UUCEF often gets questions on the performance pages presented at the Quarterly Investor Meetings. There are three common ones that we’ll address in this post.
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Q: On the total fund net performance page, what do the numbers in brackets mean?
A: This number is a percentile rank versus peers of the performance number immediately to the left, as provided by our investment consultant NEPC.
Q: What is the peer universe provided for comparison on the performance pages?
A: Currently the CEF is measured against a peer group of All US Endowments & Foundations with portfolio assets less than $250 million. This includes all university endowments, public foundations, community foundations, private foundations, etc. so it is a broad and eclectic set of peers based solely on size of the portfolios. This is provided by our consultant NEPC who believe that peer benchmarking can be helpful in adding context to performance evaluations. However, it’s important to note that this peer group does not solely include peers engaged in mission-aligned investing like the UUCEF. While peer benchmarking can be informative, each peer portfolio’s goals and objectives can differ widely. As a result, members of this peer group can have very different exposures to index funds, regions, private and impact investments, etc. along with different screening criteria.
A: Both of these measures are related to asset allocation, or the mix of asset classes – e.g. stocks, bonds, etc – in the portfolio. The Allocation Index is the average benchmark return for all of the asset classes in the CEF weighted according to the actual weights of the assets in the portfolio at a given time. The Allocation Index helps explain how well the CEF’s actual asset allocation performed compared to the average benchmark returns. If the CEF’s performance exceeds the Allocation Index, it suggests successful active investment management or effective selection of the investment managers. The Policy Index is the average of the benchmark returns for all of the asset classes in the portfolio weighted according to the long-term strategic target weights of the assets classes. The Policy Index helps explain how well the CEF’s long-term strategic asset allocation performed compared to the average benchmark returns. If the CEF’s performance exceeds the Policy Index, it suggests that the long-term policy allocation decisions were successful.