Asset Allocation

The University has developed asset allocation guidelines based on its total return objectives, income requirements, and capital market expectations. These guidelines are long-term oriented and are consistent with the endowment’s risk posture and investment objectives. Over the last twenty years, the University has dramatically reduced the endowment’s investments in domestic stocks and bonds by reallocating to international and nontraditional asset classes. In 2000, more than 80% of endowment assets were invested in US stocks and bonds with 20% in international assets and 0% invested in hedge funds and private investments. Today, only 40% of assets are invested in U.S. stocks and bonds while 20% are invested in international stocks, 16% are in hedge funds and 21% are in private investments. As a result, the endowment is now more diversified across asset classes. The broader opportunity set should not only provide higher returns in a greater variety of investment environments but also help to control risk. The University has recently increased the Private Investments target allocation to 25% to take advantage of the superior risk-adjusted returns generated by this asset class. It will take some time to achieve this target because of the long investment periods associated with this asset class. The source of funds for these investments is currently invested in fixed income and cash.

Endowment Asset Allocations vs. Target Allocations as of 6/30/17

1