The Long Term Investment Pool returned 11.6%, net, for calendar year 2010, below the benchmark return of 12.9%. Alternative investments returned 9.0%, public equities returned 18.3% and fixed income returned 8.2%, net of fees.
The market value of Rochester’s Long Term Investment Pool (LTIP) on was $1.6 billion. Rochester's net performance for the first six months of fiscal 2011 (7/1/10 to 12/31/10) was 10.6% versus the benchmark return of 18.2% (80% ACWI plus 20% Barclay’s Aggregate US Bond Index). The ACWI-ex US (an index of international stocks) returned 25.0% and the Dow Jones U.S. Total Stock Market Index returned 24.5% over the six-month period. The performance of Rochester’s portfolio lags when equity markets rally because of exposure to alternatives. The last six months of calendar 2010 show that over short time periods the lag can be significant.
Calendar year 2010 was an excellent "alpha" (performance versus benchmark) year for the University’s US public equity managers. As a group, these managers returned 19.4% net against the benchmark return of 17.5% (Dow Jones Total US Stock Index). Most of these managers also exceeded their individual benchmarks for the year.
Rochester’s international equity managers also generated excellent “alpha” for the calendar year, returning 17.0% against 11.2% on the benchmark (ACWI ex-US).
Public equities amount to approximately one-third of the University’s Long Term Investment Pool (LTIP) and outperformed the alternative and fixed income allocations in calendar 2010. The alternative investment allocation is approximately 60% of the LTIP. Alternatives produced a net return of 9% for the calendar year, without counting the valuation adjustments for private equity and real assets (which, if posted in 2010, would have increased the return to above 10%). Mid-single digit returns from real assets (real estate and natural resources) are expected for the year due to flat returns from real estate and low teens returns from natural resources. Mid-single digit net returns were produced from most hedge funds (short positions detract from performance when equity prices rise rapidly) and mid-teens net returns were generated from private equity.
The Investment Office’s analysis indicates the portfolio has adequate liquidity. The LTIP continues to receive significant distributions from private equity and real asset investment partnerships. The line of credit was not accessed during the year. Undrawn commitments amount to approximately 15% (9% real assets and 6% private equity) of the LTIP.
On December 31, 2010 the portfolio was allocated 33% to public equities (16% domestic equity and 17% international equity), 23% to hedge funds, 15% to real assets, 4% to venture capital, 15% to private equity, and 2% to distressed and credit. Fixed income and short-term investments amounted to 8%. These allocations are near the mean of large educational endowments. The allocation to hedge funds is expected to increase toward the 25% target in 2011, with corresponding reductions to public equity. The LTIP remains highly diversified and is managed by 85 firms. John W. Bristol, the balanced manager, is the only firm with an allocation greater than 5%; the combined Bristol account totals 6%.