The Ohio State University Foundation October 19, 2007

Transcription

1 The Ohio State University Foundation October 19, 2007 William J. Shkurti Senior Vice President for Business and Finance Thomas W. Johnson Interim University Treasurer

2 I. Introduction II. III. IV. Investment Report Follow-Up to Proctor Report Status of CIO Search Investment Performance Report as of June 30, 2007 V. Performance vs. Benchmarks VI. Conclusion 10/01/07 1

3 Proctor Report Key Follow-Up Initiatives More clearly define portfolio Reconcile all published reports with Audited Financials More complete and user-friendly Investment Performance Reports Strengthen investment function Review and document all key policies Hold investment managers accountable based on clear criteria Address low or non-income producing assets 10/01/07 2

4 Status of Search for Chief Investment Officer New position to be created responsible solely for investments Nationwide search Process to be managed by Interim Treasurer and CFO Specialized search firm to be hired Formal search committee created to work with search firm Timeline 10/01/07 3

5 The Ohio State University Investment Performance Report Fourth Quarter Fiscal Year 2007 As of June 30, 2007 Office of the Treasurer Published September /01/07 4

6 Members of The OSU Board of Trustees Investments Committee Dimon R. McFerson, Chair Walden W. O'Dell, Vice Chair Jo Ann Davidson Robert H. Schottenstein John D. Ong Ex Officio: John Gerlach, Jr. (Foundation Board) Ex Officio: David A. Rismiller (Foundation Board) 10/01/07 5

7 The Ohio State University Total Investments $3.2 Billion Investment Summary As of June 30, 2007 Other Investments includes other operating funds, student loan funds, deferred gifts, and self-insurance funds. Long-Term Investment Pool consists of gifts to the Endowment to be invested in perpetuity, and internally created endowment funds which can be invaded. Long-Term Investment Pool $2,338 Other Investments $911 (in millions) 10/01/07 6

8 The Ohio State University University Endowment Endowment Funds created with gifts to The Ohio State University Foundation Endowment Endowment Funds created with gifts to The Ohio State University Foundation Maintenance and Renewal Fund Endowment Fund created by transfers of internal funds for upkeep of the university physical plant Operating Funds: Long-Term Portfolio Portion of university working capital invested in the Long- Term Investment Pool Total Investments $2,338 Million President s Strategic Investment Fund $161 Breakdown of Total Long-Term Investment Pool/Endowment Return As of June 30, 2007 University Endowment $1,133 Operating Funds: Long-Term Portfolio $598 Foundation Endowment $443 Maintenance and Renewal Fund $3 President s Strategic Investment Fund Endowment Fund created by transfers from the Operating Funds: Long-Term Portfolio to be used at the discretion of the President Gifted Endowment Pool $1,576 Foundation Endowment $ 443 University Endowment $1,133 (in millions) Operating Pool $762 President s Strategic Investment Fund $161 Operating Funds: Long-Term Portfolio $598 Maintenance and Renewal Fund $ 3 10/01/07 7

9 Long-Term Investment Pool Return As of 6/30/07 Report One Year 18.0% Three Year 11.8% Five Year 11.2% Total Return including appreciation and dividends net of fees. Does not include Development Support Fees. 10/01/07 8

10 Long-Term Investment Return vs. External Benchmarks as of June 30, 2007 Institution Market Value Total Returns 1 Year Total Returns 3 Year Total Returns 5 Year University of Michigan $6.9 billion (est.) 25.1% Unavailable Unavailable University of Washington $2.1 billion 23.3% 17.8% 14.2% Pennsylvania State University $1.5 billion 21.2% 16.0% 12.6% University of Wisconsin Foundation $1.6 billion 18.6% 15.1% 12.1% University of Illinois Foundation $1.1 billion 18.2% 13.2% 11.7% The Ohio State University $2.3 billion 18.0% 11.8% 11.2% University of Texas 1 $23.3 billion 18.0% 13.2% 10.8% University of Minnesota Foundation $1.4 billion 17.3% 14.6% 13.5% Note: Figures for Arizona and UCLA are not yet available. 1 Assets are University of Texas and Texas A & M managed by the University of Texas Management Company 10/01/07 9

11 Other Institutions as of June 30, 2007 Institution Market Value Total Returns 1 Year Total Returns 3 Year Total Returns 5 Year Yale $22.5 billion 28.0% 24.4% 20.1% Northwestern University $6.5 billion 24.3% 18.9% 15.5% Harvard $34.9 billion 23.0% Unavailable Unavailable Indiana University Foundation $1.6 billion 21.5% 14.6% 13.6% Purdue University $1.8 billion 19.4% 14.3% 11.9% Michigan State University The Ohio State University University of Iowa Foundation $1.3 billion 19.0% 16.2% 14.3% $2.3 billion 18.0% 11.8% 11.2% $636.2 million 16.8% 10.5% 10.2% 10/01/07 10

12 Median Returns as of June 30, 2007 Total Return 1 Year Total Return 3 Year Total Return 5 Year Foundations and Endowments (Median) Foundations and Endowments with assets greater than $1 billion (Median) 17.5% 12.8% 11.5% 18.1% 13.1% 12.3% Source: Wilshire Trust Universe Comparison Service 8/23/07 OSU Return 18.0% 11.8% 11.2% Source: Cambridge Associates LLC periods ended 6/30/07 10/01/07 11

13 The Ohio S tate University OSU Long-Term Investment Pool Recommended Changes Effective September 30, 2007 (U.S. Equity Portfolio) Nicholas Applegate State Street Extended US Small-Cap Equity Bernzott Opus GW Capital Total Value Independence Nicholas Applegate Total Growth Diamond Hill Hoover Russell 2000 Index-Passive Blend Total Blend Asset Class US Large Cap Equity Fifth Third Huntington OSU Students S&P 500 Index-Passive US Mid-Cap Equity Meeder 100 Meeder Enhanced *Based on MV as of Style Value Value Blend Blend Blend Blend Growth $ 64.5 Index $ 40.2 $ Value $ 28.0 Value $ 31.2 Value $ 14.0 Tilt $ 73.3 Growth $ 31.3 Growth $ 65.1 Blend Blend July 31 MV (in millions) $ $ 46.0 $ 43.6 $ 25.0 $ $ $ 84.9 $ 41.2 $ 96.3 $ 10.6 $ 33.1 $ 12.0 $ 55.6 Current Large Cap Weight Recommended Changes 100% $ 20% $ - 19% $ 11% $ - 51% $ - 100% $ (13,234,831) 37% $ (38,000,000) 18% $ (18,000,000) 28% $ (17,000,000) 17% $ 60,000, % $ (4,565,284) 12% 14% $ - 6% $ - 33% $ - 14% $ - 29% $ (20,000,000) 43% $ (20,000,000) 5% $ (10,565,284) 15% $ - 5% $ 26,000,000 25% $ 15,434,716 Projected MV 9/30/07 (in millions) $ $ 46.0 $ 43.6 $ 25.0 $ $ $ 46.9 $ 23.2 $ 47.5 $ $ $ 28.0 $ 31.2 $ 14.0 $ 73.3 $ 31.3 $ 45.1 $ 76.3 $ - $ 33.1 $ 38.0 $ 71.0 Projected Weight 100% 19.8% Watch No Change; Portfolio manager retiring, monitor transition. 18.9% Probation Manager has underperformed benchmark and peers inception to date; Operational concerns. 10.7% Watch No Change; Monitor use of non-benchmark stocks. 50.8% N/A No Change 100% 21.6% Watch Reduce-Manager has overweight position; Periods of inconsistent performance vs. benchmark and peers. 10.7% Watch Reduce-Manager has overweight position; Periods of inconsistent performance vs. benchmark and peers. 21.8% Watch Reduce-Manager has overweight position; Effects of increased level of turnover at firm will be monitored closely. 46.0% N/A Invest proceeds from active manager changes. 100% 12.7% Retain No Change 14.2% Retain No Change 6.4% Retain No Change 33.2% 14.2% 20.4% 34.6% 15.0% 17.2% 32.2% Rank Watch Watch Terminate Performance has significantly lagged benchmark and peers; Reduced confidence in strategy; small-cap portfolio is somewhat crowded-overlap of strategies. Retain N/A No Change; Monitor parent company relationship (Convergent Capital Management effective May 2006). Reduce-Manager has overweight position; Effects of increased level of turnover at firm will be monitored closely. No change Comments Proceeds from active manager changes. 10/01/07 12

14 Conclusion The Office of the Treasurer is undergoing its most significant restructuring in the last 20 years. One outcome will be a stronger investment function. Another outcome will be increased transparency. Although there is room for improvement, donor and public funds are being protected and invested wisely. 10/01/07 13