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Board will be requested to approve the project prior to its initiation. He complimented Mr. Wiseman, Mr. Ben Crutcher, and their staff for the good report.
Mr. Branscum announced that Mr. Wiseman and his team will be presenting an update on the university's sustainability plan at the next Finance Committee meeting.
U.      Investment Committee Report
Ms. Wickliffe, chair of the Investment Committee, reported that the committee met and authorized the Purchasing Division to enter contract negotiations with four new real estate managers to manage value-added and opportunistic real estate allocations. All new managers are hired as a result of an RFP (Request for Proposals) process under the supervision of the university's Purchasing Division.
The Endowment pool had an estimated market value at October 31, 2008 of $697 million. Consistent with the overall market decline, the Endowment lost an estimated -13.6 percent in the month of October and -21.6 percent for the four months ended October 31, 2008.
The recent market downturn underscores the importance of the asset allocation changes the Investment Committee approved in June and is in the process of implementing. As reported previously, the committee approved increasing the exposure to alternative investments by 23 percent and reducing the exposure to traditional stock and bond investments, which are more volatile. The committee approved new allocations to absolute return and real return investments and increased the allocations to private equity and real estate.
The committee discussed the timing of the new asset allocation implementation, which will involve three phases. Phase 1 will occur in December and January and involves the transition to new strategies whose values have declined more than existing US equity and fixed income investments, which will be sold to fund the new strategies. Phase 2 of the transition will be deferred until the US equity market rebounds somewhat, as the new strategies have not experienced losses to the extent of existing US equity and fixed income investments, which will be sold to fund the new strategies. Phase 3 will occur over the next few years as private equity and real estate capital calls are funded.
It is important to note that the time horizon for the Endowment is perpetuity; therefore, the Endowment has the benefit of time to recoup recent market losses. Additionally, spending distributions from the Endowment are calculated at 4.5 percent of the average market value over a 36 month period that ends each December 31st, so distributions in the current fiscal year are not being impacted and distributions for fiscal year 2009-2010 are not expected to be significantly impacted.
Ms. Ball encouraged the members to attend the Investment Committee meeting and get more familiar with what is happening with investments.