The portfolio's Domestic Equity investment utilizes a blended benchmark of 75% Russell 3000 and 25% Russell 3000 Value. Exposure is gained primarily through passive investing in the Russell 1000 and Russell 1000 Value indicies. A small portion of the portfolio is invested with Active Small Capitalization managers under concentrated mandates. All U.S. Equities exposure is managed by outside managers.
The International Public Equities portfolio is delineated into two asset classes: Developed Markets (9% of TRIP) and Emerging Markets (7% of TRIP). External advisors manage concentrated portfolios.Developed Markets: The International Equities Developed portfolio is invested approximately 80% in Large Cap stocks and 20% in Small Cap stocks. Staff believes that Developed Markets more readily lend themselves to statistical analysis and structural definition. In order to tailor the developed investments to meet our needs, the University carefully structures its portfolio among active managers, yet leaves the responsibility for tactical and security bets with those managers. The benchmark for the developed exposure is the MSCI World Ex-US Index and MSCI World Ex-US Small Cap Index.Emerging Markets: Rapid changes in Emerging Markets necessitate a de-emphasis on the structure of the portfolio and instead favors a hands-on and bottom-up investment management approach. The benchmark for the Emerging Markets portfolio is the MSCI Emerging Free Index.
The University of Chicago firmly believes that active management of the Private Equity portfolio will enhance the total return of the endowment. While these fairly illiquid assets are characterized by a long-term investment horizon, they represent an attractive investment opportunity as they have a low co-variance with other investments.
The University made the endowment's first partnership investment in 1979. With competitive advantages, the University proactively seeks opportunities with: (1) management teams of premier established private equity firms, and (2) the emerging private equity groups who have the potential to be the leading funds of tomorrow.
The University is a limited partner in 177 funds and maintains relationships with 79 management teams that span a broad array of asset sub-classes in three areas of opportunity: venture capital, corporate finance, and international private equity.
Real Assets comprise Opportunistic Real Estate, Core Real Estate, Timberland, and Oil and Gas. Investments in the Real Estate area primarily consist of private partnerships, which employ low levels of leverage. Opportunistically, investments are made in the public market utilizing REIT's and operating companies when valuations appear attractive. Though investments are made primarily through individual bottom-up analysis, the portfolio is diversified by property type and geography. The NCREIF property index is the benchmark for Real Estate.Investments in Natural Resources are made when found, not forced in order to achieve a "target" allocation. Individual investments are evaluated based on: (1) return, (2) diversification, and (3) inflation hedge characteristics. Of course, new commitments reflect the University's assessment of market conditions.Natural Resources along with Core Real Estate comprise the 8% allocation to Real Assets in the TRIP portfolio. The primary benchmark for this Natural Resources is CPI + 5% per year. The secondary benchmarks are the GSCI Energy Sub-Index for our oil and gas investments and the NCREIF Timberland index for our timber investments.
The Absolute Return portion of the portfolio is primarily invested in non-directional hedge funds. That is, returns should be independent of the direction of global equity, fixed income or currency markets. Strategies include Global Convertible Arbitrage, Global Merger Arbitrage, Long/Short Equity and Blended Strategies. Other strategies are invested in on a discretionary basis. The Absolute Return portfolio seeks a long-term equity return with low volatility. The benchmark is custom weighted MSCI Hedge Fund Sub-Indices.
The Fixed Income portion of the portfolio functions as a deflation hedge. Therefore, only non-callable U.S. Treasuries, agencies and strips are utilized. The bond portfolio has a long-term duration, typically 95% to 105% of the Lehman Brothers Long Treasury Index.