The assets of the Foundation must be considered a scarce resource with an investment objective of moderate risk that should satisfy the goal of earning a 4.0% to 4.5% real (inflation adjusted) return over time.
The objectives of the Foundation’s investment portfolio are to produce a long-term rate of return that provides sufficient funds to meet the Foundation’s required grantmaking target, cover all reasonable and necessary expenses and compensate for inflation. The assets are invested in a well-diversified global investment portfolio that accepts reasonable risk consistent with desired return.
The Foundation has adopted a globally diversified benchmark, the Global Diversified Index (GDI), comprised of stocks, bonds, real estate and private markets. The actual portfolio’s risk and return is measured against this benchmark over full market cycles. The Foundation’s benchmark composition and ranges (as of 5/31/17) are shown below:
|Asset Class||Benchmark Index Component||Normal
|Global Equity||MSCI All Country World Index||55.00%||+/- 30%|
|Private Markets||Cambridge Associates Private Equity Index||5.00%||+/- 5%|
|Real Estate||NCREIF Property Index||10.00%||+/- 5%|
|Global Bonds||25.00%||0 to +30%|
|Bloomberg Barclays US Aggregate Bond Index||12.50%|
|Bloomberg Barclays Global Aggregate Corporate ex USD Bond Index||12.50%|
|High Yield Bonds||Bloomberg Barclays High Yield Very Liquid Index||3.00%||0 to +10%|
|Emerging Market Debt||Bloomberg Barclays USD Emerging Markets Govt RIC Capped Index||2.00%||0 to +10%|
|Cash Equivalents||The BofA Merrill Lynch US 3-Month Treasury Bill Index||0.00%||0 to +50%|
Source: Bloomberg, Cambridge Associates, FactSet
Expected long term rate of return and risk
The expected long-term real rate of return objective for the benchmark is between 4.0% and 4.5%. However, in the current investment environment, we believe that this return will be difficult to achieve. The estimated long-term risk level for the benchmark is 11.0% (annualized standard deviation). This is considered a moderate risk level and appropriate for the expected return. The Foundation’s actual rate of return and risk will vary from the benchmark depending on market conditions and active investment management strategies.
Investment market conditions
Each year in its Annual Report, the Foundation provides observations regarding the past year’s market conditions, the Foundation’s investment strategy and the portfolio’s performance results. Copies of the Foundation’s Annual Reports can be found under Resources.