Strategies

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.

Our Philosophy

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. Such a controlled risk environment provides reasonable assurance that no single security, class of securities, asset manager, or portfolio or investment style has a disproportionate impact on the Endowment in aggregate.

Investment Strategies

Investment strategies are developed and implemented to address the philosophy, goals, and objectives of the Endowment. The Endowment is invested across a broad array of strategies designed to create a diversified portfolio that pursues long-term capital growth while providing a stable stream of income despite fluctuations in the financial markets so that the Endowment may endure volatility events and market cycles. TCU Investment Management seeks investment opportunities categorized as follows:

 

RETURN
Equity investments are the core return-seeking assets expected to provide appreciation potential and growth of income with the understanding that volatility and some risk of loss must be assumed. Equity strategies include, but are not limited to, domestic and global long-only stocks, equity long/short marketable alternatives, and private equity, including co-investments. Global equity includes strategies with regional weightings in a proportional relationship to a global equity index. Global market exposures may include the United States, international developed countries, and emerging markets. The Return portfolio is broadly diversified across global public company stocks and private company securities. The objective of the Return portfolio is to achieve the highest level of return possible within acceptable levels of risk.

CONSISTENCY
The requirement for an annual payout of approximately 5% each year necessitates that strategies be employed to mitigate the more volatile return streams. The Consistency portfolio may include Absolute Return and Fixed Income strategies. Absolute Return incorporates alternative partnerships including co-investments designed to be positive in any given year with a relatively low correlation to the broad equity market. Private credit and absolute return-oriented marketable alternatives are the core strategies.

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. Such strategies may include but are not limited to a variety of real assets such as real estate, commodities, and energy private equity. The University’s directly held mineral assets are not included in the capital markets portfolio except for purposes of separate monitoring and cash flow tracking. The Inflation Hedge portfolio seeks a total real return of 5% or higher over a full market cycle to satisfy the long-term objectives of the Endowment, correlated with inflation while uncorrelated with other Endowment strategies.

LIQUIDITY
Endowment cash, futures overlay program, and the tactical exposure management account are included in this strategy. Endowment cash is distinctive from other short-term assets managed by TCU Investment Management. As such, it may be used as a liquidity and/or risk management tool to opportunistically hedge market risks or for other risk management approaches. TCU Investment Management utilizes the tactical exposure management account as a portfolio risk management tool to hold ETF shares to control portfolio exposure for geography, sector, size, style, and other risk factors that require affirmative management and where index futures are unavailable or impractical. The wide variety of ETF applications provides many benefits for addressing risk management including unanticipated distributions of capital.