THE UNIVERSITY OF TOLEDO FOUNDATION
Joint Investment Committee Meeting
May 20, 2011 - 2:30 p.m.
Driscoll Center Schmakel Room
Members Present:Nick Conrad – Chair(
Gene Collins
Dave Dabney
Jeff Denker
Bill Koester
Greg Kopan
Linda Molenda(
Anne Marie Riley-Vice Chair
Scott Savage
( participated via phone / Members Not Present:
Joel Epstein
Bill Fall
Fund Evaluation Group:
Mike Oyster
Stephen Hodson / Others Present:
Lisa Cousino-Hoersten
Bryan Dadey
Brenda Lee
Vern Snyder
Randy Ruttenberg-Faimount
Brock Walters-Pinnacle
Anne Marie Riley, Vice Chair, called the meeting to order at 2:34 p.m.
I. Approval of Minutes
Ms. Riley asked for a motion to approve the minutes of the February 8, 2011 meeting. Following the recommendation of one minor change, a motion to accept the minutes as revised was made by Mr. Kopan and seconded by Mr. Koester. The minutes were then unanimously approved.
II. Dorr Street Gateway Investment
Mr. Schroeder, the Foundation’s Vice President of Real Estate and Business Development, updated the Committee in connection with the ongoing Dorr Street Gateway project as presented at the last meeting. He thanked Mr. Conrad, Mr. Denker and Mr. Kopan for their active participation on the Gateway project’s core work group. He then introduced the project’s development team, Mr. Ruttenberg of Fairmount Properties, and Mr. Walters of Pinnacle Financial Group, who proceeded to share a high level overview of the project’s evolution over the past six months with respect to establishing a front door to the Main Campus which would be open to students, faculty/staff, the surrounding neighbors and community.
Mr. Ruttenberg presented a detailed update on the project schedule, architectural design and development, cost estimating, retail leasing efforts and student housing. Following a Q &A session, Mr. Walter provided a thorough analysis of the May 10th project pro forma and debt sourcing for both construction and permanent financing. While current financial returns are acceptable to the UT/UTF Trustee Work Group, they fall short of the private equity benchmark. In addition, advantages under a UTF model vs. a public/private joint venture were discussed. Following a lengthy discussion, it was determined that the project would be best served if UTF provided 100% of the necessary equity. A motion was then made by Mr. Collins to invest 100% of the equity in the Dorr Street Gateway Project (at the time of the Investment Committee meeting, it was determined to be $5.2MM+/-). Mr. Denker seconded the motion. The motion was unanimously approved.
[Ms. Molenda then joined the meeting.]
III. University Matters
Mr. Dabney reported that the University had finished its annual review of its Investment Policy and was recommending two changes: 1) transition management of the UT Quasi-Endowment to the UT Foundation to assist Institutional Advancement with critical components for the upcoming $200 million Capital Campaign, and 2) applying the same asset allocation strategy to the Quasi-Endowment as is currently used for the current investment pool. Mr. Dabney then outlined both short- and long-term benefits of the recommendations, which included establishing a self-sustaining Foundation and Advancement function. He noted that the recommendation was approved by the UT Finance Committee and is currently on the May 16th agenda of the full UT Board of Trustees Meeting for review and approval. A motion was made by Mr. Collins to accept/support the recommendation as presented. Mr. Koester seconded the motion, and the motion was unanimously approved.
IV. Robeco Clean Tech Fund III
Ms. Lee reported at the February meeting a presentation was given by representatives from Robeco Securities LLC to advise the Committee with respect to the Robeco SAM Clean Tech Fund III. As outlined in the February meeting minutes, three members disclosed perceived conflicts; as a result, a quorum was not present to vote on the recommendation. The matter was tabled until the May meeting.
For the minutes and for those present, Ms. Lee outlined the procedure for handling conflicts and then requested Mr. Conrad and Ms. Molenda to discuss with the Committee their perceived conflicts. Mr. Conrad reported that he is employed by The Andersons as the Vice President of Finance. Very recently, The Andersons began a commercial relationship with Rabobank, which is the parent company of Robeco. While the conflict is fairly removed, he felt compelled to make the disclosure and let the Committee determine whether it rose to the level of a conflict. Ms. Molenda then disclosed that she is an employee of Harbor Capital, which is currently 100% owned by Robeco. It was noted that Mr. Epstein, who had reported a conflict at the February meeting, was not present today.
Following a brief discussion, Mr. Collins made a motion to assert that Mr. Conrad’s disclosure was not deemed to be a conflict that would preclude his participation in a vote. Mr. Denker seconded the motion and following unanimous consent, the motion was carried. Mr. Collins then made a motion to assert that Ms. Molenda’s disclosure was deemed to be a conflict and therefore she should not vote on the proposal to engage Robeco. Mr. Kopan seconded the motion and following unanimous consent, the motion was carried.
Following that determination, a further discussion was held on the proposal and portfolio allocation. Mr. Kopan made a motion to invest $2 million in Robeco SAM Clean Tech Fund III. Mr. Denker seconded the motion. Ms. Molenda did not vote and Mr. Savage abstained. The motion was then approved with the present quorum. [Mr. Conrad then left the conference call.]
V. Performance Review – March 31, 2011
Mr. Oyster reviewed FEG’s market overview for the period ending March 31st. The portfolio value for the Foundation Composite was $219,579,304, which was up 4.3% for the quarter and 22.4% for FYTD. The portfolio value for the University Combined Pools was $252,617,125. For the Quasi-Endowment, the calendar FYTD return continued positive, up 25.4%.
Mr. Oyster reviewed the market’s rally performance in all areas, i.e. domestic, international, etc., noting strong fund returns. He highlighted both short- and long-term effects of various economic components, e.g., unemployment, high food and energy pricing, inflation, stimulus, etc., on the market and various sectors. He noted that emerging markets have been a strong performing asset class over the past year. Discussion was held on FEG’s view of challenging opportunities and risks in the future due to projected market volatility.
VI. Manager Performance Review
In connection with Westfield Large Cap funds, Mr. Oyster reported positive performance of 5.8% for the Quarter and 38.4% for the FYTD. Westfield outperformed over the course of the year, lifted by the energy consumer discretionary sector and are in a position to do well as the economy recovers.
CommonSense was added to the watch list at the February meeting due to recent poor performance. He reported that while their performance has been somewhat better as of late, overall it remains poor in long and short equity over the past year. This is perceived to be a result of the aggregate of sub-managers adhering to their primary methodologies. FEG believes that, going forward, the managers will most likely perform better, it is just that the current environment is the style’s worst case scenario. He will continue to monitor and report on their performance, noting that this is a manager that FEG recommends.
Mr. Oyster reported that FEG provides fundamental coverage for Harris Investments, which had a very strong performance of 8.8% for the Quarter and 38.4% for the FYTD. This was due to the fact that quality stocks are returning to favor.
VII. Target Allocation Review
Mr. Hodson outlined opportunities and risks within four categories which FEG was recommending for consideration as follows:
1. Global Equity
a. Private Equity
b. Emerging Markets
(The Robeco investment falls into Global Private Equity.)
2. Global Fixed Income
Currently, the portfolio has a large allocation to the PIMCO Total Return Fund (2/3 of the fixed income portfolio) and a small allocation to the Loomis Sayles Bond Fund. These are other opportunities within the category that would provide better risk return opportunities that could be implemented rather quickly. FEG believes we should go further than PIMCO goes, i.e., take more risks, so long as it is rewarded.
3. Real Assets
4. Diversified Strategies
In looking at each class, Mr. Oyster would suggest focusing on diversifying the fixed income portfolio and adding more Global Private Equity. Following discussion, Mr. Koester made a motion to accept FEG’s recommendation, as presented, to move $6.6 million and $3.6 million from PIMCO in the Foundation’s and University’s portfolio, respectively, into the Templeton Global Bond Fund, Seix Floating Rate HI and Fidelity Real Estate High Income Fund in equal proportions. Mr. Kopan seconded the motion. Following discussion, the motion was unanimously approved.
Mr. Oyster suggested that, due to moving the Quasi-Endowment into the Foundation’s investment pool, the next meeting should be dedicated to a review of the asset allocation and Investment Policy.
Mr. Koester suggested that a blended investment return for all funds (University and Foundation) be included in future reports.
VII. Comments & Adjournment
With no further business to discuss, the meeting adjourned at 4:46 p.m.
Next Meeting August 9th at 2:30 pm in the Driscoll Center
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Joint UT-UTF Investment Committee Mtg. - May 10, 2011