2016 ANNUAL REPORT OF THE INVESTMENT COMMITTEE David Cooper Chief Investment Officer Purdue Research Foundation
Fiscal Year 2016 Market Value and Performance PURDUE MARKET VALUES (IN MILLIONS) $2,473 $2,398 $2,500 $2,255 $2,182 $2,000 $1,917 $1,787 $2,000 $1,736 $1,633 $1,457 $1,500 $1,000 $500 $0 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 Investment 19.4% -2.7% -20.4% 14.4% 23.7% -2.5% 12.2% 17.1% 2.4% -3.4% Performance ANNUALIZED NET INVESTMENT RETURNS 1-Year 3-Year 5-Year 10-Year Purdue Endowment -3.4% 5.0% 4.9% 5.2% Target Benchmark -2.1% 4.7% 4.6% 4.2% 2
Fiscal Year 2016 Performance Update Purdue Endowment Preliminary Returns (in Percent) 20.0 17.8 15.0 10.1 10.0 3.5 3.3 5.0 0.0 -0.5 -5.0 -3.4 -10.0 -7.1 -8.0 -15.0 -11.8 -20.0 -18.8 Contributors: Public and Private Real Estate Private Equity / VC Fixed Income Detractors: Equities Hedge Funds * Preliminary Natural Resources 3
Outperformance vs. Target Benchmark Trailing 3-Years Trailing 5-Years 10.0 10.0 Return (%) Return (%) Purdue Purdue 5.0 5.0 Target Target Benchmark Benchmark 0.0 0.0 0.0 5.0 10.0 0.0 5.0 10.0 Annualized Standard Deviation (%) Annualized Standard Deviation (%) Trailing 3-Years Trailing 5-Years Return(%) Vol.(%) Sharpe Beta Return(%) Vol.(%) Sharpe Beta Purdue 5.0 6.6 0.76 0.57 4.9 7.7 0.65 0.56 Target Benchmark 4.7 7.6 0.65 0.64 4.6 8.8 0.56 0.64 Source: Cambridge Associates, Calculations are based on monthly data net of fees 4
PURDUE ENDOWMENT ASSESSMENT RESULTS
ASSET ALLOCATION MODIFICATION THEMES INVE STME NTS The following main themes of change are based on the past several months of investigation, research, interviews, committee(s) discussions, and survey results. 1. Significantly Modify and Reduce Hedge Funds from 25% to 15% (40% Reduction) Currently not demonstrating intended purpose Crowded industry Fees are weighing on performance Replace with lower cost options 2. Increase Public and Private Equity Better probability of achieving return imperatives Efficiency does not materially change Investment profile of Endowment has the ability to accept added risk Similar to risk of the “majors” peers Limited choices with reduction of hedge fund proceeds 3. Increase Public Equity Passive Management Transition current passive public equity management from 23% to 50% Public markets continue to trend toward efficiency Frustration with recent performance of active management 6
CURRENT POLICY VS. PROPOSED INVE STME NTS 7
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