FY 2015 Market Value Comparison PURDUE MARKET VALUES (IN MILLIONS) - - PowerPoint PPT Presentation

2015 ANNUAL REPORT

OF THE INVESTMENT COMMITTEE

David Cooper Chief Investment Officer Purdue Research Foundation

FY 2015 Market Value Comparison

PURDUE MARKET VALUES (IN MILLIONS)

Source: Market Values as of June 30, 2015 NCSE Study

$1,341 $1,494 $1,787 $1,736 $1,457 $1,633 $2,000 $1,917 $2,182 $2,473 $2,398 $0 $500 $1,000 $1,500 $2,000 $2,500 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15

$10,193 $9,952 $3,636 $3,634 $3,297 $2,465 $2,398 $2,388 $2,275 $1,974 $1,538 $1,263 $1,002 $986

2000 4000 6000 8000 10000

BIG TEN MARKET VALUES (IN MILLIONS)

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Financial Market Returns

7.4 4.1 10.6 6.5

• 5.3
• 4.8

8.8 24.9 13.4

• 23.7

2.3 0.8

• 25.0
• 15.0
• 5.0

5.0 15.0 25.0

S&P 500 U.S. Large Cap Value U.S. Large Cap Growth U.S. Small Cap International Emerging Private Equity Venture Capital Real Estate Commodities Treasuries

• Inv. Grade

Corpates

Asset Class Returns

Fiscal Year Ending June 30, 2015

• 4.8
• 8.2
• 4.1
• 16.8
• 13.5
• 22.6

NA NA NA

• 24.8

3.0 0.8

• 30.0
• 20.0
• 10.0

0.0 10.0

S&P 500 U.S. Large Cap Value U.S. Large Cap Growth U.S. Small Cap International Emerging Private Equity Venture Capital Real Estate Commodities Treasuries

• Inv. Grade

Corpates

Asset Class Returns

As of January 31, 2016

Since the End of the Fiscal Year………..

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Source: Cambridge Associates Note: Returns are based in U.S. Dollars

Returns for Selected Indices (in percentages)

FY15 NACUBO Endowment Study

FOR FISCAL YEARS ENDED JUNE 30

Source: 2015 NCSE Study

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One Year Three Year Five Year Ten Year Purdue University 2.4 10.4 10.2 6.7 Top Decile 7.8 11.7 11.1 7.9 Top Quartile 3.7 10.9 10.6 6.9 All Institutions Median 2.2 9.8 9.5 6.2 Public Endowments 2.5 10.1 9.7 6.5 Over $1.0 Billion 4.3 10.8 10.4 7.2 All Private Colleges and Universities 2.4 9.9 9.8 6.3 Target Benchmark* 0.6 9.2 9.3 5.5

*28 percent R3000 + 13 percent MSCI EAFE + 5 MSCI Emerging markets + 25 percent HFRI Diversified Index + 7 percent Cambridge Private Natural Resources Index + 7 percent MSCI World NR Index + 15 percent Barclays Aggregate Bond Index

Outperformance vs. Target Benchmark

Return(%) Vol.(%) Sharpe Beta Return(%) Vol.(%) Sharpe Beta

Purdue 10.4 4.9 2.03 0.54 10.2 7.6 1.30 0.54 Target Benchmark

9.2 5.8 1.55 0.65 9.3 8.8 1.04 0.64 0.0 5.0 10.0 15.0

0.0 5.0 10.0 15.0 20.0

Return (%) Annualized Standard Deviation (%)

Trailing 3-Years

Purdue Target Benchmark

Trailing 3-Years Trailing 5-Years

0.0 5.0 10.0 15.0

0.0 5.0 10.0 15.0 20.0

Return (%) Annualized Standard Deviation (%)

Trailing 5-Years

Target Benchmark Purdue

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Source: Cambridge Associates, Calculations are based on monthly data net of fees

FY 15 Asset Allocation

Source: 2013 NCSE Study *Manager counts reflect the current active managers

6 Asset Class Policy Targets Policy Range

Purdue Actual Over $1.0 Billion Over $1.0 Variance

U.S. Equity 18.0% 10-35%

21.1% 13.0% 8.1%

Non-U.S. Equity 13.0 5-20%

13.8

11.4

2.4

Emerging Markets 5.0 0-10% 6.6 7.6

(1.0)

Total Equities 36.0 15-65% 41.5 32.0

9.5

Private Equity 5.0 2.5-7.5%

6.6 15.0 (8.4)

Venture Capital 5.0 2.5-7.5%

5.6 7.0 (1.4)

Hedge Funds 25.0 10-30%

24.6 21.0 3.6

Real Estate 7.0 2-10%

5.7 7.0 (1.3)

Natural Resources 7.0 0-10%

4.4 7.0 (2.6)

Total Alternatives 49.0 17-65%

46.9 57.0 (10.1)

Fixed Income/Cash 15.0 10-20%

11.6 11.0 0.6

100.0%

100% 100.0% 0.0%

FY16 Performance Update

ENDOWMENT RETURNED -7.5% FOR THE FISCAL YEAR-TO-DATE AS OF JANUARY

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Contributors: Public Real Estate Fixed Income Detractors: Equities Hedge Funds

• 7.5
• 8.3
• 14.6
• 20.8
• 8.9

1.8 0.2

• 25.0
• 20.0
• 15.0
• 10.0
• 5.0

0.0 5.0 Total Assets U.S. Equity International Emerging Hedge Funds Public Real Estate Fixed Income

Asset Class

FY 16 Performance Update

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• With an expected long term rate of return of 7% and a standard deviation of 10%:
• Any given year, approximately 2/3 of the time, the portfolio is expected to return between -3% and +17%.
• Approximately one in seven years, the portfolio is expected to return between -13% and -3%.
• Purdue’s fiscal year-to-date performance is -7.5 percent.
• Given the Endowment’s goal of spending plus inflation, the portfolio needs to take

market risks and should be expected to experience volatility at times. 7%

• 13%

27%

• 3%

17% Expected returns Probabilities FY15 = 2.4% Current FY16 = -7.5%

PURDUE INVESTMENT POOL - CASH

PIPC Characteristics

$928 $933 $998 $1,062 $992 $1,030 $1,110 $1,277 $1,217 $1,315 $1,514 $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY15

PIPC Market Value

• Fixed income investment portfolio
• Collects and invests operating funds
• Daily liquidity needs of the University
• Dollar in dollar out - No risk to the participant
• Student fee and state appropriations

restricted to fixed income by state statutes

• PIPC Loan Fund
• Self liquidity support for variable rate debt
• General Fund Budget Support

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For Fiscal Years Ended June 30, Market Value does not include the Quasi Endowment

PIPC Investment Results

– Funds placed with external managers – FY15 return: 1.32% - Benchmark 1.06%, CY return: 0.63% - Benchmark 0.47% – FYTD return through January 31, 2016: 0.20% - Benchmark 0.88% – $293 million Quasi Endowment – Liquid, short duration and high quality – Continued downward pressure on income based on interest rates – Current yield is 1.69 percent – Offset by gains and size of pool

Asset Class (as of June 30, 2015) Policy Range Actual Cash and Cash Equivalents $50M – 100% 29% U.S. Treasury Bills, Notes, Bonds, and Agencies 0 – 100% 30% Corporate Bonds 0 – 50% 26% Mortgage-Backed Securities 0 – 30% 10% Asset-Backed Securities 0 – 25% 5%

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PIPC Annualized Returns

1.3% 1.5% 2.3% 3.8% 1.1% 1.2% 1.9% 3.2% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 1-year 3-Years 5-Years 10-Years PIPC Benchmark

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FOR FISCAL YEARS ENDED JUNE 30