellor, UNCW

• Up to five members elected by the UNCW Board of Trustees

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(4) Endowment Portfolios Benefiting UNCW$90 million Market Value at November 30, 2016

UNCW Endowment Investments, $80,156,508

UNCW Endowment Real Estate, $4,745,964

Foundation of UNCW Endowments,

$4,080,453

Donald Watson Foundation

Endowment, $1,476,250

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Growth of UNCW Endowment Investments(in Millions)

$23.3

$28.7 $33.5

$38.5

$47.9

$53.5

$46.2 $50.3

$61.0 $61.6

$69.8

$79.1 $81.8 $80.1 $80.2

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017(thruNov.)Fiscal Year Ending June 30

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Endowment Portfolio Valuations

November 30, 2016

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University Endowment at November 30, 2016

University Endowment Assets Market Value % of Total

UNC Investment Fund $ 66,325,519 83%

TIFF * Multi-Asset Fund 13,075,430 16%

State Treasurer’s Short-Term Investment Fund 755,559 1%

Investable Assets $ 80,156,508 100%

Real Estate $ 4,745,964 100%

Non-investable Capital Assets $ 4,745,964 100%

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* The Investment Fund for Foundations

Endowment Investment Fund

Managers

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Allocation by Fund Manager

UNC Investment Fund83%

TIFF Multi-Asset Fund16%

State Treasurer, 1.0%

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UNC Investment Fund, LLCBackground

Established January 1, 2003 as exempt 501(c)(3) organization

Office in Chapel Hill with 40 employees and two teams, Investment Management and Operations

UNC Management Company serves as Manager of the UNC Investment Fund (UNCIF) - $4.9 billion in assets UNCIF currently has 28 participants, which are UNC Chapel Hill, other UNC constituent

institutions, and their affiliated foundations

Responsibilities include evaluating and monitoring investment managers, recommending changes to investment objectives and asset allocation, monitoring risk, and implementing changes to investment decisions approved by Chapel Hill Investment Fund’s (CHIF) Executive Committee.

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UNC Investment FundOther UNC Participants

• UNC Chapel Hill (100%)

• NC State (90%)

• UNC Charlotte (50%)

• UNC Asheville (100%)

• Appalachian State (20%)

• UNC Fayetteville (100%)

• NC A&T (57%)

• Winston-Salem State (100%)

• NC School of the Arts (100%)

• East Carolina (n/a)

• NC Central University (n/a)

• Western Carolina (50%)

• NC School of Science and Mathematics (100%)

• NC School of the Arts (n/a)

In August 2003, UNCW made the first investment in the UNCIF, and UNCIF currently manages

83% of our endowment portfolio.

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UNC Investment FundOverview

• Inception: January 1, 2003

• Total Assets: $4.9 Billion UNC-Chapel - $3 Billion

NC State – approx. $667 Million

• Minimum Initial Investment $5,000,000

• Long-term Benchmark: CPI +5.5% and Global 70/30

Short-term Benchmark: Strategic Investment Policy Portfolio

Top third of NACUBO * Endowment Study

• Asset Based Management Fee 0.50% of first $50 million

0.24% of amounts > $50 million

* National Association for College & University Business Officers

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UNC Investment FundPortfolio Composition

The current strategic asset allocation targets approximately:

• 63% to equity oriented strategies

• 27% to other investment strategies that have low correlations with traditional equity and fixed income investments

• 10% to fixed income investments

Different types of hedging strategies such as short-selling and derivative investing to help reduce the volatility of the Fund

Fund’s focus on volatility and downside protection preserves capital and provides best performance in down or sideways markets

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UNC Investment FundPortfolio Composition

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ASSET ALLOCATION (%)

Asset Class Actual Strategic Target Range

Long Biased Equity 26.3 27.0 20-35

Long/Short Equity 18.0 18.0 12-24

Private Equity 19.7 18.0 14-22

Diversifying Strategies 7.1 12.0 8-16

Real Estate 6.6 8.0 5-12

Energy & Natural Resources 5.8 7.0 5-10

Fixed Income 9.9 10.0 5-18

Cash 6.6 0.0 0-10

Total 100.0 100.0

Allocation by Fund Manager

UNC Investment Fund83%

TIFF Multi-Asset Fund16%

State Treasurer, 1.0%

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The Investment Fund for Foundations (TIFF) Background

Established in 1991 offering investment programs for non-profits

Offices in Philadelphia, Boston, London and Washington

TIFF Advisory Services (TAS) serves as Manager for the TIFF Investment Program (TIP) - $10 billion in total assets

Participants include 757 non-profit organizations across 43 states

Multi-Asset Fund (MAF) offered as a core endowment investment vehicle through the TIFF Investment Program

TAS’s responsibilities for all TIP investment vehicles include evaluating and monitoring investment managers, recommending changes to investment objectives and asset allocation, monitoring risk, and implementing changes to investment decisions

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The Investment Fund for Foundations (TIFF)Participants by Organization Type

• Community Foundations (7%)

• Cultural / Historical Institutions (7%)

• Education-Related Institutions (26%)

• Health Care-Related Institutions (9%)

• Private Foundations (27%)

• Specific Public Benefit Institutions (24%)

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In March 2006, UNCW made the first investment in TIFF’s Multi-Asset Fund, which currently represents 16% of our endowment portfolio.

TIFF Multi-Asset Fund Overview

• Inception: March 31, 1995

• Total Assets: $4.4 Billion

• Minimum Initial Investment $2,500,000

• Long-term Benchmark CPI + 5%

• Short-term Benchmark Constructed Index (“CI”)

• Annual Operating Expenses 1.51% of average net assets

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TIFF’s Multi-Asset FundPortfolio Composition

The current strategic asset allocation targets approximately:

• 65% to equity oriented strategies

• 20% to other investment strategies that have low correlations with traditional equity and fixed income investments

• 15% to fixed income investments

The fund seeks to achieve its objective through two principal means: (1) diversification across multiple asset classes and (2) active security selection.

The fund invests in issuers within the U.S. and in foreign countries. Under normal circumstances, up to 50% of the fund’s assets may be invested in foreign securities.

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TIFF’s Multi-Asset FundPortfolio Composition

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ASSET ALLOCATION (%)

Asset Class Actual Strategic Target

Equity-Oriented 69 65

Diversifying Strategies 16 20

Fixed Income 10 15

Cash 5 0

Total 100 100

Endowment Real Estate

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Real Estate Properties

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Description Cost % of Total

Leasehold improvements at Center for Innovation & Entrepreneurship (CIE)

$2,237,832 47%

Student parking lot at former College Road Cinema 2,013,366 43%

Land for Center for Marine Science/MARBIONC Facility 290,000 6%

Residence on College Acres Drive – hospitality housing 204,000 4%

Land gift – 1/16 interest in lot at Wrightsville Beach 766 -

Total Real Estate $4,745,964 100%

Endowment Investment Performance

Through November 30, 2016

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Asset Allocation September 30, 2016

US Equity17.7%

Global ex US Equity10.7%

Private Strategies27.9%

Marketable Alternatives 29.7%

Commodities1.4%

Distressed Debt1.6%

Fixed Income3.7%

Cash7.3%

Private Strategies:

- Venture Capital- Buyouts- Private Equity- Private Equity Real Estate- Energy & Natural Resources

Marketable Alternatives:- Long/short Equity- Long/short Credit- Long/Short Commodities- Arbitrage- Macro-Commodities

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Quarterly Portfolio Performance

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Note 1: Policy Index = UNCIF's Strategic Investment Policy Portfolio Index (SIPP)

Note 2: Global Index = 70% ACWI; 30% Barclay's Aggregate

Note 3: BNY Mellon Endowment & Foundation Universe Median Return-175 portfolios

September 30, 2016

Market Value $ 79,500,509

Performance FYTD 1 YR3 YR

Annualized

5 YR Annualized

10 YR Annualized

Inception Annualized

UNCW Endowment 3.9% 7.4% 6.7% 9.1% 6.5% 7.5%Benchmarks

4.5% Annual "Real" Return n/a 6.0% 5.5% 5.8% 6.3% 7.1%

Policy Index (1) 3.9% 5.8% 5.7% 8.3% 6.2%

Global Index (2) 3.8% 10.1% 5.0% 8.5% 4.8%

BNY E&F Univ (3) 3.8% 7.9% 5.5% 8.5% 5.5%

UNCW Endowment Fund Managers

UNCIF 4.0% 4.1% 7.5% 9.0% 6.5% 8.6%

TIFF Multi-Asset Fund 3.8% 6.5% 2.6% 7.0% 5.7% 7.6%

UNCW Annual Net Returns 2003-2016

21.9%

14.2%

17.1%

13.6%

17.9%

-3.7%-4.5%

9.3%

1.9%

14.2%

11.6% 11.4%

1.5%

7.4%

Annual Returns

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FYTD Portfolio PerformanceNovember 30, 2016

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November 30, 2016

Market Value $ 80,156,508

Performance FYTD

UNCW Endowment 4.6%Benchmarks

Global Index (1) 2.2%

UNCW Endowment Fund Managers

UNCIF 5.1%

TIFF Multi-Asset Fund 2.5%

Note 1: Global Index = 70% ACWI; 30% Barclay's Aggregate

Endowment Spending

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Spending Policy Objectives• Goals

Protect the real (inflation adjusted) value of endowment assets over the long term and manage in a way that provides equity among generations

Rate of annual spending kept below the long term average real rate of return on total portfolio

Distribute dollars to support programs at a stable and sustainable rate

• Methodology

Spending policy rate of 4.5% approved by Board of Trustees, upon recommendation from Endowment Board

Spending policy rate applied to endowment portfolio’s three-year average balance

77% of institutions surveyed apply spend rate to a moving average of endowment value, per 2015 NACUBO* Commonfund Endowment Study

* National Association for College & University Business Officers

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Endowment Spending Budgets Time Table

Time period used for calculation of 3 year average

2015 2016

FY 2017-18

X

Measurement date for FY2017-18 Spending Budgets

Endowment spending reserves must be adequate at June 30, 2016 in order to fund a spending distribution in FY2017-18.

Fiscal year forwhich budget isbeing prepared

6/30/2016

2014

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Growth of Endowment Spending($ Millions)

33

$1.02

$.54$.79

$1.18

$1.45

$1.78

$2.12

$1.85

$1.47 $1.68

$2.25 $2.37

$2.98

$3.33

$3.61 $3.66

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fiscal Year

Endowment Spending Supports UNCW Mission2017-18

ENDOWMENT PURPOSE # OF NAMED ENDOWMENTS

SPENDING DOLLARS % OF TOTAL

Scholarships 285 $1,577,806 43

Professorships 17 712,180 19

Academic Support(instructional areas, academic departments & research)

42 646,529 18

Discretionary Support 5 337,687 9

Facilities 7 260,762 7

Public Service(Osher Lifelong Learning

1 127,342 4

Total 357 $3,662,306 100

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Endowment Spending Supports UNCW Mission2017-18

Scholarships$1,577,806

Professorships$712,180

Academic Support$646,529

Discretionary Support$337,687

Facilities$260,762

Public Service$127,342

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Concluding Remarks

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