Foundation Finance | Investment Fund
Investment Fund
History
CA Capital Management, Cambridge Associates’ dedicated outsourced chief investment officer (OCIO) business, is the UNCG Investment Fund’s OCIO. Cambridge Associates is one of the largest endowment management firms in the U.S. with a network of 200+ college and university clients. CA Capital manages the Fund on a day-to-day basis, while the Vice Chancellor of Finance & Administration, Treasurer, and Board of Directors of the Fund work closely with CA Capital and maintain high-level oversight of the Fund.
The primary objective of the Fund is to preserve and enhance its real (inflation-adjusted) purchasing power while providing a relatively predictable, stable, and constant (in real terms) stream of earnings for current use. Over the long-term, we seek to generate real returns at or above 5.0%.
To accomplish this goal, the Fund is invested primarily in Capital Appreciation (equity-related) investments, both in public and private markets. In addition, the Fund holds a set of volatility / risk reducing strategies: deflation hedging, inflation sensitive, and diversifiers. The current long-term target allocation to each of these strategies (the “Policy Portfolio”) is presented in the following table.
Policy Portfolio
| Portfolio Role | Policy Targets | Allowable Range |
|---|---|---|
| Capital Appreciation | 70% | 40% – 80% |
| Public Equities | 47% | 30% – 55% |
| Private Equity | 33% | 0% – 40% |
| Diversifying Strategies | 15% | 10% – 30% |
| Deflation Hedging | 15% | 5% – 25% |
| Bonds | 15% | |
| Cash | 0% | 0% – 10% |
| Total | 100% |
Investment Fund Board
Current Board
- Adam Aiken
- Sam Cone
- Kim Eder
- Chancellor Frank Gilliam (Non-voting)
- Board of Trustees Chair – George Hoyle (Non-voting)
- Randall Kaplan
- Chair – Charles King
- Brad Morton
- Billy Nutt
- Bob Shea (Non-voting)
- Lascel Webley
In 1985 the Chancellor appointed a University of North Carolina at Greensboro Investment Fund (UIF) and charged it with the general responsibility for management of investments subject to the formal delegation for all the University and the University Foundations. The principal activities of the Corporation shall be to accept the transfer of assets which benefit UNCG and to manage the investments of those assets. The UIF meets at least quarterly each year to discuss the investment portfolio.
The number of all voting Directors of the Corporation shall be not less than five (5) nor more than seven (7), which number shall be fixed from time to time by the Board of Trustees of The University of North Carolina at Greensboro, upon recommendation of the Chancellor of the University. Each board member is appointed for a term of four years and then eligible for reappointment for one additional term. The Board members are selected for their knowledge and experience with investments.
Endowment Overview
An endowment fund is a permanent, self-sustaining source of funding. Under donor restrictions, the University is unable to spend the principal (original gift) of the endowment but it can spend the “income” that is generated through the investment of the gift in earnings.
Donors may restrict the purposes for which endowment “income” can be spent. The purpose could be to support a professorship, to fund lectureships or scholarships, or for general use at the discretion of the University. The terms of an endowment are documented in a formal endowment agreement that is executed by both the donor and the University. University Advancement is the holder of these agreements. The University has a legal, as well as an ethical, obligation to a donor to continually administer the endowment and all distributions in accordance with the terms of the agreement.
The sum of each endowment fund creates a form of permanent capital for the university. This provides funding to support the mission of the university and lends fiscal stability. The endowed funds are invested. The funds are invested by “buying shares” in UNCG’s Investment Fund. The University’s Investment Fund (UIF) is administered by an external investment firm. The investment pool is a diversified fund comprised of equities, fixed income, commodities, various specialized investments and cash designed to ensure that future growth is sufficient to offset normal inflation plus reasonable spending. The University’s Investment Fund is managed by the University Investment Fund Board. The Board attempts to provide a relatively predictable, stable, and constant (in real terms) spending stream to support budgetary needs.
Annual Spending Distribution
Income from the endowment fund is contributed to the university’s operating budget and core priorities of financial aid, faculty excellence and research. Each year a portion of the endowment is paid out as an annual distribution to support the fund’s purpose. Any appreciation in excess of this annual distribution is retained in the endowment so it can grow and support future generations.
This annual distribution is to be used for current spending within the same fiscal year. This annual distribution is known as the “spending distribution.” Over sixty percent of the annual spending distributions currently are funding scholarships for undergraduate and graduate students, while other distributions go to support academic departments and professorships.
The use of a spending distribution formula is used to calculate the amount of income to distribute annually. Spending from the Fund in any one fiscal year shall not exceed 5.5% of the “average market value” of the Fund. The “average market value” is defined as an average of the market values on June 30 of the previous three years. This statement is issued by the Board and governs the maximum spending allowable from the Fund. The actual spending rate may be less than the 5.5% maximum rate due to the economic environment. The rate established for fiscal year ending June 30, 2023 is 3.65%. This rate is established upon recommendation from the Treasurer of the UIF Board and is approved at the October Board meeting.
The annual spending distribution to each fund takes place by the end of August each year for the fiscal year. The spending distribution funds are all held in the UNCG chart of accounts. All spending related to these accounts must be in accordance with donor intent. Each year, around February, the holders of endowed funds are notified of the estimate for the annual spending distribution for the next upcoming fiscal year if the fund is fully endowed.