oklahoma state regents presented on september 27, 2006 by michael h. strauss, chief economist and...
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![Page 1: Oklahoma State Regents Presented on September 27, 2006 by Michael H. Strauss, Chief Economist and Chief Operating Officer of Commonfund Asset Management](https://reader030.vdocuments.net/reader030/viewer/2022032804/56649e4d5503460f94b43af3/html5/thumbnails/1.jpg)
Oklahoma State Regents
Presented on September 27, 2006 by
Michael H. Strauss, Chief Economist and Chief Operating Officer of Commonfund Asset Management Company
Crissie L. Tewell, Managing Director
Commonfund 15 Old Danbury Road P.O. Box 812 Wilton, CT 06897-0812 Telephone: 888-823-6246Securities offered through Commonfund Securities, Inc., a member of the NASD
Presented to
![Page 2: Oklahoma State Regents Presented on September 27, 2006 by Michael H. Strauss, Chief Economist and Chief Operating Officer of Commonfund Asset Management](https://reader030.vdocuments.net/reader030/viewer/2022032804/56649e4d5503460f94b43af3/html5/thumbnails/2.jpg)
2Oklahoma State Regents
Why Invest with Commonfund
To improve investment management practices and to enhance the financial resources of the nonprofit community
STRONG FINANCIAL RESOURCES
SERVICEEDUCATIONAL
PROGRAMSPERFORMANCE
COMMONFUND MISSION
The Pillars That Support Our Mission
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3Oklahoma State Regents
A History of InnovationCommonfund has a History of Providing Programs Across a Broad Range of Asset Classes
1Hedge strategies first used as diversifier in Commonfund equity portfolio2Distressed debt first used as diversifier in Commonfund Multi-Strategy Bond Fund.3This service existed as the Endowment Planning Model since 1990.
U.S. Equities 1971
Cash (Short Term Fund) 1974
Fixed Income 1976
Hedged Equity1 1982
International Equities 1983
Real Estate 1988
Private Capital 1988
Distressed Debt2 1989
Absolute Return Strategies 1991
Commonfund Strategic Solutions® 2001
Allocation Planning ModelTM3 2002
Commodities 2005
Program Initiated
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4Oklahoma State Regents
Education and Best PracticesA Commitment to Professional Development and the Sharing of Best Practices
Commonfund Benchmarks Study® Series
Endowment Institute
Regional Roundtables and Seminars
Publications and White Papers
Commonfund Forum Annual Conference
Treasury Institute for Higher Education
Higher Education Price Index (HEPI)
Commonfund Forum (Annual)
Commonfund Investment Management & Governance Seminars (3 per Year)
Commonfund Trustee Roundtable Series (Twice monthly on average)
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5Oklahoma State Regents
Asset Allocation for Total Institutions
3%
16%
18%
35%
28%
Dollar-weighted asset mix
As of June 30, 2005
Domestic Equities
International Equities Fixed Income
Alternative Investments
Short Term/Cash
Copyright 2006 The Common Fund for Nonprofit Organizations.All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may beused without the express written permission of The Common Fund for Nonprofit Organizations.
2006 Commonfund Benchmarks Study® Educational Endowment Report
Hot Charts\CFBenchmarks_Study_2006
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6Oklahoma State Regents
9.7
13.9
11.8
10.39.4
8.6 8.79.5
3.5
5.14.3
3.5 3.3 3.0 3.3
8.89.49.8
10.611.6
9.6
0
5
10
15
20
TotalInstitutions
Over $1Billion
$501 Million - $1 Billion
$101 Million -$500 Million
$51 Million - $100 Million
$10 Million - $50 Million
Under $10Million
9.6%
Average Reported One-, Three- and Five-Year Returns1
An
nu
al N
et T
ota
l Ret
urn
%
Fiscal Years 2000-2005 ending June 30
1 Net of fees. 729 InstitutionsCopyright 2006 The Common Fund for Nonprofit Organizations.All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may beused without the express written permission of The Common Fund for Nonprofit Organizations.
FY2005 total return3-year return5-year return
2006 Commonfund Benchmarks Study® Educational Endowment Report
3.5%
Average return
Hot Charts\CFBenchmarks_Study_2006
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7Oklahoma State Regents
Asset Allocation1 Trend for Total Institutions
2426
32 33 34 35
0
10
20
30
40
50
2000 2001 2002 2003 2004 2005
Domestic equitiesFixed incomeInternational equitiesAlternative strategiesShort-term securities/cash/other
Per
cen
t (%
)
Total Institutions 563 617 637 657 707 729
1 Dollar WeightedCopyright 2006 The Common Fund for Nonprofit Organizations.All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may beused without the express written permission of the Common Fund for Nonprofit Organizations.
Fiscal Years 2000-2005 ending June 30
2006 Commonfund Benchmarks Study® Educational Endowment Report
Hot Charts\CFBenchmarks_Study_2006
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8Oklahoma State Regents
Is there a correlation between performance and liquidity?
Source: 2006 Commonfund Benchmarks Study® – Educational Endowment Report, Based on 729 institutions that provided asset allocation data
2006 The Common Fund for Nonprofit Organizations. All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common
Fund for Nonprofit Organizations. No part of this material may be used without the express written permission of The Common Fund for Nonprofit Organizations.
Source: 2005 NACUBO Endowment Study, the two smaller fund groupings as reported by NACUBO, $26M - $50 M and <$25M, are represented in the
Commonfund $10 - $50M grouping equally weighted.
86.5%
81.9%
70.9%
53.3%
75.4%
8.1%
8.7%
9.3%
10.3%
12.0%
55.00%
89.60%87.80%
81.80%
74.50%
50%
60%
70%
80%
90%
$ 10 - 50 Million $50 - 100 Million $100 - 500 Million $500 Million - $1 Billion > $1 Billion
Liq
uid
ity
(%)
7%
8%
9%
10%
11%
12%
13%
Per
form
ance
(%
)
Daily Liquidity of Portfolio - FY2005
NACUBO 10-Year Annualized
Daily Liquidity of Portfolio (FY 2004)
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9Oklahoma State Regents
Population Demographics
Technological Advances
Global Competition
Economic Shocks
Education Competitiveness
Internal and external forces effecting the Campus of the Future
China-IndiaImpact
Intergenerational Equity“The Trustees of an endowed institution are the guardians of the future against the claims of the present. Their task is to preserve
equity among generations.” - James TobinYale University
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10Oklahoma State Regents
Primary Issues in Investment Management
Asset allocation is the key to successful investment management.
Investments should grow to offset inflation.
Over long periods of time equities typically produce higher incremental returns than cash or bonds.
Diversification among asset classes and managers is a key to increase return and reduce volatility.
Access quality portfolio managers and monitor them on a regular basis for compliance with guidelines and performance measurement.
Conduct periodic asset allocation review.
Minimize costs.
Hot Charts\Asset Allocation\Primary_Issues_InvstMngmnt
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11Oklahoma State Regents
Cumulative Inflation-Adjusted Performance
Historical Perspective
0
20
40
60
80
100
120
140
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
Cum
ulat
ive
Val
ue (
Rea
l $)
Source: Ibbotson, Bloomberg, Commonfund Institute
The equity portion of the hypothetical portfolio is based on monthly returns of the S&P 500 Index (12/65-03/05), and the fixed income portion is based on
monthly returns of the Lehman Brothers Aggregate Index (1/73-03/05) and the Ibbotson Associates Long Term Corporate Bond Index (12/65-12/72). HEPI data
from 7/04 to 03/05 is replaced with CPI+1%. The hypothetical portfolio is rebalanced to 70/30 annually on 1/1/yy and 5% is distributed annually on 1/1/yy.
CPI
HEPI
Consumer Price Index (CPI) versus Higher Education Price Index (HEPI)
12/31/99$126.7
12/31/99$105.6
7/30/82$33.8
7/30/82$33.2
12/31/05$67.5
December 1965 – December 2005 / Consumer Price Index (CPI) versus Higher Education Price Index (HEPI)
12/31/05$87.4
Hypothetical Portfolio(70% Equity/30% Fixed Income, 5% Spending)
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12Oklahoma State Regents
World Economic Growth
Source: SG Research, Global Economic Forecast, June 2006
-2
0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007
Per
cen
t (%
)
-2
0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007
Per
cen
t (%
)
World US Japan EU Emerging countries China Latin AmericaEastern Europe
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13Oklahoma State Regents
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
YEAR
PE
RC
EN
TU.S. Real GDP (% yr/yr change)
Source: BEA
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14Oklahoma State Regents
World Inflation
Source: SG Research, Global Economic Forecast, June 2006
-2
0
2
4
6
8
10
12
14
16
18
2002 2003 2004 2005 2006 2007
Per
cen
t (%
)
World US Japan EU Emerging countries China Latin AmericaEastern Europe
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15Oklahoma State Regents
Employment
Civilian Unemployment Rate (%)
3.5
4.5
5.5
6.5
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
Perc
en
tag
e
Nonfarm Payroll Employment 3 month average (000's)
-300
-200
-100
0
100
200
300
400
500
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
No
nfa
rm P
ayro
lls (000's
)
Source: BLS
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16Oklahoma State Regents
Housing Sector Weakening
Source: ISI Group
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17Oklahoma State Regents
Y/Y% Change
Y/Y% Change Y/Y% Change
Percent Change
Retail Sales and the Consumer
Source: ISI Group
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18Oklahoma State Regents
Energy Prices
Source: Bloomberg, EIA
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19Oklahoma State Regents
Consumer Price Index
0.0
1.0
2.0
3.0
4.0
5.0
Jan
-96
Ju
l-96
Jan
-97
Ju
l-97
Jan
-98
Ju
l-98
Jan
-99
Ju
l-99
Jan
-00
Ju
l-00
Jan
-01
Ju
l-01
Jan
-02
Ju
l-02
Jan
-03
Ju
l-03
Jan
-04
Ju
l-04
Jan
-05
Ju
l-05
Jan
-06
Ju
l-06
Perc
en
t
CPI
CPI-Core (ex-food & energy)CPI-Core less shelter
Source: BLS
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20Oklahoma State Regents
The Fear of the Three Bears
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21Oklahoma State Regents
This document is intended only for qualified, pre-existing investors in Commonfund Capital, Commonfund Realty and Commonfund Asset Management Company programs, Members of The Common Fund For Nonprofit Organizations (“Commonfund”), or other eligible institutional investors approved by Commonfund Securities, Inc. It is not intended to constitute an offer to sell, nor the solicitation of an offer to buy, securities. Any such offerings will be made only by means of information memoranda and related subscription documents that will be made available by Commonfund Securities, Inc. (a broker-dealer affiliate of Commonfund Capital, Commonfund Realty and Commonfund Asset Management Company) only at the time an offering is in progress and only to investors qualified and eligible to invest.
Important Information About Procedures for Opening a New Account:To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each customer who opens an account.
What this means for you: When you open an account, we may ask for documents or information related to: your principal place of business, local office or other physical location; taxpayer identification number; and other documents demonstrating your lawful existence such as certified articles of incorporation, a government-issued business license, a partnership agreement, or a trust instrument, and other identifying documents.
Important Notes for Private Programs