Endowment Funds Performance (Year ending March 31st, 2012) · Endowment Currency Exposure as of...
Transcript of Endowment Funds Performance (Year ending March 31st, 2012) · Endowment Currency Exposure as of...
Endowment Funds Performance
(Year ending March 31st, 2012)
Investment Management Committee Meeting
June 20th, 2012
(Note: all returns and values are expressed in Canadian Dollars- CAD’s)
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Endowment Results Summary
Net Annual Returns and Market Values at March 31st, 2012
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$170.8
$138.5
$179.6
$215.1 $227.4
-10.3%
-19.2%
24.4%
11.9%
2.9%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
50
100
150
200
250
2008 2009 2010 2011 2012
Net
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U of G Endowment Market Values At March 31 (2008 to 2012)
Heritage General Total % CAD$ Return (Net)
Total Endowment Portfolio Vs Benchmark (Gross Of Fees)
Annualized Periods Ending March 31st, 2012
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Endowment Policy Benchmark : 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI
Emerging Markets Index
Investment Return Summary for March 2003 - March 2012
Annualised Return Summary
Annual Return Summary
4 * 7-10 Year Net of Fee returns are internal estimates
YTD 1 Year 2 Years 3 Years 4 Years 5 Years 6 Years 7 Years 8 Years 9 Years 10 Years
Total Fund Gross 6.4% 3.4% 7.8% 13.3% 4.2% 1.2% 3.0% 4.0% 4.5% 6.0% 3.7%
*Total Fund Net 6.3% 2.9% 7.3% 12.7% 3.7% 0.7% 2.5% 3.5% 4.0% 5.5% 3.2%
Benchmark 5.8% 2.9% 6.3% 12.2% 2.4% 0.2% 2.2% 3.8% 3.9% 5.8% 3.3%
YTD 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Total Fund Gross 6.4% 3.4% 12.4% 25.2% -18.8% -10.0% 12.3% 9.8% 8.4% 18.8% -14.7%
*Total Fund Net 6.3% 2.9% 11.9% 24.4% -19.2% -10.3% 12.0% 9.5% 8.1% 18.5% -15.0%
Benchmark 5.8% 2.9% 9.9% 24.9% -22.0% -8.4% 12.6% 13.9% 5.1% 22.5% -16.7%
Endowment Policy Benchmark : 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI
Emerging Markets Index
Asset Class Performance
Annualized Periods Ending March 31st, 2012
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* 7-10 Year Net of Fee returns are internal estimates
YTD 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr % % % % % % % % % % %
Total Gross of Fees 6.4 3.4 7.8 13.3 4.2 1.2 3.0 4.0 4.5 6.0 3.7
*Total Net of Fees 6.3 2.9 7.3 12.7 3.7 0.7 2.5 3.5 4.0 5.5 3.2
Total Fund ex Currency Overlay (Gross)1
6.0 3.8 -- -- -- -- -- -- -- -- --
**Endowment Benchmark 5.8 2.9 6.3 12.2 2.4 0.2 2.2 3.8 3.9 5.8 3.3
Canadian Equity 4.8 -6.8 4.2 14.6 2.9 2.3 4.0 6.5 8.9 11.4 9.0
S&P/TSX Comp Index 4.4 -9.8 4.2 15.6 1.1 1.7 3.2 6.5 7.4 10.4 7.2
US Equity 10.8 7.9 12.5 17.5 5.9 -0.1 2.1 2.1 1.6 3.0 -0.7
S&P 500 Total Return Index ($CAD) 10.5 11.5 11.2 14.3 3.2 -0.9 1.0 1.9 1.4 3.4 -0.6
Non-North American Equity 9.9 0.7 5.5 15.2 -0.5 -3.2 0.7 3.1 3.8 6.6 2.2
MSCI EAFE Comp ($CAD) 8.9 -2.7 1.7 9.0 -3.8 -5.8 -2.0 0.9 1.6 5.4 1.3
Fixed Income 1.1 10.0 7.6 7.9 6.8 6.4 6.2 5.8 5.7 6.3 6.6
Dex Bond Universe -0.2 9.7 7.4 6.6 6.2 6.1 6.0 5.9 5.7 6.3 6.6
**Endowment Policy Benchmark: 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20% MSCI EAFE Net ($CAD) + 5% MSCI
Emerging Markets Index
1 – Currency hedging manager was added in November 2010
Endowment Historical Asset Mix %
6 * International equity includes 5 % Emerging market equity ( added as of November 2010 )
0.00
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15.00
20.00
25.00
30.00
35.00
40.00
45.00
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Mar-0
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Jun
-07
Sep
-07
De
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Mar-0
8
Jun
-08
Sep
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Mar-0
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Jun
-10
Sep
-10
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Mar-1
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Jun
-11
Sep
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Mar-1
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Endowment Historical Asset Mix March 2007 - March 2012
FIXED INCOME CASH US EQUITY CANADIAN EQUITY INTL EQUITY
28%
27%
22%
19%
4%
Asset Mix by Class as of March 31st, 2012
(Total Assets $ 227.4 Million)
Note: Cash & Short term includes manager residual cash balances and a positive currency hedging position of $ 0.98 mill 7
Cash & Equivalents, $8.6M,
4%
Canadian Fixed Income, $64.1M,
28%
Canadian Equity, $42.3M,
19%
U.S. Equity, $60.5M, 27%
EAFE Equity, $41.4M, 18%
EM Equity $10.3M, 4%
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Endowment Currency Exposure as of March 31st, 2012
Currency
March 31st 2012
Unhedged %
Gross Exposure
(CAD in millions )
Hedge
(CAD in millions)
March 31st 2012
Hedged %
Net Hedged
Exposure
(CAD in millions)
Canadian Dollar 48.5 $110.4 $58.4 74.3 $168.9
U.S. Dollar 33.6 $76.4 -$38.5 16.6 $37.8
Euro Currency 6.4 $14.6 -$7.6 3.1 $7.0
Japanese Yen 2.8 $6.3 -$3.2 1.4 $3.1
British Pound 3.9 $8.9 -$4.5 1.9 $4.4
Swiss Franc 2.5 $5.6 -$2.7 1.3 $2.9
Other 2.3 $5.3 -$2.1 1.4 $3.2
Canadian Dollar, 48.5% Canadian Dollar, 74.3%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
March 31st 2012 Unhedged March 31st 2012 Hedged
Endowment Currency Exposure
Other
Swiss Franc
British Pound
Japanese Yen
Euro Currency Unit
U.S. Dollar
Canadian Dollar
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Endowment Policy Allocation
Percentage of Fund at Market Values
Interim Target Actual Final Target Permitted
Component Asset Classes Asset Mix* Weight Asset Mix Range
March 31st ,2012 Low High
Canadian Equities 20% 19% 17.5% 7.5% 27.5%
U.S. Equities 25% 27% 20% 10% 30%
International Equities (EAFE) 20% 18% 20% 10% 30%
Emerging Markets Equities 5% 4% 5% 0% 10%
Total Equities 70% 68% 62.5% 50% 80%
Infrastructure 0% 0% 7.5% 0% 10%
Fixed Income 30% 28% 30% 10% 50%
Cash & Cash Equivalents 0% 4% 0% 0% 20%
Toal Fixed Income and Cash 30% 32% 30% 20% 50%
* The Interim Mix was effective Jan 1st, 2011
Note : # Prior to June 2010, the Endowment Fund did not have a portfolio “benchmark”. A formal investment policy (including a benchmark) was recommended by the IMC and approved by the University's Board of Governors. The new policy and Asset Mix Target or benchmark (approved in June 2010) will be implemented over the next 12 -24 months. While not fully implemented, this report presents results relative to the interim benchmark mark contained in the new policy.
Asset Mix by Manager as of March 31st, 2012
Note: Market Values include Cash & Equivalents 10
Manager Date Hired Asset Mandate Market Value % of Portfolio Mandate Objective over 4 yrs
Management
Fees
($M) (%)
Jarislowsky Fraser Jul-99 Canadian Equity 32.1 14.4% S&P/TSX Total Return + 1.5% 0.22
U.S. Equity 23.4 10.5% S&P 500 Total Return (in CAD $) + 1.5%
Canadian Fixed Income 64.6 29.9% SCM Universe + 0.5%
Sionna All Cap Sep-07 Canadian Equity 11.1 4.9% S&P/TSX Total Return + 1.6% 0.45
Tweedy Browne Dec-03 EAFE Equity 28.9 12.5%
MSCI EAFE Index (in CAD $) + 3.0% 1.35
LSV Asset Mgmt. Sep-07 EAFE Equity 18.0 6.4%
MSCI EAFE Index (in CAD $) + 2.5% 0.66
LSV - Emerging Mkts Oct-10 EM Equity 10.3 3.8% Outperform MSCI EM Index 1.00
Wedge Oct-06 U.S. Midcap 23.2 9.7% Russel Midcap Value + 2.0% 0.70
Wedge Small Cap Jun-08 U.S. Small Cap 13.3 5.6% Russel Small Cap Value + 2.3% 1.00
Internal Cash 2.77 2%
Mesirow Nov-10 Passive Currency Hedge -0.18 0.5% Hedge 50 % of Foreign Currency 0.04
Total $ 227.4 100.0%
Annualized Manager Performance Periods Ending March 31st, 2012
* 2-10 Year Net of Fee returns are internal estimates; Former Managers; Philips Hager & North (June 1995 – December 2001) , EBS (September 2006-January 2010)
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YTD 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr
% % % % % % % % % % %
JF Canadian Equity(Gross) 4.4 -7.3 3.2 13.0 2.4 1.9 3.7 6.2 8.7 11.2 8.8
JF Canadian Equity(Net)* 4.3 -7.7 2.9 12.7 2.1 1.6 3.4 5.9 8.4 10.9 8.5
Sionna (Gross) 5.7 -5.2 6.9 17.2 4.2 -- -- -- -- -- --
Sionna (Net) 5.6 -5.5 6.5 16.8 3.8 -- -- -- -- -- --
S&P/TSX Comp Index 4.4 -9.8 4.2 15.6 1.1 1.7 3.2 6.5 7.4 10.4 7.2
JF US Equity(Gross) 9.5 11.2 9.9 13.2 3.1 -0.6 1.7 1.7 1.3 2.7 -1.0
JF US Equity(Net)* 9.4 11.0 9.7 13.0 2.9 -0.8 1.5 1.5 1.1 2.5 -1.2
S&P 500 Total Return Index ($CAD) 10.5 11.5 11.2 14.3 3.2 -0.9 1.0 1.9 1.4 3.4 -0.6
JF Fixed Income(Gross) 1.1 10.0 7.6 7.9 6.8 6.4 6.2 5.8 5.7 6.3 6.6
JF Fixed Income(Net)* 1.0 9.9 7.5 7.8 6.7 6.3 6.1 5.7 5.6 6.2 6.5
Dex Bond Universe -0.2 9.7 7.4 6.6 6.2 6.1 6.0 5.9 5.7 6.3 6.6
Wedge (Gross ) 11.8 6.4 13.9 20.9 7.2 0.5 -- -- -- -- --
Wedge (Net ) 11.7 5.8 13.3 20.3 6.6 -0.2 -- -- -- -- --
Russell Midcap Value 9.4 5.1 11.0 19.6 4.8 -1.6 1.1 3.1 3.8 6.9 3.1
Wedge Small Cap (Gross) 10.7 4.4 12.8 18.1 -- -- -- -- -- -- --
Wedge Small Cap (Net) 10.4 3.4 11.7 17.0 -- -- -- -- -- -- --
Russell Small Cap Value 9.5 1.6 8.4 16.1 4.1 -2.8 -0.9 1.8 1.7 5.9 1.7
Tweedy Browne (Gross) 8.0 6.9 9.4 17.3 4.5 1.2 4.4 5.9 6.5 -- --
Tweedy Browne (Net) 7.7 5.6 8.1 15.8 3.2 0.0 3.3 4.8 5.4 -- --
LSV (Gross) 7.6 -3.7 1.1 9.9 -4.9 -- -- -- -- -- --
LSV (Net ) 7.5 -4.3 0.5 9.1 -5.5 -- -- -- -- -- --
MSCI EAFE Comp ($CAD) 8.9 -2.7 1.7 9.0 -3.8 -5.8 -2.0 0.9 1.6 5.4 1.3 LSV EM (Gross) 14.5 -5.6 -- -- -- -- -- -- -- -- --
LSV EM (Net ) 14.2 -6.7 -- -- -- -- -- -- -- -- --
MSCI Emerging Markets Index 12.0 -6.0 3.5 16.2 0.5 2.0 4.8 9.5 9.3 14.2 9.2
Endowment Fund Results Summary of Major Events: (for the 12 Months Ended March 31st, 2012)
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Global Markets: The following is a summary of the major changes in indices for the year ended March 31st, 2012;
Canadian equity S&P/TSX index returned -9.8%
International equity markets MSCI EAFE index returned -2.7%
US equity market S&P 500 index returned 11.5%
Canadian fixed income (DEX Universe) returned 9.7%
Total Endowment portfolio increased $ 12.3 M to $ 227.4 M consisting of:
Net additions of $ 5.9 M
Annual return (net of investment management fees) of 2.9 % compared to 11.9% for the same period in 2011.
Review of / Changes to Managers:
No changes.
Endowment Fund Results: Relative to major asset class indices (for the 12 Months Ended March 31st, 2012)
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Results relative to major asset class indices#: Canadian equity outperformed the S&P/TSX by 3.0%. The fund’s value style bias paid off over the course of the unusually volatile year. JF and Sionna both outperformed the benchmark by 2.5% and 4.6% respectively. Most of the value add stemmed from the underweight in materials and overweight in consumer staples sectors (7.4% vs 22.5% and 7.8% vs 2.6% respectively). International equities posted positive returns 0.7% versus - 2.7% for the MSCI EAFE index (CAD$). Tweedy Browne returned 6.9% and LSV underperformed the index over the period returning -3.7% . US equity returned 7.9% versus 11.5% for the S&P 500 (CAD$) index. Much of this detracted value was due to the participation in the US mid-cap and small cap sectors. These sectors underperformed the broader US equity market , however the two mandates with Wedge capital outperformed their respective benchmarks. Midcap by 1.4 % and Small cap by 2.8% . Canadian fixed income also outperformed for the 12 month period: 10.0% versus 9.7% for the Dex Bond Universe. The bond market posted positive returns over the period driven by increasing confidence in the U.S. recovery and a stabilization in Eurozone markets. There was a slight rise in government bond yields while corporate bond yields declined reflecting strong investor demand. The main contributor to performance was the significant overweight in corporate bonds. Security selection was also a positive contributor.
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Endowment Fund Results: Relative to Endowment Policy Benchmark (for the 12 Months Ended March 31st, 2012)
•Endowment Fund Policy Benchmark: 30% DEX Bond Universe + 20% S&P/TSX Composite + 25% S&P 500 ($CAD) + 20%
MSCI EAFE Net ($CAD) + 5% MSCI Emerging Markets Index
•12-month Total Gross Portfolio return of 3.4% versus Composite Benchmark returns of 2.9%. The chart below summarizes
the attribution of returns relative to the Benchmark. The selection effect measures the investment manager’s ability to select
securities within a given segment relative to a benchmark. The allocation effect indicates whether the overweighting or
underweighting of segments relative to a benchmark contributed positively or negatively to the overall portfolio return. The
combined effect is the Net Management Effect. The Chart below shows strong security selection by Canadian as well as
foreign managers (particularly Tweedy Browne) offset by weaker performance in US Equities .
Note : Emerging Market equity is combined with EAFE equity and shown as international equity. Cash return includes currency
hedging effect.
0.53
0.59
-0.68
1.14
0.04
-0.55
-1.00
-0.50
0.00
0.50
1.00
1.50
Total Fund CanadaEquity
US Equity InternationalEquity
FixedIncome
Cash
% Performance Attribution by Asset Class
Allocation Effect
Selection Effect
Net ManagementEffect
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Market Values and Cash Flows March 31st, 2012 (in millions $)
HERITAGE FUND: 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Market Value of Fund Balance at Quarter end 82.2 75.7 61.3 46.4 56.7 60.3 52.7 46.1 42.5 37.6
Capital Additions to Fund in period 4.1 6.6 3.6 2.3 4.0 3.0 3.7 1.7 0.8 0.7
Distributions to University in period - - - -1.9 -1.5 -1.5 -1.5 -1.5 -1.5 -1.5
GENERAL ENDOWMENT:
Market Value of Fund Balance at Quarter end 145.1 139.4 118.4 92.1 114.1 126.5 113.7 99.2 93.4 78.1
Capital Additions to Fund in period 1.8 6.5 4.7 - 1.7 1.7 4.7 - 0.5 2.5
Distributions to University in period - - -0.8 - -1.0 -2.5 - -1.6 -0.5 -
TOTAL MARKET VALUE OF ENDOWMENTS 227.3 215.1 179.6 138.5 170.8 186.9 166.5 145.4 135.9 115.7