Asset Management Committee: October 7, 2015
Chairman Kevin Lockett presided at the regularly scheduled meeting on October 7, 2015. The following actions were taken:
Meeting minutes for the August 17, 2015 Asset Management Committee were approved.
Staff began by thanking committee members who have served their terms and welcomed new committee members.
Staff gave an overview of recent travel and its views on emerging markets and global equities, specifically as it related to China. Staff also shared its opinion on real estate and energy from its recent manager meetings. Staff mentioned that most managers it has recently met with share its cautious view on global markets.
Staff introduced the topical discussion for December and stated that it will be focused on the 66 percent of the endowment pool invested in the growth engine, which includes both private and public equities.
Chairman Lockett introduced the October topical discussion regarding the risk overlay and volatility cap strategies. Staff noted that the strategies were put in place after the endowment pool experienced a decline over 20 percent in fiscal year 2009, which made distributions difficult. It was then decided a task force would be assembled to study strategies limiting drawdown in the Endowment pool to 20 percent.
Staff and the Committee discussed the volatility cap and risk overlay strategies in depth. Staff noted that since the inception of the account, the risk overlay has added value to the portfolio. The volatility cap has not been executed since inception.
Staff recommended exiting the risk overlay strategy and adding a managed futures allocation in its place. Staff told the Committee that it has already selected a manager for the new mandate. Staff also recommended maintaining the strategic asset allocation, but asked the committee to allow staff to tactically overweight diversifiers outside of the current rebalancing ranges. Staff noted that the shift in asset allocation was a proposal and not a recommendation to alter the strategic asset allocation. The committee approved staff’s request.
The committee discussed that the Governance Committee will be presented with a proposal for trust management for new trusts at the December meeting by Staff, at which time, the committee will be given a further update on its role in governance of the trusts.
Staff then reviewed fees paid in FY15 and highlighted that fees are down roughly 10 percent from FY13. Staff showed fees by strategy and asset class, noting the highest fees are paid to hedge fund and private capital managers.
Staff noted that the distribution policy for the endowment pool is inflation based using CPI and is capped/floored at 4.5 percent/3 percent of the market value of the endowment pool. Staff recommended no changes to the current formula based approach or to any other element of the policy.Staff then discussed the comprehensive reserve policy.