Asset Management Committee: December 13, 2012
The Asset Management Committee met on Dec. 13, 2012. Chairman Richard Myers presided. The theme of this meeting was policy review and updating. In addition to the regular performance monitoring reports reviewed in the November 16 teleconference, the following are a few of the reports received and actions taken at the regular meeting:
- The committee received from staff a final report of the asset allocation study conducted by consultant Cambridge Associates (CA). Staff reviewed the key risk factors to the portfolio that were specifically analyzed during the study. The four recommendations CA made were:
- Continue the planned reductions of the distributions to the deans and foundation operations to increase the sustainability of the endowment. Modeling showed the endowment portfolio as currently constructed, and with the planned reduction to total distributions, has a reasonable probability of maintaining intergenerational equity.
- The CA stress tests of the impact of extreme market downturns indicated the percent of the portfolio represented by illiquid private-capital investments could rise to uncomfortable levels. CA recommended continuing to reduce the current elevated level of private-capital exposure. (The current level is above the strategic allocation as a result of both the market downturn of 2009 and the implementation of a risk-overlay strategy to reduce the impact to the portfolio during a market drawdown. Staff began scaling back new commitments to private capital in 2009 and will continue to do so.)
- Changing of the long/short strategies and inflation-hedge benchmarks was recommended to more accurately monitor relative performance.
- A reduction of the potential impact of increased market exposure through operations of one of the two overlay strategies was recommended. (Staff will evaluate ways to address this concern and present recommendations to the committee.)
If you are interested in learning more about the status of the endowment and the policies and procedures utilized in managing all KSU Foundation assets, please click here: http://www.found.k-state.edu/financials/investments/