he finance committee of the Fund's board of directors is responsible for the effective and prudent investment of the endowment, a task essential to assuring a stable source of funds for programs and the foundation's perpetuity. The committee determines the allocation of the endowment among asset classes and hires external managers, who do the actual investing. Day-to-day responsibility for the management of the endowment rests with the Fund's executive vice president and treasurer, who with the assistance of Cambridge Associates consultants is also responsible for researching policy questions to be addressed by the committee. The committee meets at least twice a year with the Fund's principal external investment managers, at which time it also deliberates investment issues affecting the management of the endowment and considers new undertakings.
The value of the endowment fell from $501.7 million on June 30, 2002, to $498.3 million on June 30, 2003, reflecting a return of 5.3 percent on the investment portfolio during the year combined with total spending (including programs, administration, investment management fees, and taxes) of $30.8 million. In that 12-month period, the return of the Wilshire 5000 index of U.S. stocks was 1.3 percent; the return of the Lehman Aggregate Bond index was 10.4 percent; and the return of a benchmark portfolio weighting these two broad market indexes according to the Fund's target allocations of stocks and bonds during the year was 5.2 percent. The Fund's overall investment performance exceeded the 2.6 return produced by the median balanced U.S. manager during the fiscal year.
The Fund's team of marketable equity (U.S. and international) managers produced a combined 12-month return of 5.0 percent, well above the Wilshire 5000's 1.3 percent, the median U.S. equity manager's -.1 percent, and the EAFE international stock index return of -6.1 percent. In a period of pronounced volatility in marketable equity markets, almost all of the foundation's equity managers produced very strong returns compared with their market benchmarks. The Fund's bond manager underperformed the Lehman Aggregate index (8.5 percent versus 10.4 percent), as a result of an early bet on U.S. economic recovery. Reflecting both depressed private equity market returns and the youth of most of the foundation's current venture capital and other private equity partnerships, this segment of the portfolio detracted from overall performance during the year.
The Fund's investment returns in 2002-03 continued to benefit from the significant restructuring of the management of the endowment that the foundation's finance committee began in early 2000. The restructuring has been aimed at reducing the risk of performance significantly divergent from that of the overall market or peer institutions and at streamlining the management structure.
|
