Investment Management Strategies

 

Strategies

 

TCU Investment Management’s investment philosophy is based upon the belief that excess returns, relative to an appropriate benchmark, can be achieved to varying degrees in all asset classes through the implementation of active management and, more specifically, investment strategies that seek to benefit from less efficient market environments. Simultaneously, the philosophy assumes that a lower level of investment risk or volatility, relative to an appropriate benchmark, can be achieved through prudent diversification at the asset class, asset manager, and security level and, thereby, provide for a controlled risk environment which provides reasonable assurance that no single security, class of securities, asset manager, or portfolio or investment style will have a disproportionate impact on the endowment in aggregate. In application, the total return concept of management is utilized with an objectives-based approach to asset allocation that balances annual payout needs with the necessity of long-term growth.

graph showing proportion of each investment strategy. 52.7% Equity; 19.6% Absolute Return/Fixed Income; 15.8% Inflation Hedge; 12% Opportunistic

Return
Equity investments are the core return seeking assets, providing 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.

 

Absolute Return
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. Private credit and absolute return-oriented marketable alternatives are the core strategies that will be employed. Total returns within this 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.

 

Inflation Hedge
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 and commodities, energy private equity, inflation-protected securities (TIPS), and synthetic hedges. The University’s mineral assets provide the core of the inflation hedging strategy.

 

Opportunistic
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. Cash may be allocated to this strategy for the purpose of opportunistically hedging market risks or for other risk management approaches.