Treasury Pool - $1.6 billion When building the portfolio, invest to - - PowerPoint PPT Presentation

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Treasury Pool - $1.6 billion

When building the portfolio, invest to maintain a balance between:

1. Safety 2. Liquidity 3. Return

Investment process starts with cash flow study

• Predict daily in and outflows
• Forecast daily liquidity

Segment 1

Daily liquidity

• 1. Safety
• 2. Liquidity

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Treasury Pool

Should the cash flow projections be incorrect, we set aside an amount in Segment 2

Segment 1 Segment 2

First source of liquidity

• 1. Liquid
• 2. AA credit quality
• 3. Short duration

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The remainder of the Treasury Pool is Segment 3

Investments can be more volatile with higher earnings expectations

Segment 1 Segment 2 Segment 3 $1.1 billion

Diversify

• 1. Asset classes

Mutual Funds Bonds Alternatives (CUF LTIP)

• 2. Styles

Active and Passive Value and Growth Concentrated and Diversified

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Treasury Pool Segment 3

(excludes CUF-LTIP) Large cap Mid cap Mid cap Small Cap

8 Equity Funds Value

Core Growth

Domestic Global Non-US

2 Fixed Income

BBB- BB+ Investment Grade All domestic

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Manager Selection and Review Process

Ten investment funds in Segment 3 Review Process

• Investment Advisory Committee - 8 meetings each year
• Annual face-to-face meetings with fund managers

Selection Process – Identify need to replace or add a fund

• Replace

1. Performance lags 2. Changes in staffing or organization 3. Change in investment style

• Add

1. Competitive performance and fees 2. Complements other portfolio funds 3. Due diligence review A manager is usually, but not always, hired after considering the above.

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Energy Sector Considerations

• Approximate size of energy sector
• 1. 8% of domestic market
• 2. 7% of non-US market
• Percent of funds eliminated if screening is applied – 85% to 90%
• Funds screened for fossil fuels are newer, smaller, have higher fees
• 1. Lower risk-adjusted returns are anticipated
• 2. Large firms are creating new funds and indices
• 3. 9 of 14 managers/sub-advisors are signatories to the UN’s PRI
• Looking ahead, if screen funds perform well, they will be considered

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Conclusion

Consideration for structuring and managing the Treasury Pool

• 1. University’s financial obligations must be met – three Segments
• a. Safety
• b. Liquidity
• c. Investment return
• 2. Input from IAC and investment consultant
• 3. Manager selection considerations
• a. Established need for new investments or manager replacement
• b. Investment committee assists with profile of manager
• c. Due diligence on potential managers
• d. New investments must complement existing strategy