Keeping Underwater Endowments Afloat (and the Programs They Support)
When endowment funds slip “underwater,” institutions must evaluate the tradeoff between distributing anticipated budget support and restoring the endowment to its original value.
Governance and Management
Spending Policy Practices: 2016
Setting an appropriate spending policy is an important part of effective endowment management, as an institution’s spending policy serves as a bridge that links the long-term investment portfolio (LTIP) and the enterprise. The data and analysis in this report cover a variety of spending topics including spending rule types, the endowment’s support of operations, and effective spending rates.
Quarterly Regulatory Update: Second Quarter 2016
In this Edition: Hedge fund risks continue to draw the interest of US regulators; Potential new fee reporting template furthers push for private equity transparency; Federal court ruling creates questions around private fund structures and liabilities; Comprehensive European Union legislation adds to increasingly complex global regulatory landscape.
Investment Publications Highlights: May 2016
May’s publication summarizes three articles focused on investment management fees. The first argues that the total fees charged to investors increase when incentive fees are more frequently crystallized, the second suggests high fees can significantly reduce an asset class’s diversification benefit, and the third explores five myths about fees and fee structures.
The Foundation of Good Governance for Endowments and Investment Committees
Suboptimal governance can extend disappointing performance or perpetuate suboptimal past decisions. By contrast, good governance leads of its own design to necessary mid-course corrections. To create the conditions for good governance, endowments should assess whether they have in place the appropriate model for portfolio oversight and management, are upholding their fiduciary responsibilities, and are learning about peer best practices in structure, process, policies, and role of the portfolio.
A Holistic Approach to Liquidity Management
In this paper we share trends in liquidity creation at institutions and look at what’s behind them. We outline three building blocks to optimize liquidity management across an enterprise, providing several approaches to assessing liquidity needs holistically. We offer specific examples from US colleges and universities given the availability and breadth of data, though we believe that the lessons learned are broadly applicable. Finally, we discuss approaches to cash management in the current environment.
Strategic Currency Hedging Policy: A New Framework
Currency risk is a fact of life for investors, yet few investors have given appropriate thought to setting a strategic hedging policy. The typical approaches have material drawbacks, being either too simplistic or too complex. The new framework we introduce in this paper achieves an attractive balance by seamlessly integrating qualitative portfolio considerations driven by relevant asset class characteristics with a highly simplified yet robust method of incorporating individual currency characteristics. The framework is applicable to a broad set of investors, accommodates lack of precision in measuring currency exposures, separates the question of implementation from policy setting, and helps clearly distinguish between strategic exposures and tactical overlays.
Quarterly Regulatory Update: First Quarter 2016
This edition includes a look back at key regulatory changes and proposals in 2015 and a look ahead at 2016 for mutual funds, hedge funds, and private investments.
What Does US FIRPTA Reform Mean for Global Investors?
While it is too soon to know the full impact of reform, recent legislative changes are likely to increase global investors’ interest in US REITs and real property, with potential implications for valuations, fund flows, and transactions in 2016 and beyond.
Are Your Reserves Long-Term Capital?
Determining the appropriate size of near-term reserves and how to invest any remaining reserves is more art than science and requires careful consideration of a number of factors.