five years after the financial crisis - nacubo

Five Years After the Financial Crisis: Did the Endowment Model Fail Us or Did We Fail the

Endowment Model?

NACUBO Endowment and Debt Management ForumFebruary 5, 2014

S T R A T E G I C A D V I C E & P L A N N I N G | I N V E S T M E N T M A N A G E M E N T | M E R C H A N T B A N K I N G

Casey Whalen Sellers, Chief Investment Officer

1 ROUNDTABLE INVESTMENT PARTNERSStrategic Advice & Planning | Investment Management | Merchant Banking

I n t r o d u c t i o n

Casey D. Whalen Sellers, CFA – Chief Investment Officer

• Former CIO, The New York Public Library, responsible for building the investment office

• Former Director of Public Investments (hedge strategies, equities & fixed income), The Rockefeller

University

• Former Investment Director of Brookdale Realty Partners, commercial real estate development &

acquisition

• Former Senior Analyst of Yale University Investments Office, responsible for various asset classes

including foreign equities and fixed income

Roundtable Investment Partners

• A shared investment office for a select set of institutions and institution-sized families

• Designed to provide investment capabilities to mid-sized clients that have historically been

accessible to large universities and charitable foundations

• Pride ourselves in providing a service that feels and acts like an in-house investment office. We

understand that every institution and family is unique.


C o n t e n t s

The Endowment Model

Drivers of Return

Measuring Risk

Unique Institutional Attributes

Conclusions

Takeaways

3

The Endowment Model


The endowment model is a philosophical approach to investing, not a defined

asset allocation.

D e f i n i t i o n o f t h e e n d o w m e n t m o d e l

Portfolio StrategyPortfolio Strategy Investing StrategyInvesting Strategy ManagementManagement

• Broadened asset allocation

• Long time horizon

• Total return

• Disciplined spending rules

• Aligned with operating

budget

• Equity bias

• Fundamental underpinnings

• Expert manager selection

• Blend of liquid and illiquid

investments

• Analytical rigor

• Principal orientation

• Dedicated, experienced team

• Institutional philosophical

alignment

Endowment Model

THE ENDOWMENT MODEL


There is no ‘magic’ model

• Similar asset allocations can produce very different results

• Results achieved by successful investment offices are not easily replicated

• Incorporating alternative assets alone does not guarantee success

One size does not fit all

• Each institution is unique

• Revenue and expense compositions differ

• Institutions should leverage their unique strengths and understand their limitations

Asset allocation is often viewed as the primary driving force behind returns. However,

if you analyze the leading endowments, implementation and performance attribution

vary and are often reflective of the CIO’s knowledge base, needs of the institution and

natural intellectual capital base affiliated with the institution.

THE ENDOWMENT MODEL

W h y d o e s t h e d e f i n i t i o n o f t h e m o d e l m a t t e r ?


Committed resources

• Experienced investment professionals

• Dedicated full-time team (internal or external)

• Sufficient capital support

Softer, qualitative factors have contributed to success

• Culture

• Character

• Governance

• Alignment of interests

Implementation is key to success. Therefore, internal or external resources need to be

matched appropriately to the complexity of the portfolio.

THE ENDOWMENT MODEL

W h y d o e s t h e d e f i n i t i o n m a t t e r ? ( c o n t i n u e d )


THE ENDOWMENT MODEL

C r i t i c s p o i n t t o 2 0 0 9 a s e v i d e n c e t h a t t h e m o d e l i s f l a w e d

Systemic crisis

• Went beyond a specific asset class; global in nature and structurally damaging

• Paralyzing for many investors, even veterans

• Fear overrode greed

Negative implications for endowments

• Risk framework shifted quickly and dramatically

• Normal rebalancing was difficult to implement

• Illiquidity from private alternatives and leverage left some handcuffed

• Some were forced to “sell low” (creating permanent loss of capital)

• Operating budgets were severely impacted

The impact of the 2008 financial crisis was pervasive across many asset classes. Unlike

previous downturns, there were few places to hide, especially for long-term, equity

oriented capital. Most endowment portfolios experienced stress during this period and

many were surprised by the drawdowns in the equity oriented portfolios.


THE ENDOWMENT MODEL

O t h e r h e a d w i n d s l e a d i n g u p t o t h e c r i s i s

Alternative asset class markets maturing

• Large amounts of capital flowing into alternatives

• Number of alternative investment managers grew dramatically, but alpha is a zero sum game

• Agency issues develop as fund assets grew larger

Large revenue sources were highly correlated

• Philanthropic support and endowment market values both suffered

Increased tension between current spending and long-term intergenerational growth

• Spending rates at many institutions were raised during the 2005 to 2007 time period

• Endowment spending became an increasingly important source of revenue at schools

Governance and staffing did not evolve with increasingly sophisticated investment portfolios

• Underappreciated need for communication and shared philosophy among constituents

• A “fill the bucket” approach lowered the bar on manager selection

• Experience, skill and time necessary to manage a multi-asset class portfolio were undervalued


THE ENDOWMENT MODEL

R e s u l t s m a d e h e a d l i n e s , b u t w e r e p r o b a b l y e x a g g e r a t e d


THE ENDOWMENT MODEL

Let’s take a step back to review the origins of the

endowment model


THE ENDOWMENT MODEL

T h e o r i g i n s o f t h e e n d o w m e n t m o d e l

The original thesis challenged conventional wisdom, but did so by taking a bottoms-up

approach and building an asset allocation that accounted for all of the factors that were

unique to the institution, the nature of the endowment assets and the opportunity set in

the marketplace.

Total return approach – supported the short-term spending needs and the long-term compounding

goals of endowment growth

Diversification – Markowitz mean-variance portfolio theory demonstrated that adding higher risk and

higher return asset classes could still reduce the overall volatility of the portfolio

Long-term approach – enabled portfolios to weather short-term volatility moves and earn

incremental returns

Illiquidity premium – due to the long-term nature of endowment assets, universities could earn an

outsized premium for taking on illiquidity


Identifying the approach and defining a process were the initial building blocks.

Equally important was the willingness of the institution to fund the resources

necessary to manage the portfolio, hire professional talent and create a governance

structure that supported those efforts.

Longer term, the colleges and universities that experienced the most success

where those that had the following characteristics:

• An understanding of their own strengths and weaknesses (e.g. size, liquidity needs)

• A governance structure that was supportive of the approach

• Buy-in across staff, university leadership and trustees

• A long-term mindset

• A rigorous analytical approach

• Skilled investment teams

THE ENDOWMENT MODEL

O r i g i n s o f t h e e n d o w m e n t m o d e l ( c o n t i n u e d )


$3,001

$11,644

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

60 / 40 Portfolio 4 Largest Endowments

Growth of $1,00020 Years Ended 06/30/13

THE ENDOWMENT MODEL

Over the last twenty years, the four largest endowments have seen significant

appreciation as a result of investment returns, well in excess of a traditional 60 / 40

portfolio.

13% CAGR

7% CAGR vs.

Note: 4 largest endowments by assets includes Yale, Harvard, Stanford and Princeton as of FY2013. 4 largest endowment returns calculated using average annual return for the

4 largest endowments, non-asset weighted, from 06/30/93 to 06/30/13. 60 / 40 portfolio represents a 60% allocation to the MSCI All Country World Index and a 40% allocation to

the Bank of America Merrill Lynch US Corporate/Government/Mortgage Index.

Sources: Bloomberg, University annual reports, press releases and websites.

L o n g - t e r m r e s u l t s a r e q u i t e s t a g g e r i n g …


THE ENDOWMENT MODEL

…but are they repeatable?

15

Drivers of Return


DRIVERS OF RETURN

S u c c e s s f u l m a n a g e r s e l e c t i o n h a s b e e n u n d e r a p p r e c i a t e d

Source: Yale Endowment Update 2012


DRIVERS OF RETURN

A c t i v e m a n a g e m e n t i s k e y t o o u t s i z e d r e t u r n s

0

5

10

15

20

25

30

35

40

45

50

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Upper Quartile

Median

Source: Cambridge Associates, U.S. Private Equity Index

U.S. Private Equity Vintage Year IRRs

IRR


E x a m i n i n g t h e e n d o w m e n t m o d e l ’ s p e r f o r m a n c e

To isolate where the endowment model succeeded or fell short over the past 12

years, we can separate the horizon into two six year periods and disaggregate the

performance by asset class and passive/active investing.

US, International Developed, Emerging Market Equities and Fixed Income are represented by the S&P 500 TR, MSCI EAFE TR, MSCI EM TR and ML US Corp, Gov’t,

and Mortgages Index, respectively. Hedge Funds are represented by the median manager performance in the TASS database minus an annual 2% for survivorship

bias. Private Equity and Real Estate are represented as the median manager return within the Cambridge Associates Private Equity and Real Estate Indices.

Alpha is defined as the difference between the top quartile and the median manager annualized returns over the specified periods. Active Equities and Fixed Income

are based on the Russell database. Hedge Fund alphas are calculated using the TASS database. Private Equity and Real Estate quartiles are based on Cambridge

Associates Private Equity and Real Estate Indices.

4.9%

4.8%

13.2%

-1.9%

25.1%

0.7%

5.2%

5.5%

8.0%

2.1%

13.8%

6.1%

19.2%

-6.5%

-10% -5% 0% 5% 10% 15% 20% 25% 30%

US Equities

Int’l. Dev. Equities

EM Equities

Fixed Income

Hedge Funds

Private Equity

Real Estate

Beta:Passive Annual Returns

Alpha (Top Quartile – Median):Excess Annual Returns

1.3%

0.5%

1.9%

1.0%

1.9%

2.4%

0.3%

1.7%

6.8%

6.2%

8.7%

6.8%

7.9%

5.4%

0% 2% 4% 6% 8% 10%

DRIVERS OF RETURN

Asset Class Time Period 1: July 2001 – June 2007Time Period 2: July 2007 – June 2013

Beta Alpha


E x a m i n i n g t h e e n d o w m e n t m o d e l ’ s p e r f o r m a n c e ( c o n t i n u e d )

The data supports the assertion that if you cannot add value through manager

selection, the addition of alternative asset classes may not be worthwhile.

DRIVERS OF RETURN

60/40 Global Equities/Fixed Income portfolio is allocated 60% Global Equities (50% US, 40% Int’l Dev. and 10% Emerging Markets) and 40% Fixed Income using the passive

asset class returns

Endowment Portfolio (passive and active) asset allocations are 30% Global Equities (50% US, 40% Int’l Dev. and 10% Emerging Markets), 10% Fixed Income, 25% Hedge

Funds, 17.5% Private Equity and 17.5% Real Estate

Passive asset class performance for US, International Developed, Emerging Market Equities and Fixed Income are represented by the S&P 500 TR, MSCI EAFE TR, MSCI EM

TR and ML US Corp, Gov’t, and Mortgages Index, respectively. Passive Hedge Fund returns are represented by the median manager performance in the TASS database

minus an annual 2% for survivorship bias. Passive Private Equity and Real Estate returns are represented as the median manager return within the Cambridge Associates

Private Equity and Real Estate Indices.

Active asset class performance is defined as the top quartile annualized returns over the specified periods. Active Equities and Fixed Income are based on the Russell

database. Hedge Fund quartiles are calculated using the TASS database. Private Equity and Real Estate quartiles are based on Cambridge Associates Private Equity and

Real Estate Indices.

Time Period 2: July 2007 – June 2013 Time Period 1: July 2001 – June 2007

0

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60/40 Global Equities/Fixed Income Endowment Portfolio (Passive/Median) Endowment Portfolio (Active/Top Quartile)

60/40 Global Equities/Fixed Income

Endowment Portfolio(Passive/Median)

Endowment Portfolio(Active/Top Quartile)


A c t i v e m a n a g e m e n t i s e v e n m o r e i m p o r t a n t i n a l o w - r e t u r n e n v i r o n m e n t

Low yields in fixed income and somewhat elevated PE multiples in equities create

headwinds for future returns.

Adding value through security selection will become a more important driver of returns

1 Fixed income index represents the Bank of America Merrill Lynch US Corporate/Government/Mortgage Index. The index is comprised of a mix of high grade U.S.-

listed bonds across corporate, government and mortgage markets.2 June 2001 price to earnings multiples are trailing figures for MSCI EAFE and MSCI EM due to lack of information.3 Data as of January 16, 20144 Yield to Worst as defined in Bloomberg

Source: Roundtable, Bloomberg

DRIVERS OF RETURN

Today3

2.38%

Today3

15.6x

14.2x

9.4x

Fixed IncomeYield4 June '01 June '07 June '13

Fixed Income Index1

6.06% 5.66% 2.34%

EquitiesForward Price to Earnings June '01 June '07 June '13S&P 500 20.4x 16.1x 14.6x

MSCI EAFE 18.9x2

14.9x 13.0x

MSCI EM 9.5x2

14.2x 10.4x


A c t i v e m a n a g e m e n t i s e v e n m o r e i m p o r t a n t i n a l o w r e t u r n e n v i r o n m e n t … b u t r e m e m b e r t h a t t h i n g s c h a n g e

Impact of central bank quantitative easing --

parallel shift downward in frontier

Source: GMO, Roundtable

DRIVERS OF RETURN


DRIVERS OF RETURN

T h e i m p o r t a n c e o f s t a y i n g t h e c o u r s e …

Note: 4 largest endowments by assets includes Yale, Harvard, Stanford and Princeton as of FY2013.

Source: 2012 NACUBO-Commonfund Study of Endowments, annual reports of Yale, Harvard, Stanford and Princeton Universities, Roundtable calculations

0%

2%

4%

6%

8%

10%

12%

14%

3 YR 5 YR 10 YR

Trailing Fiscal Year Returns (For periods ending June 30, 2012)

25th - 50th Percentile (All) 50th - 75th Percentile (All) Largest Endowments Mean (>$1 B)


DRIVERS OF RETURN

… b u t d o n ’ t f o r g e t a b o u t r i s k !

Before implementing an asset allocation and an investment approach, ensure that

the institution can weather the downturn.

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

FY 2009

2009 Fiscal Year Returns

25th - 50th Percentile (All) 50th - 75th Percentile (All) Largest Endowments Mean (>$1 B)

Note: 4 largest endowments by assets includes Yale, Harvard, Stanford and Princeton as of FY2013.

Source: 2012 NACUBO-Commonfund Study of Endowments, annual reports of Yale, Harvard, Stanford and Princeton Universities, Roundtable calculations

24

Measuring Risk


Q u e s t i o n s

How do you define risk?

How do you measure risk?

How can you manage risk?

MEASURING RISK


The complexity of endowment portfolios requires quantitative and qualitative rigor

around risk analysis.

MEASURING RISK

A p p r o a c h e s t o r i s k m a n a g e m e n t

There is no single risk measure that is comprehensive in nature. A multi-dimensional

approach to risk analysis and the understanding of where quantitative measures fall short is

essential.

• Multiple measures of risk

• Modeling correlation matrices

• Non-normal distributions

• Stress scenarios

• Tail risk

• Factor analysis


P i t f a l l s o f t a r g e t i n g a s i n g l e r i s k a n d r e t u r n m e a s u r e

Sample Portfolio 11

Index Allocation

US Equities 10%

Emerging Markets 30%

Fixed Income 35%

Cash 25%

Total: 100%

(Jan 1990 – Dec 2013)

Ann. Return 10.3%

Ann. Volatility 15.2%

Sharpe Ratio (r.f. = 1%) 0.55

Sample Portfolio 22

Index Allocation

US Equities 80%

Fixed Income 20%

Total: 100%

(Jan 1990 – Dec 2013)

Ann. Return 10.2%

Ann. Volatility 15.1%

Sharpe Ratio (r.f. = 1%) 0.55

Appears to have a similar risk/return

profile

Relying on single risk/return data points can lead to unexpected results. In the

example below, we observe two portfolios with similar risk/return measures, but

with very different asset allocations.

MEASURING RISK

1Portfolio 1: 10% S&P 500 TR Index, 30% MSCI Brazil TR USD Index, 35% Barcap Aggregate TR Bond Index, 25% 3 Month US T-Bills

2Portfolio 2: 10% Russell 2000 TR Index, 70% REIT TR USD Index, 20% JP Morgan Global Aggregate TR Bond Index



O b s e r v i n g t h e r a n g e s o f o u t c o m e s

MEASURING RISK

Despite having similar annual return and volatility over the period from January 1990

to December 2013, Portfolio 2 experienced significantly greater downside risk.

1Portfolio 1: 10% S&P 500 TR Index, 30% MSCI Brazil TR USD Index, 35% Barcap Aggregate TR Bond Index, 25% 3 Month US T-Bills

2Portfolio 2: 10% Russell 2000 TR Index, 70% REIT TR USD Index, 20% JP Morgan Global Aggregate TR Bond Index


-20%

-10%

0%

10%

20%

30%

40%

5% 25% 50% 75% 95%

12

Mo

nth

Ro

llin

g R

etu

rns

Percentiles

Portfolio 1 Portfolio 2

-60%

-50%

-40%

-30%

-20%

-10%

0%

Dec-8

9

May-9

1

Oct-

92

Mar-

94

Au

g-9

5

Jan

-97

Ju

n-9

8

No

v-9

9

Ap

r-01

Sep

-02

Feb

-04

Ju

l-05

Dec-0

6

May-0

8

Oct-

09

Mar-

11

Au

g-1

2

Dra

wd

ow

ns

Portfolio 1 Portfolio21 2 1 2


M e a s u r i n g r i s k b e y o n d v o l a t i l i t y a n d e x p l o r i n g t h e r a n g e s o f e x p e c t a t i o n s

Risk can be defined in many different ways and no single risk measure is sufficient.

Portfolio 1Portfolio 2

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0% 5% 10% 15% 20% 25% 30% 35%

Exp

ecte

d A

nn

ual

Ret

urn

Expected Annual Volatility


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0% 10% 20% 30% 40% 50%

Exp

ecte

d A

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ual

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urn

Modified 3 Month VaR @ 99%


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0% 20% 40% 60% 80% 100%

Exp

ecte

d A

nn

ual

Ret

urn

Probability Annual Return is Less Than 5%

Portfolio 1: 10% S&P 500 TR Index, 30% MSCI Brazil TR USD Index, 35% Barcap Aggregate TR Bond Index, 25% 3 Month US T-Bills

Portfolio 2: 10% Russell 2000 TR Index, 70% REIT TR USD Index, 20% JP Morgan Global Aggregate TR Bond Index

Efficiency Frontier are based on varying allocations to Russell 2000, S&P 500, MSCI Brazil, REIT Index, US 3M T-Bills, Barcap Agg Index, and JPM Global Bond Index;

Data from Jan 1990 – Dec 2013


MEASURING RISK


N o n - n o r m a l d i s t r i b u t i o n s a r e c l o s e r t o r e a l i t y

MEASURING RISK

The simplicity and universality of normal distribution has led to its faulty application

in asset allocation.

Source: Bloomberg


MEASURING RISK

W h e n c o m b i n g a s s e t c l a s s e s , t a k e i n t o a c c o u n t t h e d y n a m i c n a t u r e o f c o r r e l a t i o n s

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

Jan

-78

Ap

r-79

Ju

l-80

Oct-

81

Jan

-83

Ap

r-84

Ju

l-85

Oct-

86

Jan

-88

Ap

r-89

Ju

l-90

Oct-

91

Jan

-93

Ap

r-94

Ju

l-95

Oct-

96

Jan

-98

Ap

r-99

Ju

l-00

Oct-

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Jan

-03

Ap

r-04

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Jan

-08

Ap

r-09

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l-10

Oct-

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Jan

-13

Asset Class Correlations24 Month Rolling Correlations (Jan 1978 – Dec 2013)

S&P 500 vs Barcap Agg Bond Index S&P 500 vs GSCI

While much has been said about correlations in the recent past, they have never

been static. Therefore the single static correlation matrix used in asset allocation

models is not sufficient.

Source: Bloomberg, Roundtable


I n c o r p o r a t i n g s h i f t i n g r e g i m e s

MEASURING RISK

By combining the two stress and stable regimes, as a weighted average, we lose

the high correlation and higher probability for large drawdowns. Instead we

should switch between the regimes in order to express a more accurate model of a

stress environment.

Stress Stable

Long Term

Source: Roundtable


A s s e t a l l o c a t i o n c o m b i n e d w i t h f a c t o r a n a l y s i s

MEASURING RISK

While asset allocation provides the starting point for the risk framework of the

portfolio, examining risk factors within asset classes is useful to further understand

areas of risk, sensitivity and intended/unintended bets.

Source: Roundtable

Equity Managers Hedge Fund ManagersFixed Income Managers

Private Equity Managers Real Asset Managers

Manager 1 2, 3, . Manager 1 2, 3, . Manager 1 2, 3, … Manager 1 2, 3, … Manager 1 2, 3, …

Interest Rate Sensitivity X X X

Inflation X

Equity Beta X X X

Credit Beta X X

Liquidity X

Momentum X X

Volatility X

. . . .

34

Unique Institutional Attributes


UNIQUE INSTITUTIONAL ATTRIBUTES

I n s t i t u t i o n s a r e u n i q u e

Each academic institution necessitates a customized investment policy.

Strategic Goals

Nature of Operating Budget

Level of Endowment Assets

Governance Structure

Culture


A s s e t a l l o c a t i o n n e e d s t o m a k e s e n s e f o r t h e s c h o o l


33%

27%

40%

INSTITUTION A

Endowment

Income

Private

Gifts

Grants

23%

18%

25%

35%

INSTITUTION B

Endowment

Income

Private

Gifts

Grants

Tuition

The mix of revenues should be factored into the risk/return profile of an institution.



I m p o r t a n c e o f g o v e r n a n c e

“Every approach works well sometimes and poorly other times. In order for the

approach and investment staff to survive these periods, the governance structure needs

to understand and believe in the process.”*

Structure

• Distinction of roles between the investment committee and investment team (internal or external)

• Clearly defined relationship between board/trustees, university leadership and investment

professionals

Philosophical alignment

• Portfolio cannot be up for grabs every quarter

• Ability to stay the course during difficult market environments

• Willingness to stray from the herd and not feel pressure to perform in line with peers

• Minimize agency risks

*Source: Uncorrelated, LLC, 2013, The Portfolio Whiteboard Project, September 2013



C u l t u r e e n c o u r a g e s a s p e c i f i c m i n d s e t

“We simply attempt to be fearful when others are greedy and to be greedy only when

others are fearful.” -Warren Buffet

A culture of intellectual honesty fosters fact-based decision making and minimizes behavioral

pitfalls.

Analytical rigor

• Greater conviction

• Better ability to withstand difficult periods

• Ability to admit mistakes (which every investor makes) and reverse course

• Conducive to maintaining a long-term investment approach

Contrarian viewpoint

• Ability to drown out the noise

Sense of mission

• Investment results impact the short and long-term needs of a nonprofit institution

• Socially responsible investing

• Loyalty and passion

39

Conclusions


It is a philosophical approach to investing not a defined asset allocation.

Implementation influenced results

• Emphasis on manager selection

• Multi-dimensional approach to risk

• Investment policy suited specifically to the needs of the institution

• Skilled and resourced investment team

• Well defined governance

• Collaborative culture

There were definitely some missteps

• Increased spending

• Private alternatives allocation modeling

• Mixed results in manager selection

The endowment model did not fail but, in some cases, we failed the endowment model.

CONCLUSIONS

T h e e n d o w m e n t m o d e l d i d n o t f a i l

41

Takeaways


TAKEAWAYS

I m p l i c a t i o n s f o r u n i v e r s i t y l e a d e r s h i p a n d i n v e s t m e n t c o m m i t t e e s

Endowment revenue is increasingly important to institutions

• Tuition pressures

• Government revenue pullbacks

• Inflation

Need to develop expertise to deal with growing and complex endowment portfolios

• Multi-asset class approach requires a dedicated full-time investment team

• Large endowment donors are increasingly demanding sophisticated investment capabilities


TAKEAWAYS

M o r e o p t i o n s t o d a y t o f u l f i l l i n v e s t m e n t g o a l s

In-house investment team

• Culture is critical to attracting and retaining talent (high turnover in recent history)

• Clear, shared investment philosophy between university leadership, investment committee and

investment team is essential

• Strategic about initial expense

• Long-term commitment

External solutions – OCIO

• Increased options today, but tread lightly as many players are entering the market

• Success stories have limited number of relationships and prior in-house experience at nonprofits (actual

experience combined with a deep understanding of the mindset)

• Understand potential conflicts (e.g. allocation of ideas) and the incentives of various providers

Passive management

• Some institutions may decide based on their size, governance structure and goals, that paying for an

internal or external team is not viable

• These groups should feel confident in adopting a passive portfolio approach and, from a fiduciary

perspective, it may make the most sense

Understanding their unique attributes, governance structure and culture should lead

institutions down a specific path.


“The trustees of an endowment institution are the guardians of the

future against the claims of the present. Their task is to preserve

equity among generations.”-JAMES TOBIN, 1981 Nobel laureate, Sterling Professor of Economics, Yale University


D i s c l o s u r e sThis presentation (the “Presentation”) is being provided on a confidential basis for informational and discussion purposes only and does not

constitute an offer to sell or a solicitation of an offer to purchase any interest in any of the Funds or any investment opportunities offered by

Carleon Capital Partners LLC d/b/a Roundtable Investment Partners (“Roundtable” or the “Fund”) or any other security. Any such offer or

solicitation shall be made only to qualifying investors, and only pursuant to a final confidential private placement memorandum (the “PPM”),

which describes the terms applicable to the relevant Fund and certain risks related to an investment in the relevant Fund and which qualifies in

its entirety the information set forth herein. Such PPM should be read carefully prior to an investment in the relevant Fund. This Presentation

does not constitute part of any such PPM.

This Presentation is intended for authorized recipients only and must be treated in a confidential manner. Each person accepting this

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In addition, certain information contained herein has been obtained or derived from published and non-published sources prepared by other

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