Minutes forOctober 23, 2017 KIPP MAC Endowment Committee Meeting

Attendees

Committee members Tom Avery, Hunter Pierson and Tom Pritchard; Kelly Shields from KIPP MAC; and representatives of Atlantic Trust (AT).

Purpose of meeting

The Endowment Committee (“EC”) met to: (1) review the performance of the portfolio as of September 30, 2017;and (2)discuss any other business.

Actions taken

  • Minutes from the August 21, 2017 meeting were approved by the EC.
  • The EC approved the current phase-in plan for cash assets, which is to allocate pro rata over the remainder of the calendar year unless market dislocations provide opportunity to invest faster.
  • The EC also discussed the role of Tactical Investments (TI) in the portfolio. Our basic default portfolio is a passive equity strategy combined with cash holdings and TI (targets of 82%, 8% and 10%, respectively). The way we view the TI category is shown below (TI is labeled Alternatives) as included in our Investment and Spending Policies for the KIPP Metro Atlanta Scholarship and Financial Aid Endowment:

“Although the EC favors a largely passive investment approach, it also wants to maintain flexibility to take advantage of occasional recommendations by AT to invest in proprietary strategies that appear to be particularly attractive. Such strategies can cover a range of liquid asset classes (no illiquid investments will be considered), but any strategies considered should either be managed in-house by AT with a long and successful track record, or be managed by an external manager with a long and successful track record and with whom AT has had a long-term relationship and is a current investor. (In English, the previous sentence emphasizes that AT must be a very enthusiastic and knowledgeable advocate for the strategy and also have its own money in it.) Also, as the EC has a long-term investment horizon and does not want to “trade” the Endowment based on short-term considerations, Alternatives will be evaluated based on an investment time horizon of 3-5 years and with the prudent expectation that such investment will outperform a passive equity strategy over that time frame on a risk-adjusted basis. If AT ceases to be the Endowment’s external adviser, this allocation to Alternatives may be revisited and possibly eliminated.”

  • Given the above discussion on TI, the EC voted to eliminate the AT Income Opportunities Fund and VirtusSelix Floating Rate Fund from the portfolio and phase the proceeds into the passive equity strategy by the end of the calendar year. The EC emphasized that it is perfectly acceptable to have no investments in the TI category, as the range is 0%-20%, and encouraged AT to only recommend such investments that had an opportunity to outperform a passive equity strategy over a 3-5 year period. Consistent with this approach, the EC also requested that AT measure any TI investments against the S&P 500 over a 3-5 year period, along with any other benchmark specific to the individual investment.
  • Finally, the EC discussed the approval process for the Annual Spending Percentage, which is shown below as included in our Investment and Spending Policies for the KIPP Metro Atlanta Scholarship and Financial Aid Endowment:

“The Annual Spending Percentage is approved each fiscal year by a majority vote of the endowment committee (“EC”) and then confirmed by a majority vote of the Directors at the meeting in which the budget for the upcoming fiscal year is approved.”

The EC voted to retain this approval process as is currently stated.

Respectfully submitted,

Thomas A. Pritchard, EC Chair