TCU: Investment Management

 

Strategies

 

Investment strategies are developed and implemented to address the philosophy, goals and objectives of the Endowment.

 

Return Strategy – Equity investments will be the core return seeking assets. Equity investments are expected to provide appreciation potential and growth of income with the understanding that volatility and some risk of loss must be assumed. Equity strategies will include but are not limited to domestic, international, and global long-only stocks, equity long-short marketable alternatives, and private equity. The Return portfolio will be broadly diversified in global public stocks and private company securities. The objective of the Return Strategy is to achieve the highest level of return possible within acceptable levels of risk. The portfolio is expected to exceed the return of the MS-All Country World Index by at least 1.5% on a rolling 5-year basis.

  • Domestic Equity
  • Global Ex US Equity
  • Global Equity
  • Equity Hedge Funds
  • Private Equity

Consistency Strategy – The requirement for an annual payout of approximately 5% each year necessitates that strategies be employed to mitigate the more volatile return streams, thus providing for desired levels of return consistency for the Endowment. Fixed income and absolute return oriented marketable alternatives are the core strategies that will be employed. Total returns within the Consistency Strategy are expected to be positive in any given year. Such strategies should have relatively low correlation to the broad equity market, and are expected to fall between the returns of equity and fixed income markets over the long term. The strategy should seek to reliably achieve a total real return of 5% or higher after costs.

  • Absolute Return
  • Fixed Income

Inflation Hedge Strategy – Strategies may be employed that have the specific purpose of offsetting the effects of inflation rather than seeking return for a given level of risk. Typical strategies include but are not limited to real assets such as real estate, timber, and commodities; inflation-protected securities (TIPS); and synthetic hedges. The University’s mineral assets provide the core of the inflation hedging strategy. The Inflation Hedge Strategy should achieve a total real return of 5% after costs.

  • Minerals and Energy
  • Real Assets

Opportunistic Strategy – Timely and/or innovative investment opportunities that meet return or provide risk-reduction objectives might not logically be included in existing portfolios utilized in the above strategies. The investment staff is expected to monitor and take advantage of evolving market situations that inevitably develop. Staff should periodically make the case for such opportunities to the Committee for inclusion in the Endowment. Cash may be allocated to this strategy for the purpose of opportunistically hedging market risks or for other risk management approaches. The minimum objective for Opportunistic Strategies that are not risk management oriented should exceed a total real return after costs of 6%.