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he investment committee of The Commonwealth Fund's board of directors is responsible for the effective and prudent investment of the endowment, a task essential to ensuring 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 COO/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 three times a year to review the performance of the endowment and individual managers, reassess the allocation of the endowment among asset classes and managers and make changes as appropriate, deliberate investment issues affecting the management of the endowment, and consider new undertakings.
The value of the endowment rose from $606.7 million on June 30, 2005, to $667.8 million on June 30, 2006, reflecting a return of 15.4 percent on the investment portfolio during the year combined with total spending (including programs, administration, investment management fees, and taxes) of $30.0 million. In that 12-month period, the return of the Wilshire 5000 index of U.S. stocks was 10.0 percent; the return of the Lehman Aggregate Bond index was -0.8 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 7.8 percent. The Fund's overall investment performance exceeded not only that of the weighted market benchmarks but also the 9.9 percent produced by the median U.S. balanced manager during the fiscal year.
The Fund's team of marketable equity (U.S. and international) managers produced a combined 12-month return of 19.2 percent, well above the Wilshire 5000's 10.0 percent and the median U.S. equity manager's 9.3 percent. The foundation's energy, emerging markets equities, international equities, commodities, hedge fund, U.S. small capitalization growth stock, and venture capital/private equity managers produced very strong returns compared with their market benchmarks, and accounted for the overall superior equity team performance. The Fund's bond manager team (including a global fixed-income manager) outperformed the Lehman Aggregate bond index (1.6% vs. -0.8%) in 2005-06.
The Fund's investment returns in 2005-06 continued to benefit from the significant restructuring of the management of the endowment that the foundation's investment 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.
 
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