B. REBALANCING PLAN
Where possible, use cash flows (including donor gifts) to rebalance the split among asset classes and Investment Managers.
ASSET GUIDELINES
Acceptable securities to hold:
Global Equities
Global Fixed Income
Alternative Investment Strategies (“AIS”)
AIS includes Absolute Return Strategies, Private Equity, and Real Assets. AIS exposure will be sought that is generally on the conservative end of the AIS risk spectrum. Offer significant diversification benefits. Use a fund-of-funds vehicle, by which a single investment is pooled in a broadly diversified (by strategy manger) program of AIS that will be monitored by independent third-party managers.
The Committee will use the procedure detailed in the complete version of the Statement to select managers as needed for these assets. Further detail of guidelines for each asset class is provided in the complete version of the Statement. A complete version of the Statement is available to Board members upon request.
| Asset Class |
Benchmark Index |
| U.S. Large Capitalization |
S&P 500 Index |
| Equity |
|
| U.S. Small Capitalization |
Russell 2000 Index |
| Equity |
|
| Non-U.S. Equity |
MSCI EAFE Index |
| Fixed Income |
Lehman Brother Aggregate Bond Index |
| Absolute Return |
Long-Term: U.S. T-Bills + 7% per annum |
| Strategies |
Short-Term: HFR Conservative Fund of Dedge Funds |
| Real Assets - |
Dow Jones AIG Commodity Index |
| Commodities |
|
| Real Assets - Real |
Private: NCREIF Property Index |
| Estate |
Public: NAREIT Equity Index |
| Cash |
91-Day U.S. Treasury Bills |
B. STATISTICAL UNIVERSE OF SIMILAR FUNDS
C. VOLATILITY AND RISK-ADJUSTED PERFORMANCE
Use Sharpe Ratio; excess return (portfolio return less risk-free return) divided by the variance of total return. Over a market cycle, expected to exceed Sharpe Ratio of benchmark. In general, higher-than-market volatility for each component of the Fund is permitted only to the extent that proportionate returns in excess of the benchmark index are generated. Over a Market Cycle, the Sharpe Ratio for each active manager is expected to exceed that of its respective benchmark index.
D. AUTOMATIC REVIEW PROCESS FOR INVESTMENT FUNDS
Investment performance reviews of all funds will be conducted quarterly, or no less then annually. The reports cover four basic areas: returns, comparisons of returns to benchmarks and a statistical universe of similar portfolios, diagnostic risk analyses, and compliance with relevant policies and objectives.
Certain performance-related, organizational, or portfolio characteristic circumstances or events will trigger automatic formal reviews and where appropriate, reconsideration by the Committee of the appropriateness of continuing to use the affected manager in the investment structure.
MANAGER SELECTION
The Committee recognizes the inherent benefits of working with local financial institutions and intermediaries in the investment and oversight of the funds of the Fund. However, the skills and resources required to meet investment criteria for certain asset classes may not be locally available. Local managers must meet the criteria specified in this policy.
Approved by Finance Committee November 8, 2006