UNC Chapel Hill Investment Fund

Transcription

1 UNC Chapel Hill Investment Fund Fiscal Year 2009 Summary Presentation To: The Board of Trustees of The University of North Carolina at Chapel Hill November 19, 2009

2 Organizational Structure UNC Chapel Hill Foundation Investment Fund, Inc. UNC Management Company, Inc. (Formed in 2002) Manager Controlling Member UNC Investment Fund, LLC (Formed in 2002) Members Other UNC Campuses and Affiliates

3 University of North Carolina at Chapel Hill Foundation Investment Fund, Inc. 06/30/09 UNC CH Foundation Investment Fund $1.78 Billion Invested in UNC Investment Fund ($2.26 billion) UNC Chapel Hill Affiliated Foundations (23) $779.8 Million Arts& Sciences Business Educational Law Medical Public Health Others UNC Chapel Hill Statutory Endowment $853.2 Million UNC Chapel Hill Foundation $167.5 Million Foundation Unitholders Scholarships, Professorships etc. Endowment Unitholders Scholarships, Professorships etc. Foundation Unitholders Scholarships, Professorships etc.

4 UNC Investment Fund Market Value (Includes Chapel Investment Fund and Other UNC System Schools & Affiliates) Market Value of the total UNC Investment Fund at June 30, $2.26 billion At June 30, 2009 the Fund s composition was: $1.78 billion - - UNC Chapel Hill Investment Fund (CHIF) Market Value (billions) $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $2.21 billion $185 mil $2.02 billion (CHIF) $2.53 billion $307 mil $2.22 Billion (CHIF) $2.26 billion $471 mil $1.78 Billion (CHIF) $471 million - - other UNC system schools and affiliates $0.0 6/30/2007 6/30/2008 6/30/2009 4

5 UNC Investment Fund Investment Objectives Preserve the Real (inflation-adjusted) purchasing power of the Fund while providing a predictable and growing stream of spending distributions to Fund participants. Earn an annualized real total rate of return of at least 5.5% (CPI +5.5%) over 5 10 year time horizons. Earn an annual rate of return that exceeds the Strategic Investment Policy Portfolio (SIPP) benchmark. Perform in the top quartile of University Endowment Funds. 5

6 Asset Allocation: UNC Investment Fund Investment Implementation LONG -TERM time horizon Focus on assets that provide equity-like returns Mitigate risk through diversification Opportunistically over- and under-weight asset classes within the target ranges Add value through manager selection Managing the UNC Investment Fund is labor intensive 6

7 UNC Investment Fund Strategic Investment Policy Portfolio (SIPP) Asset Class Strategic Target % Tactical Range % Over / Under Target at 6/30/09 Domestic Equity International Equity Global Equity Equities Absolute Return Fixed Income Fixed / Absolute Private Equity Real Estate Energy & Natural Resources Privates 7

8 UNC Investment Fund FY 2009 Overview The one-year period ended June 30, 2009 (FY 2009) represented the worst fiscal year for college and university endowments in decades (ever?) The negative 26.2% return on the S&P 500 in FY 2009 represented the worst July 1 to June 30 (fiscal year) period since 1932 The negative 31.4% return on the MSCI EAFE index (international developed markets equities) was that index s worst fiscal year return since its inception in 1969 The FY 2009 median investment return in the Cambridge Associates universe of 163 colleges and university endowments is negative 20.0% NACUBO has been collecting endowment return data for 35 years and there has been only one prior year when the average endowment investment return was below -10% (-11.4% in FY 1974) 8

9 College and University Endowments Mean Annual Investment Return FY s (# of fiscal years, n = 35) # of Occurences mean: -11.4% < - 10% -10% to 0% 0% to 10% 10% to 20% 20% to 30% > 30% Source: NACUBO 9

10 UNC Investment Fund Return Summary Investment Returns for periods ended June 30, 2009: 12 Months (FY 2009) -19.6% 3 Years 2.3% 5 Years 8.1% 10 Years 8.1% 10

11 1-, 3-, and 5-Year Investment Performance Periods ended June 30, % 0% 2.3% -0.1% -1.7% -3.7% 8.1% 5.3% 3.7% 0.1% -10% -20% -19.6% -17.1% -20.0% -17.1% -30% 1 Year 3 Years 5 Years The UNC Investment Fund Endowment Median (Cambridge Assoc) Strategic Investment Policy Portfolio 70% S&P 500 / 30% BC Aggregate The Fund s longer term returns are still relatively attractive although the margin has narrowed over the past 12 months 11

12 UNC Investment Fund Fiscal Year 2009 Performance Drivers The Investment Fund s Real Estate portfolio recorded a 38.8% loss for the fiscal year. The Domestic Equity, International Equity and Private Equity categories within the Investment Fund were each down between 20% and 26% for the year, even though all three outperformed their respective benchmarks. The Investment Fund s Absolute Return category, which is expected to retain value in down markets, was a disappointment in FY 2009, losing 16.9% for the year. The Fund s only asset classes that produced positive returns in FY 2009 were Domestic Fixed Income and Cash. 12

13 UNC Investment Fund Performance Relative to Peers June 30, 2009 The UNC Investment Fund s negative 19.6% return in FY 2009 placed it squarely in the middle of the pack, slightly ahead of the negative 20% median return in the Cambridge Associates universe of college and university endowment funds. The UNC Investment Fund s performance ranks in the top 10% of college and university endowment funds in the Cambridge Associates Universe for the 3-, and 5-, and 10-year periods ended June 30,

14 Cambridge Associates Endowment Universe Periods ended June 30, 2009 FY Years 5 Years 10 Years (n=163) (n=162) (n=160) (n=148) UNC Investment Fund (19.6%) 2.3% 8.1% 8.1% SIPP (17.1%) (0.1%) 5.3% 5.3% Cambridge Assoc Universe (> $1 Billion) 25th Percentile (18.1%) (0.5%) 4.9% 5.6% Median (20.0%) (1.7%) 3.7% 4.2% UNCIF % Rank Top 45% Top 3% Top 5% Top 10% UNCIF ranks in the top 10% of endowments for the most recent 3-, 5-, and 10-year periods 14

15 Cambridge Associates Universe Endowments > $1 Billion (at 6/30/08; n=56) Periods ended June 30, 2009 FY Years 5 Years 10 Years UNC Investment Fund (19.6%) 2.3% 8.1% 8.1% SIPP (17.1%) (0.1%) 5.3% 5.3% Cambridge Assoc Universe (> $1 Billion) 25th Percentile (18.9%) 0.2% 6.2% 8.0% Median (20.9%) (0.9%) 4.9% 5.6% UNCIF Rank 19 of 56 1 of 56 5 of of 55 UNCIF % Rank Top 40% Top 1% Top 10% Top 25% UNCIF s 2.3% 3-year return ranks first among endowments with >$ 1 billion 15

16 UNC Chapel Hill Foundation Investment Fund FY 2009 Change in Market Value In FY 2009, the University of North Carolina at Chapel Hill Foundation Investment Fund (CHIF) declined in value by $440.7 million, from $2.22 billion at June 30, 2008 to $1.78 billion at June 30, 2009 Major components of this decline include net investment losses of $462.9 million, the annual endowment distribution of $108.5 million and other participant withdrawals of $56.8 million Partially offsetting the above declines were participant contributions of $200.7 million during the year 16

17 UNC Chapel Hill Foundation Investment Fund Components of Change in Market Value July 1, 2006 June 30, 2009 ($ in millions) Fiscal 2007 Fiscal 2008 Fiscal Year Cumulative Beginning Market Value $1,479.0 $2,024.6 $ 2,224.4 $1,479.0 Net Investment Gains (Losses) (462.9) 79.5 Payout (68.5) (91.7) (108.5) (268.6) Net Gain After Payout (571.33) (189.2) Gifts & Other Additions Admin Fees (8.4) (10.2) (13.2) (31.9) Other Net Withdrawals (22.6) (21.2) (56.8) (100.6) Net Additions Net Increase (440.7) Ending Market Value $2,024.6 $2,224.4 $1,783.7 $1,

18 UNC Chapel Hill Foundation Investment Fund FY 2010 Distribution Rate At its May 2009 meeting, the Investment Fund Board: approved the Fiscal Year 2010 annual distribution rate of $387 per unit for the University of North Carolina at Chapel Hill Foundation Investment Fund, Inc., representing a 7.4% decrease from the Fiscal Year 2009 distribution rate of $418 per unit. The $387 per unit will be distributed to CHIF Fund participants on June 30, 2010 based on units held in the Fund during the course of FY

19 UNC Chapel Hill Investment Fund Per Share Distribution Rate 425 $418 Per Share Distribution Rate $319 $329 $333 $333 $339 $350 $362 $380 $ Fiscal Year 19

20 UNC Chapel Hill Investment Fund Distribution as a % of Beginning Mkt Value 6.5% 6.0% 6.1% 5.5% 5.4% 5.8% 5.7% 5.4% 5.7% 5.0% 4.5% 4.8% 4.9% 4.4% 4.6% 4.0% Fiscal Year 20

21 UNC Investment Fund Long-Term Performance Periods ended June 30, % 10% 7.4% 8.1% 8.1% 8.1% 8.2% 8.4% 7.5% 5% 2.3% 0.1% 0.5% 0% -3.7% -5% 3 Years 5 Years 10 Years 20 Years The UNC Investment Fund Inflation + 5.5% 70 / 30 Index 21

22 FY 2009 Summary FY 2009 represented the most difficult year for endowments in more than a generation as global financial markets recorded sharp declines in value The UNC Investment Fund was not immune, recording a negative 19.6% return in FY 2009 The UNC Investment Fund continues to be relatively defensively postured, although we have recently rebalanced domestic and emerging markets equities closer to target allocations We are maintaining a higher degree of liquidity in the Fund than in recent years We remain confident that over long-term time horizons the UNC Investment Fund will remain a top performer Patience and discipline are required as it is likely to take a number of years to repair the damage done in FY