Title of Project - University of North Carolina Wilmington

Endowment Board University of North Carolina Wilmington April 3, 2014

1

2

Endowment Board University of North Carolina Wilmington Thursday, April 3, 2014 at 3:00 pm Masonboro Island Room, Fisher Student Center Agenda Welcome

Ms. Wendy Murphy

Approve Minutes of October 24, 2013

Ms. Wendy Murphy

Results of FY 2013 NACUBO Endowment Study

Ms. Roberta LaSure

Endowment Portfolio at February 28, 2014 (unaudited)

Ms. Roberta LaSure

Endowment Performance Returns through February 28, 2014

Ms. Roberta LaSure

Request for Proposal: Investment Consulting Services

Mr. Charles Maimone/Dr. Rick Whitfield

Update: BOG Approval of UNCW Request of a For-Profit Associated Entity

Mr. Rob Hoon/Mr. Charles Maimone

Closed Session

Mr. Charles Maimone

Adjournment

Ms. Wendy Murphy

3

2013 NACUBO Endowment Study For the Year Ended June 30, 2013

4

NACUBO Endowment Study Overview • 835 U.S. endowments and affiliated foundations participated in the 2013 NACUBO-Commonfund Study of Endowments (NCSE) • All data is through June 30, 2013 • The breakdown of participating institutions is by size below Percent of total respondents

Percent of total endowment dollars

Over $1 billion

16%

10%

8%

15%

$501 million to $1 billion $101-$500 million

20%

31%

Over $1 billion $501 million to $1 billion

11.0% 71.6%

13.2%

$51-$100 million

$51-$100 million

$25-$50 million Under $25 million

$101-$500 million

2.7%

0.4%

1.1%

$25-$50 million Under $25 million

5

NACUBO Endowment Study: Average Returns of Top Performers and Select Portfolio Sizes FY2013 Average 1,3,5 & 10 Net Returns per NACUBO and by UNCW Portfolio Top Decile Top Quartile All Institutions All Public Institutions Over $1 Billion $51 Million - $100 Million University Endowment Portfolio Foundation Endowment Portfolio UNC Investment Fund TIFF Multi-Asset Fund GMO Quality Strategy Fund GMO US Equity Fund

1 Year 16.4 14.7 11.7 11.5 11.7 11.6 12.9 11.8 11.8 12.6 16.5 18.2

3 Year 12.1 11.7 10.2 10.3 10.5 10.0 10.8 9.4 9.4 10.5 18.8 19.2

5 Year 5.6 5.2 4.0 4.2 3.8 4.0 4.4 2.2 2.2 5.5 9.0 8.6

10 Year 7.5 7.5 7.1 7.1 8.3 6.7 9.1 n/a n/a 9.4 n/a 7.3

6

NACUBO Endowment Study: Asset Allocation of Top Performers and Select Portfolio Sizes FY2013 Asset Allocations per NACUBO and per UNCW

Top Decile Top Quartile All Institutions All Public Institutions Over $1 Billion $51 Million - $100 Million University Endowment Portfolio Foundation Endowment Portfolio UNC Investment Fund TIFF Multi-Asset Fund GMO Quality Strategy Fund GMO US Equity Fund * dollar weighted

Domestic Alternative Equities Fixed Income Int'l Equities Strategies 28 10 18 40 22 9 19 46 16 10 18 53 19 12 19 47 13 8 17 59 33 20 20 23 34 6 12 41 12 2 8 61 14 2 10 71 28 17 27 16 86 13 100

S-T Securitites/ Cash/Other 4 4 3 3 3 4 7 16 2 2 1

7

NACUBO Endowment Study: Spending Policy and Long-Term Return Objectives Spending Policy for FY2013 Total numbers in percent (%) Institutions Over $1 Billion $51 - $100 Million Percentage of moving average 77 60 83 Average Percentage 4.7 4.7 4.8 Long-Term Return Objectives Total numbers in percent (%) Institutions Over $1 Billion $51 - $100 Million Have return objectives 72 61 75 Less than 5% 2 1 1 5.0% - 5.9% 9 6 10 6.0% - 6.9% 7 5 7 7.0% - 7.9% 17 12 18 8.0% - 8.9% 30 30 30 9% and over 7 7 9 Do not have return objectives 13 12 10 No answer/uncertain 15 27 15

8

NACUBO Endowment Study: Internal Chief Investment Officer

9

NACUBO Endowment Study: Outsourced Investment Consultant

10

ENDOWMENT PORTFOLIO INVESTMENT STATEMENT At February 28, 2014

Consolidated Endowment Investment Activity thru February 28, 2014

BEGINNING MARKET VALUE

Total Endowment Funds

University Endowments

Foundation Endowments ***

Fiscal Year To-Date 7/1/13 -2/28/14

Fiscal Year To-Date 7/1/13 - 2/28/14

Fiscal Year To-Date 7/1/13 -2/28/14

$

76,009,323

$

3,818,828 167,000 (55,112) 3,930,716

$

503,674 4,818,384 2,166,953 7,489,011

DISBURSEMENTS Annual endowment distributions Annual administrative fees Investment Fund Fees TOTAL DISBURSEMENTS ENDING MARKET VALUE

RECEIPTS Donor Contributions Match from General Administration Repurposing of gifts by donors TOTAL RECEIPTS EARNINGS Interest and Dividends Realized Gains /Losses Unrealized Gains /Losses TOTAL EARNINGS

***

$

72,283,342

$

3,816,318 167,000 (20,866) 3,962,452

$

481,896 4,785,144 1,845,977 7,113,017

$

(2,275,653) (575,983) (149,110) (3,000,746)

$

84,428,304

$

3,725,981

2,510

$

(34,246) (31,736)

$

21,778 33,240 320,976 375,994

$

(2,207,146) (558,911) (141,908) (2,907,965)

$

(68,507) (17,072) (7,202) (92,781)

$

80,450,846

$

3,977,458

Includes $1,370,478 not managed by Board but by students as part of student managed investment portfolio

11

University’s Endowment Investment Activity thru February 28, 2014

BEGINNING MARKET VALUE

Total University Endowment Investments $ 72,283,342

% of Endowment Investments

Total Pooled Endowment Investments $ 69,724,700 100.0%

FISCAL YEAR TO-DATE THRU FEBRUARY 28, 2014 POOLED ENDOWMENT INVESTMENTS State Note UNC Treasurer's S/T Receivable Investment TIFF Multi- GMO Quality GMO US Investment from Fund Asset Fund Fund Equity Fund Fund Foundation $ 37,008,371 $ 14,189,239 $ 9,960,075 $ 5,202,875 $ 2,085,695 $ 1,278,445 53.0%

20.4%

14.3%

7.5%

-

-

3.0%

RECEIPTS Donor Contributions Match from General Administration Repurposing of gifts by donors Transfers TOTAL RECEIPTS

3,816,318 167,000 (20,866) $ 3,962,452

3,816,318 167,000 (20,866) (1,000,000) (1,307,403) $ 3,962,452 $ (1,000,000) $ (1,307,403) $

- $

3,816,318 167,000 (20,866) 2,307,403 6,269,855 $

EARNINGS Interest and Dividends Realized Gains /Losses Unrealized Gains /Losses TOTAL EARNINGS

481,896 4,785,144 1,845,977 $ 7,113,017

481,896 122,524 214,226 133,198 4,785,144 537,538 1,307,403 966,389 1,973,483 1,845,977 3,364,090 (49,889) (462) (1,467,762) $ 7,113,017 $ 3,901,628 $ 1,380,038 $ 1,180,153 $ 638,919 $

11,948 331 12,279 $

DISBURSEMENTS Annual endowment distributions Annual administrative fees Investment Fund Fees Promissory note payments Purchase of real estate TOTAL DISBURSEMENTS ENDING MARKET VALUE % of Endowment Investments

(2,207,146) (558,911) (141,908) (2,907,965) $ 80,450,846

(2,207,146) (558,911) (141,908) (2,013,366) (4,921,331)

(141,908)

(141,908)

-

- $

-

-

-

-

-

-

$ 75,878,838 $ 39,768,091 $ 14,261,874 $ 11,140,228 $ 5,841,794 $ 100%

52.4%

18.8%

14.7%

7.7%

(2,207,146) (558,911) 1,278,445 (2,013,366) (3,500,978) 4,866,851 $ 6.4%

12

ENDOWMENT REAL ESTATE & OTHER ASSETS Total NonPooled Non-Pooled Life Endowment Real Estate Endowed Insurance Investments Properties Scholarship Gift $ 2,558,642 $ 2,531,832 $ 11,008 $ 15,802

1.8%

100.0%

99.0%

-

0.4%

0.6%

-

-

- $

- $

- $

-

-

- $

- $

- $

-

-

-

-

2,013,366 2,013,366

-

-

(1,278,445) (1,278,445) 0.0%

$

2,013,366 2,013,366

-

$ 4,572,008 $ 4,545,198 $ 100.0%

99.5%

11,008 $ 15,802 0.2%

0.3%

Foundation’s Endowment Investment Activity thru February 28, 2014 FISCAL YEAR TO-DATE THRU FEBRUARY 28, 2014 Student Managed Board Managed Endowments Endowment Total Foundation Endowment Investments BEGINNING MARKET VALUE

$ 3,725,981

% of Endowment Investments

RECEIPTS Contributions Transfers TOTAL RECEIPTS

UNC Investment Fund $

100.0%

State Treasurer's S/T Investment Fund

2,127,090

$

57.1%

$

2,510 (34,246) (31,736) $

(47,296) (47,296) $

$

21,778 33,240 320,976 375,994

14,164 203,675 217,839

DISBURSEMENTS Annual endowment distributions Annual administrative fees Investment Funds Fees TOTAL DISBURSEMENTS

$

(68,507) (17,072) (7,202) (92,781) $

ENDING MARKET VALUE

$ 3,977,458

EARNINGS Interest & Dividends Realized Gains (Losses) Unrealized Gains (Losses) TOTAL EARNINGS

% of Endowment Investments

100.0%

$

$

$

(7,202) (7,202) $

57.5%

$

$

1,247,057

9.4%

33.5%

2,510 47,296 49,806

$

(34,246) (34,246)

$

21,290 19,076 117,301 157,667

488

-

2,290,431

351,834

TD Ameritrade

488

(68,507) (17,072) (85,579) $ 316,549 8.0%

$

1,370,478 34.5%

13

14

ENDOWMENT INVESTMENT PERFORMANCE RETURNS Through February 28, 2014

15

Endowment Portfolio Returns @ February 28, 2014

Portfolio vs. Benchmarks UNCW Endowment Portfolio CPI + 4.5% (spend rate) CPI +5.75% (spend rate + admin fee)

16.0%

14.3%

Annualized Net Returns @ February 28, 2014 Return since 1 YR 3 YR 5 YR 10 YR inception 14.3% 9.4% 10.8% 8.2% 7.7% 5.6% 6.5% 6.5% 6.9% 7.2% 6.9% n/a n/a n/a 8.4%

UNCW Endowment Return vs. Benchmarks

14.0% 12.0%

10.8% 9.4%

10.0%

8.2%

8.0% 6.0%

Date of inception 07/01/87

6.9% 5.6%

6.9%

6.5%

6.5%

4.0% 2.0% n/a

n/a

n/a

0.0%

1 YR UNCW Endowment Portfolio

3 YR CPI + 4.5% (spend rate)

5 YR

10 YR CPI +5.75% (spend rate + admin fee)

16

Endowment Fund Manager Returns @ February 28, 2014 Investment Name UNC Investment Fund, net return Strategic Investment Policy Portfolio (SIPP)

TIFF Multi Asset Fund (MAF), net return Constructed Index

GMO Quality Fund , net return S&P 500

GMO US Equity, net return S&P 500

Annualized Net Returns @ February 28, 2014 Date UNCW Fund of UNCW 1 YR 3 YR 5 YR 10 YR Inception Inception Inception 14.5% 8.8% 9.1% n/a 9.3% 9.3% 08/01/03 n/a

n/a

n/a

n/a

n/a

n/a

12.2%

7.9%

16.6%

8.6%

7.3%

8.5%

16.8%

6.3%

8.3%

5.8%

14.6%

6.7%

18.4%

15.1%

18.4%

6.4%

25.4%

14.4%

23.0%

7.2%

19.5%

7.2%

15.1%

19.9%

5.9%

16.8%

11.3%

25.4%

14.4%

23.0%

7.2%

19.5%

11.1%

Investment Manager Allocations GMO 22.4% $17.0M

UNC Invest. Fd 52.4% $39.8M

03/20/06

03/31/95

04/30/09

02/06/04

04/01/09

09/18/85

7.7%

18.3%

TIFF 18.8% $14.3M

Date of Fund's Inception 01/01/03

STIF 6.4% $4.9M

17

INVESTMENT COMMITTEE INTIATIVES

18

Background: Investment Committee Initiatives • Results of combined efforts of Endowment & Foundation Investment Committees over past few years: 1. Updated and revised Investment Policy Statement (IPS) 2. Systematic review of asset allocation at portfolio level 3. Refined Investment Performance Report against benchmarks

• Committees recommended UNCW staff’s next project be an assessment of our current investment management structure relative to spectrum of services offered in marketplace

19

UNCW Endowment at a Glance Endowment • •

Total investable assets of $76M for University and $3M for Foundation Currently utilizing “hybrid” approach  Two outsourced CIO managed funds – UNCMC and TIFF, representing 73% of assets • UNCW is “little fish in big pond” – receive little attention from managers • Structure of each managed pool is a “fixed menu” – no customization

 Two direct mutual fund investments with GMO, representing 23% of assets

Endowment Board • •

7 Trustees Quarterly meetings

UNCW Staff •

VC of Business Affairs, Associate VC Finance & Director of Endowment Accounting

Catalysts For Change in Oversight & Management Issues Facing Institutional Investors • •

Progressively more complex and volatile markets Increased complexity in strategies and financial instruments  Increased time and expertise required for proper oversight

• •

Expectations of a potentially lower return environment Growing emphasis on risk adjusted performance returns

Issues Facing Smaller & Mid-Size Universities • • •

Limited resources to develop in-house investment capabilities Lack economies of scale Building donor confidence

Issues Facing University Investment Committees • • •

Trustee Succession – loss of continuity as trustees roll off committees Active asset management no longer a desirable role Focus on governance and policy; reviewing asset allocation and performance returns against benchmarks

20

21

Participants in Process • Endowment & Foundation Board member participants in this process:         

Britt Preyer Edward Alexander Steve Warwick Hank Miller Jason Wheeler Chad Paul David Hartness Charles Mattox Robert Keith

• UNCW Staff participants in this process:  Vice Chancellor for Business Affairs  Associate Vice Chancellor for Finance  Director of Endowment Accounting

22

Request for Information (RFI) • UNCW issued Request for Information (RFI) in July, 2013 to conduct assessment and gather relevant information on the spectrum of investment consulting services offered in marketplace • UNCW staff reviewed all 40 responses and recommended on-campus visits from 3 firms whose core client base consist of higher education institutions, who offer full range of discretionary services, and who are not a subsidiary of a larger holding company

• Visits from following (3) firms completed on January 15, 2014:  Fund Evaluation Group  Hirtle Callaghan  Cambridge Associates

23 kkkkkkkkk

24 Three Common OCIO Models Single commingled fund

Multiple commingled funds

Multiple direct investments

Ex: UNCMC, TIFF

No ownership of managers

Complex administration

Cash in / cash out

Not Customized

Fully Customized

25

Next Steps: Request for Proposal • Investment committee members and other Board participants recommended issuing a Request for Proposal for outsourced Chief Investment Officer (CIO) services with full discretion

26

Endowment Board University of North Carolina Wilmington Thursday, April 3, 2014 at 3:00 pm Masonboro Island Room, Fisher Student Center Agenda Welcome

Ms. Wendy Murphy

Approve Minutes of October 24, 2013

Ms. Wendy Murphy

Results of FY 2013 NACUBO Endowment Study

Ms. Roberta LaSure

Endowment Portfolio at February 28, 2014 (unaudited)

Ms. Roberta LaSure

Endowment Performance Returns through February 28, 2014

Ms. Roberta LaSure

Request for Proposal: Investment Consulting Services

Mr. Charles Maimone/Dr. Rick Whitfield

Update: BOG Approval of UNCW Request of a For-Profit Associated Entity

Mr. Rob Hoon/Mr. Charles Maimone

Closed Session

Mr. Charles Maimone

Adjournment

Ms. Wendy Murphy

27

Endowment Board University of North Carolina Wilmington Thursday, April 3, 2014 at 3:00 pm Masonboro Island Room, Fisher Student Center Agenda Welcome

Ms. Wendy Murphy

Approve Minutes of October 24, 2013

Ms. Wendy Murphy

Results of FY 2013 NACUBO Endowment Study

Ms. Roberta LaSure

Endowment Portfolio at February 28, 2014 (unaudited)

Ms. Roberta LaSure

Endowment Performance Returns through February 28, 2014

Ms. Roberta LaSure

Request for Proposal: Investment Consulting Services

Mr. Charles Maimone/Dr. Rick Whitfield

Update: BOG Approval of UNCW Request of a For-Profit Associated Entity

Mr. Rob Hoon/Mr. Charles Maimone

Closed Session

Mr. Charles Maimone

Adjournment

Ms. Wendy Murphy