Investment Performance Commentary for the Year Ending June 30, 2008
Rochester’s investment return for the long-term investment pool (primarily endowment) for the fiscal year ending June 30, 2008, net of all fees and expenses, was approximately -0.1% compared to the benchmark return of -7.4% (comprised of 60% Wilshire 5000, 20% Lehman Aggregate and 20% ACWI ex-US).
Rochester’s five-year average annual net return through June 30, 2008 was 12.4% vs. 9.6% for the benchmark. The ten-year average annual net return through June 30, 2008 was 9.2% vs. 4.7% for the benchmark.
The value of the long-term investment pool at the end of the fiscal year was $1.75 billion, $24 million below the value reported at the beginning of the year. The change in value was attributable to investment returns of -$5.6 million, gifts and additions of $71.4 million and spending and withdrawals of $90.0 million.
Asset Allocation and Performance
Major asset classes generated the following performances in fiscal year 2008:
- Domestic equity managers, representing 19% of the portfolio, returned -12.3% compared to -12.5% from the Wilshire 5000 benchmark.
- Domestic fixed income, representing 7% of the portfolio (net of the line of credit), returned 8.9%, compared to 7.1% from the Lehman Aggregate benchmark. Fixed income generated a return of 13.2% for the year when the impact of short term investments are excluded (short term investments generated a return of 5.8% for the year).
- International equities, representing 18% of the portfolio, returned -8.8% versus -6.6% from the ACWI ex-US benchmark. The benchmark for international equities was changed during the fiscal year from EAFE to ACWI ex-US. The return from the EAFE benchmark was -10.6% for the year.
- The alternative investment program, representing 56% of the portfolio, generated a net return of 6.6%. Hedge funds returned 4.9% (1.1% for absolute return funds and 13.9% for equity-oriented funds), private equity returned 9.6% and real assets returned 7.6%.
Rochester’s return was generated through the efforts of many talented advisors, investment committee members, consultants and investment office staff. It is the consensus of these groups that, over time, the University of Rochester’s targeted net nominal return of 8% per annum is achievable.