Sec. 4-807. Performance Objectives and Benchmarks

1. Short-term market fluctuations may cause variations in investment performance. Therefore, performance will ordinarily be measured over a moving five-year period, net of investment management fees and transaction costs; and the criteria set forth in this section will ordinarily be applied in evaluating investment performance. The University reserves the right to evaluate and make necessary changes regarding investment managers and/or funds over a shorter term using the same criteria or other criteria.
2. Market Benchmark:
   1. The total return for the short-term investment pool and for each short-term investment manager shall exceed the rate of return on 3-month U.S. Treasury Bills.
   2. The total return for the intermediate-term investment pool and for each intermediate-term investment manager shall exceed the Merrill Lynch 1-3 Year Government Bond Index. The total return for each intermediate-term investment manager shall rank in the top half of the intermediate-term fixed income universe.
   3. The total return for the long-term investment pool shall exceed the total return of a target Balanced Index composed of: 30% of the S&P 500 Index, 10% of the Russell 2000 Index, 10% of the EAFE Index, and 50% of the Barclays Capital Aggregate Bond Index. The total return for each active long-term investment manager shall exceed the total return of the relevant benchmark (Domestic Large Cap - S&P 500 Index; Domestic Small Cap - Russell 2000 Index; Core International - EAFE Index; and Fixed Income - Barclays Capital Aggregate Bond Index). The total return for each passive long-term investment manager shall approximate the total return of the relevant benchmark (Domestic Large Cap - S&P 500 Index; Domestic Small Cap - Russell 2000 Index; Core International - EAFE Index; and Fixed Income - Barclays Capital Aggregate Bond Index). Furthermore, the total return for each active long-term investment manager shall rank in the top half of the appropriate universe (Large Cap Equity, Small Cap Equity, Small Cap Growth, Small Cap Value, International Equity, and Fixed Income).
3. Variability
   1. The standard deviation for each short-term investment manager shall not exceed the standard deviation of 52-week Treasury Bills.
   2. The standard deviation for each intermediate-term investment manager shall not exceed 1.2 times the standard deviation of the Merrill Lynch 1-3 Year Government Bond Index.
   3. The beta (volatility) for each long-term equity investment manager shall not exceed 1.2 times that of the relevant equity benchmark. Furthermore, each active equity investment manager is expected to achieve a positive alpha (risk-adjusted return).
      
      

   The standard deviation for each long-term fixed income investment manager shall not exceed 1.2 times the standard deviation of the Barclays Capital Aggregate Bond Index.