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Report on Calendar Year 2011 Performance

February 2012

The Long Term Investment Pool (LTIP) returned 3.6%, net, for calendar year 2011, above the benchmark return of -4.2%. Alternative investments returned 7.8%, public equities returned        -3.6% and fixed income returned 3.7%, net of fees.

Calendar year 2011 was an excellent "alpha" (performance versus benchmark) year for the University’s public equity managers.  As a group, Rochester’s domestic equity managers generated a return of 0.9% net against the benchmark return of 1.1% (Dow Jones Total US Stock Index). 

Rochester’s international equity managers also generated excellent “alpha” for the calendar year, returning -8.0% against -13.7% on the benchmark (ACWI ex-US). 

Public equities amount to approximately one-third of the University’s Long Term Investment Pool (LTIP) and underperformed the alternative and fixed income allocations in calendar 2011.  The alternative investment allocation is approximately 61% of the LTIP.  Alternatives produced a net return of 7.8% for the calendar year.  Mid-single digit returns from real assets (real estate and natural resources) are expected for the year due to flat returns from natural resources and low teens returns from real estate.  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.

Liquidity

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.

Asset Allocation

On December 31, 2011 the portfolio was allocated 31% to public equities (16% domestic equity and 15% international equity), 21% to hedge funds, 17% to real assets, 5% to venture capital, 16% to private equity, and 2% to distressed and credit.  Fixed income and short-term investments amounted to 8%.  The LTIP remains highly diversified and is managed by approximately 85 firms.  No firm holds an allocation greater than 5%.