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Asset Management Committee: February 19, 2016

Chairman Stephen Lacy presided at the regularly scheduled meeting on February 19, 2016. The following actions were taken:
 
Meeting minutes for the December 3, 2015 Asset Management Committee were approved.
 
Staff began by providing an Executive Summary to the Committee, summarizing the status of investments for the Endowment Pool and Expendable Funds Pool.   
 
Staff then reviewed the breakdown of participants in the Endowment Pool, which includes permanent endowments, term-endowments, expendable funds pool investment, board designated endowed funds, and funds held for others. Staff noted that the current distribution formula is currently capped at 4.5% of purpose and that the total distribution for Fiscal Year 2016 (FY16) is at 5.9% given the 1.40% management fee charged to the Endowment Pool for the operating budget.  Staff noted that distributions happen at the end of a quarter; contributions the first day of each quarter. Up to this point in FY16, distributions had outpaced contributions, but in a typical year they are fairly equal.
 
Staff provided an overview of the asset allocation of the Endowment Pool and highlighted the current underweight positioning in Deflation Hedge and Inflation Hedge assets and an overweight in the Diversifiers assets.  
 
Staff discussed target allocations versus actual allocations for the Endowment Pool and Staff’s views on rebalancing the portfolio in the current market environment. Staff discussed the Endowment Pool’s Private Capital Holdings and explained current uncalled commitments. Staff noted that uncalled commitments combined with the Endowment Pool’s privately-held market value result in a liquidity value within policy limits. 
 
Staff reviewed performance of the Endowment Pool, which underperformed its benchmark in the second quarter of FY2016. Staff noted that quarterly performance ranked in the fourth quartile of the peer group. Longer term performance was also discussed and Staff noted that the Endowment Pool is outperforming its benchmark over the trailing 1, 3, 5, and 7 year time periods.
 
Staff proceeded to review performance for the quarter. The Growth Engine, which makes up the largest portion of the Endowment Pool, underperformed its internal benchmark.  The Inflation Hedge allocation outperformed its internal benchmark during the quarter. The Diversifiers allocation underperformed its internal benchmark. The Deflation Hedge allocation underperformed for the quarter.  
 
Staff then reviewed risk and return data along with peer group performance for each allocation within the Endowment Pool. Staff discussed the Watch-List and commented on new additions and removals. Staff also discussed upcoming changes pending on-site visits with investment managers being conducted in the near term.
 
Staff reviewed the Expendable Funds Pool and updated the committee on the market value and policy balance at the end of the quarter.
 
Staff ended the meeting by reviewing the current rebalancing policy and proposed a new rebalancing methodology to the committee.