Part 4 Subpart 4-8 Investment Policy

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 goal for the short-term investment pool and for each short-term investment manager is to meet or exceed the rate of return on 3-month U.S. Treasury Bills.
    2. The total return goal for the intermediate-term investment pool and for each intermediate-term investment manager is to meet or 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 goal for the long-term investment pool is to meet or exceed the total return of a target Balanced Index composed of: 16% of the Russell 1000 Index, 7% of the Russell Mid Cap Index 7% of the Russell 2000 Index, 11% of the MSCI AC World Index ex-US, 7% of the MSCI Emerging Markets Index, 7% of the NAREIT Index, 28% of the Barclays Capital Aggregate Bond Index, 3% of either the S&P/LSTA Loan Index or Credit Suisse Leveraged Loan Index, and 14% of the JP Morgan Non-US GBI Index. The total return for each active long-term investment manager shall exceed the total return of the relevant benchmarks which include the MSCI Large Cap Value Index, Russell Mid Cap Growth Index, Russell Mid Cap Value Index, MSCI Small Cap 1750 Index, Russell 2000 Value Index, MSCI AC World ex-US Index, MSCI Emerging Markets Index, Barclays Aggregate Bond Index, JP Morgan Non-US GBI Index and the appropriate bank loan benchmark for the manager in the portfolio (either S&P/LSTA Loan Index or Credit Suisse Levered Loan Index). The total return for each passive long-term investment manager shall approximate the total return of the relevant benchmark. Furthermore, the total return for each active long-term investment manager shall rank in the top half of the appropriate universe.

  3. Variability
    1. The standard deviation for each short-term investment manager shall not exceed the 1.2 times the standard deviation of 3-month US 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 active long-term equity and real estate investment trust (REIT) investment manager shall not exceed 1.2 times that of the relevantbenchmarks. Furthermore, each active investment manager is expected to achieve a positive alpha (risk-adjusted return). Passive managers are expected to have a beta of approximately 1.00 and an alpha of 0%. The standard deviation for each long-term fixed income investment manager shall not exceed 1.2 times the standard deviation of the appropriate index.