Presentation Transcript

1. Independent Education gratefully acknowledges our sponsor Is the ‘Yale Endowment Model’ Obsolete? A Discussion on Lessons Learned from the Financial Meltdown of 2008
2. Agenda
3. The Endowment Model worked… Source: Cambridge Associates LLC. Note: Yale data is for years ending June 30th and from NACUBO.
4. …and worked very well for Yale! Source: Cambridge Associates LLC. Note: Yale data is for years ending June 30th and from NACUBO.
5. How does the “Endowment Model” add value?
6. Traditional vs. Endowment Models As of 2010 Source: Cambridge Associates LLC.
7. What are “Alternative” Investments?
8. The Yale Endowment As of June 30, 2010 28% Real Assets 33% Private Equity 19% Absolute Return 9% Int’l. Equity 4% Bonds 7% US Equity Source: The Yale Endowment Report 2010.
9. Endowment Asset Allocation History The Current “Over $1 billion” Endowment Universe – Historical Mean Asset Allocation Source: Cambridge Associates LLC.
10. USMF Policy Allocation History USMF Investment Committee embarked on a new strategy in 2004. Implementation took several years.
11. Current Endowment Asset Allocation Yale As of June 30, 2010 Over $1 billion Universe As of Dec. 31, 2010 U. Maryland As of Dec. 31, 2010 Liquidity: Source: Cambridge Associates LLC. Note: Real Assets includes real estate, commodities, oil & gas, timber, and other private partnerships.
12. USMF Allocation by Security Type Note: Represents a look-through to all securities held by endowment managers.
13. USMF Allocation by Security Type Note: Represents a look-through to all securities held by endowment managers.
14. USMF Allocation by Security Type Note: Represents a look-through to all securities held by endowment managers.
15. How does the “Endowment Model” add value?
16. Risk Management
17. “Non-Normal” Markets USMF Max Loss: -25.0% Note: Above stress test estimates the current portfolio’s response to the changes in capital markets during the specified events.
18. “Normal markets” – VaR analysis Need to reduce risk Note: VaR represents the likely one-month loss that might occur every 1 in 20 months, i.e. 95% of all months the portfolio’s returns are likely to be better than the stated VaR amount. This does not capture the “tail events”, and it assumes a normal distribution of returns.
19. How does the “Endowment Model” add value?
20. Value Add via Manager Selection Source: The Yale Endowment Report 2010.
21. How did Yale do it? Right place, right managers Yale’s Venture Capital results in high returns, outperformance Source: Cambridge Associates LLC. Note: Yale data is for years ending June 30th and from NACUBO.
22. How does the “Endowment Model” add value?
23. What is asset allocation? Debates about 80/20 vs. 60/40 are probably less important… diversification across different asset classes matters far more.
24. Not just US stocks/US bonds… Source: Bloomberg
25. Thematic Investing
26. Emerging Economies Drive Global Growth Source: The Conference Board, Inc.
27. Growing Bilateral Relationships in Developing World US$millions Source: IMF DOT Database, UN COMTRADE
28. Urbanization Nearly 1 billion people might urbanize in the next ten years Source: World Urbanization Prospects
29. Rising Consumer Class E.g., in China, the number of cities with large middle-affluent populations will expand dramatically in the next decade. Source: The Boston Consulting Group, Inc. 2010. “The Keys to the Kingdom – Unlocking China’s Consumer Power”
30. Urbanization Shanghai 2010 Shanghai 1990
31. Asian Demand for Resources
32. Urbanization in Africa
33. Improved Macro Fundamentals in Africa Source: IMF
34. Real vs. Financial Assets Source: Bloomberg
35. Contact Information University System of Maryland Foundation, Inc. Michael Barry – Chief Investment Officer 301-445-2796 mbarry@usmd.edu