Letter from the President
Dear Friends and Colleagues,
This September has turned out to be a month for celebration. As a sports fan, I am thrilled with the performance of "my" team, the Orioles, and applaud the Nats for winning their division and ending their regular season with a no hitter. Maryland just won its very first Big 10 football game - decisively - with a 37-15 win over Indiana. Perhaps even more exciting is Maryland's announcement earlier this month of a $31 million gift from alumnus Brendan Iribe, which will support the construction of a new computer science building on campus, as well as scholarships. Read more about this inspiring gift below, and join me in thanking Brendan, his family, and his friends for this extraordinary and visionary act of generosity.
As reported in past issues of LeaderNotes, we alerted you that beginning in Fiscal 2015, we would be displaying our investment performance in a different format to better align with long-term strategic goals. As you know, we invest endowment funds to protect the principal for perpetuity, and we assess the performance of the portfolio over varied market cycles. These cycles can persist over several years, and our investment team and Investment Committee are focused on long-term market movements.
Going forward, consistent with our philosophy of measuring long-term performance to future needs, we plan to report endowment results in LeaderNotes twice a year, reporting calendar (CY) and fiscal year (FY) results in the months of February and August, respectively. We too will include 3-year, 5-year, 10-year, and since-inception annualized returns when we report CY and FY results. Separate from LeaderNotes, all clients will continue to receive monthly individual detailed performance reports. Anyone who is a member of one of the foundation/university boards can obtain copies of the monthly report directly from the respective university's advancement office.
Our return goal is to earn a long-term objective, consisting of our Foundation's spending rate (currently 3.90%), the rate of annual inflation for higher education institutions, and our fees for asset management services, which currently amounts to a total of 7.7%. This is the minimum return we strive to earn to protect the principal and build inter-generational equity (the concept that an endowment's purchasing power should be maintained over time for future generations). We designed our portfolio to have less volatility than equity markets and to do so over multiple market cycles. Rather than assess performance on a month-to-month basis or in comparison to equity indices such as the S&P 500, we will be benchmarking our returns to our long-term objective.
Strength of endowment is considered when bond rating agencies evaluate the fiscal soundness of the entire University System of Maryland (USM). Thanks to the fiscal leadership of our USM institutions, the careful stewardship of the USM's Office of Finance, and the Board of Regents' prudent oversight of the USM's financial affairs, the USM sustained its traditionally strong rating of AA+ this year with a "stable outlook" from the three principal bond ratings agencies - Standard & Poor's, Moody's, and Fitch.
In closing, I would like to inform you that we are going to be hosting an Investors Day in May of 2015. We will be inviting each of our clients to bring three or four of their investment or finance committee members to this special program. A save the date notice will be sent directly to each client in the near future. As always, please contact me directly at [email protected] or 301-445-1941 if you have any questions or ideas you would like to share with us. We thank you for your continued support.
Sincerely,
Leonard R. Raley
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