The mission of the University of Chicago’s Office of Investments and the Investment Committee of the Board of Trustees is to provide stewardship of the University’s investment assets. This includes managing the University’s endowment to support the University’s academic programs and ensure that the endowment benefits both current and future generations. The University’s endowment is largely invested in the Total Return Investment Pool (TRIP).
The investment objective of TRIP is to achieve a high return consistent with a level of risk that is appropriate for the University of Chicago. The Investment Office takes a Total Enterprise Asset Management (TEAM) approach in designing the investment strategy of TRIP. A TEAM approach takes into account the economic risks borne by the University, such as growth objectives and debt ratios, in selecting an appropriate level of risk for TRIP. Our primary measure of risk in the portfolio is the Global Equity Factor (GEF), a metric that is similar in concept to beta. A secondary measure of risk in the portfolio is the amount of private investments that should be targeted.
Through the TEAM approach, the Investment Office, in consultation with the Investment Committee, has determined that a portfolio with a central tendency GEF of 0.75 is appropriate for the University. TRIP’s GEF is allowed to vary between 0.7 and 0.8. Furthermore, the portfolio seeks to achieve exposure to private assets of approximately 35 percent over time, in normal market environments. The portfolio is currently above its intended private investment target, and is expected to meet this target within the next three years, due to a natural evolution of the life cycle of private investing. Going forward, the exposure to private assets may vary widely depending on market conditions. Should there be material changes to the financial conditions of the University or investment markets, the Investment Office and Investment Committee may revisit these parameters.
TRIP invests in a broad array of assets, including global stocks and bonds, real estate, natural resources, private equities, absolute return strategies, and protection (tail hedging strategies). The Investment Office achieves exposure to these categories by selecting and engaging external managers. The Investment Office may also make direct investments and co-investments in these asset categories, and use listed derivatives to ensure adherence to investment policy and risk parameters. In seeking to maximize returns given these risk parameters, the Investment Office recommends an “Annual Investment Plan” of broad asset class ranges and a private investment commitment budget, which is reviewed and approved by the Investment Committee. The Annual Investment Plan is meant to be an implementable policy statement of our TEAM-driven risk and liquidity targets, rather than superseding these targets.