Transcript Slide 1

Long Term Investment Portfolio
Annual Review – FY 2011
September 8, 2011
Overview/Executive Summary
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Fiscal 2011 was fraught with multiple macroeconomic risks
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U.S. Debt Ceiling
Perpetual European Debt Issues with threat of ECB disintegrating
Japanese Earthquakes and subsequent global business disruptions
Arab Spring
Maintained Risk-Controlled stance throughout Year to protect portfolio
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Took Equity exposure down to lowest level in recent history
Continued process of building illiquid portfolio including active secondary efforts
Fiscal Year Investment Results of 16.8%, net of fees and expenses
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Returns for the fiscal year may trail many equity-heavy peers by approximately 2%
OSU Portfolio carried 1/3 market equity risk and volatility of fixed income market
Markets of July and August (Month to Date) saw Risk and Volatility spike
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Equity Markets declined (14-16%) in 40 days to August 15
OSU holding up well through this period with manager performance beating markets
July performance was down (0.42%) vs. major equity market indices being down (1.6-3.6%)
Long Term Investment Pool – June 30, 2011
University Endowment
Foundation Endowment
Long Term Operating Fund
Maintenance & Renewal Funds
Total Long Term Investment Pool
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$921,219,450
484,426,575
696,675,812
18,392,410
$2,120,714,246
Asset Allocation as of June 30, 2011
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Global Equities
Long/Short Equities
18.1%
18.9%
Market Exposure 37.0%
(Range 10 – 50%)
Fixed Income
Absolute Return
10.9%
20.6%
Risk Reducers
31.5%
(Range 25 – 50%)
Private Equity
Distressed Debt
Opportunistic
7.9%
6.2%
3.5%
Return Enhancers 17.6%
(Range 10 – 25%)
Real Estate
Natural Resources
Commodities
Infrastructure
4.2%
3.8%
2.9%
3.0%
Inflation Hedges 13.9%
(Range 10 – 25%)
Investment Performance – Fiscal Year 2011
FY 2011
Returns
Benchmark
Returns
Long-Only Equity
32.2%
24.4%
18.7%
$ 383.8 MM
Long/Short Equity
11.7%
24.4%
10.3%
$ 399.7 MM
Fixed Income
5.7%
4.2%
6.5%
$ 231.3 MM
Absolute Return Hedge Funds
7.9%
4.2%
13.0%
$ 436.5 MM
Buyouts
17.7%
21.3%
17.7%
$ 101.8 MM
Venture Capital
14.3%
21.3%
10.8%
$ 15.5 MM
Distressed Debt
13.7%
21.3%
25.2%
$ 131.9 MM
Opportunistic
14.5%
21.3%
31.2%
$ 74.2 MM
Natural Resources
59.6%
9.3%
27.1%
$80.7 MM
Real Estate
26.5%
9.3%
(2.9%)
$90.3MM
Commodities
2.5%
9.3%
1.1%
$62.2 MM
Infrastructure
30.5%
9.3%
13.7%
$63.4 MM
Other (FoFs; Sec. Funds; EM P/E)
16.7%
21.3%
13.5%
$49.4 MM
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2 Year
Annualized Returns
Dollars
Deployed
Comparison of Returns vs. Benchmarks - FY 2011
FY 2011
Actual
FY 2011
Benchmarks
One Year
Bench Comp
Two Year
Returns
Two Year
Bench Comp
Market Exposure (37.0%)
22.9%
24.4%
(1.5%)
18.7%
1.3%
Risk Reducers (31.5%)
7.3%
4.2%
3.1%
10.2%
6.0%
Return Enhancers (17.6%)
14.8%
21.3%
(6.5%)
25.2%
4.2%
Inflation Hedges (13.9%)
28.3%
9.3%
19.1%
11.3%
5.3%
Totals
16.8%
13.7%
3.1%
16.2%
4.9%
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Liquidity Measures (@ June 30, 2011)
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30 Day Liquidity
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Estimated at $661MM (31.2% of Portfolio)
5.5X Coverage for Annual Distribution to the University
3.1X Coverage for Annual Distribution + Estimated Annual Capital Calls
2.2X Coverage for Above assuming a 30% Decline in Liquid Asset Values
1.2X Coverage for Annual Distribution + Total Potential Capital Calls
365 Day Liquidity
- Estimated at $1.29 Billion (61.2% of Portfolio)
- 10.8X Coverage for Annual Distribution to the University
- 6.2X Coverage for Annual Distribution + Estimated Annual Capital Calls
- 4.3X Coverage for Above assuming a 30% Decline in Liquid Asset Values
- 2.0X Coverage for Annual Distribution + Total Potential Capital Calls
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Does not include redemptions in process ($11.0 MM)
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Unfunded Capital Commitments = 23.5% of LTIP Totals (@ 7/31/2011)
Assumes No Distributions to University from Illiquid Investments; No New Gift Inflow
Upside/Downside Capture – Last Two Years
One Year
Two Years
Upside
Downside
Upside
Downside
Vs. S & P 500
44.2%
22.7%
47.8%
26.4%
Vs. ACWI
36.5%
3.5%
45.9%
19.3%
 The Portfolio was designed and changed in 2008/2009 with
implementation from 2009 through today.
 That was a period of exceptionally high risk and, in the estimation of
some, remains a period of high risk today.
 The primary job of the Investment Office is to act as a fiduciary for the
University, preserving capital, and funding the University to the extent
required by policy.
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Metrics – Fiscal Year 2011
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Metrics – Two Years (FY2010 & 2011) Annualized
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Private Capital Diversification Over Time
(MV as of 06/30/2011)
100%
Venture Capital
90%
Secondary
80%
Real Estate
70%
Opportunistic
60%
Natural Resources
Mezzanine
50%
Infrastructure
40%
Fund of Funds
30%
Emerging Markets
20%
Distressed
10%
Buyout
0%
Jun-11
Jun-10
Jun-09
Jun-08
Jun-07
Jun-06
Jun-05
Jun-04
Jun-03
Jun-02
Jun-01
Jun-00
Jun-99
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Illiquid Portfolio Analysis (@7/31/2011)
Net Asset Value (NAV): All Privates
Unfunded Commitments
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$520 Million or 24.7% of LTIP
$494 Million or 23.5% of LTIP
Return Enhancers
Inflation Hedges
$337 Million
$157 Million
Cash Flows:
Capital Funding
Distributions
Net Cash Outflow
FY 2009
FY 2010
($174MM)
($125MM)
$17MM
$62MM
$72MM
$150MM
($157MM)
($63MM)
($69MM)
($40MM)
Wtd. Avg. Age of Portfolio:
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FY 2011
FY 2012 E
($141MM) ($190MM)
Commitments
Unfunded
2.9 Years
2.0 Years
The Ohio State University
Office of Investments
investments.osu.edu
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