Investments

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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.

Objectives

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.

Benchmark

The Foundation has adopted a globally diversified benchmark, the Multiple Markets Index (MMI), 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 5/31/16) are shown below:

Asset Class Benchmark Index Component Normal
Weight
Ranges
(95% Frequency)
Global Equity MSCI All Country World Index   55.00% +/- 30%
     Developed Markets      49.67%
     Emerging Markets       5.33%
Private Markets Private Equity Performance Indicator     5.00% +/- 5%
Real Estate NCREIF Property Index   10.00% +/- 5%
Global Bonds   25.00% 0 to +30%
Citigroup U.S. Government Bond Index      12.50%
Citigroup World Government Bond ex U.S. Index      12.50%
High Yield Bonds Merrill Lynch U.S. High Yield Cash Pay Constrained Index     3.00% 0 to +10%
Emerging Market Debt J.P. Morgan EMBI Global     2.00% 0 to +10%
Cash Equivalents Three Month Eurodollar     0.00% 0 to +50%
Total 100.00%

Source: UBS Global
Asset Management

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.