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INVESTMENT MANAGEMENT COMPANY
Records compiled specifically and exclusively for consideration in closed session. Further distribution prohibited.
Presentation to the
Japan CFA Society
“Endowment Fund Investing in the United States”
June 2011
INVESTMENT MANAGEMENT COMPANY
June 2011 2
Outline
Governance at UVIMCO
Investment Philosophy
Investment Strategy
Asset Allocation
Themes
Manager Selection
Risk Management
Current /Future Issues
Japan CFA Society
INVESTMENT MANAGEMENT COMPANYGovernance at UVIMCO
Investment Decision Making Process
Communication
Seasoned Board of Directors and senior investment staff Board of Directors
10 members led by John Macfarlane as Chair; 3 BOV appointees and a President’s
appointee Average of over 20 years of investment experience
Staff 25 members led by Larry Kochard as CEO/CIO Investment team comprised of a CEO/CIO, 3 Managing Directors, an Associate,
and 5 Analysts Average of 21 years of investment experience among senior staff
June 2011 Japan CFA Society 3
INVESTMENT MANAGEMENT COMPANY
June 2011 Japan CFA Society 4
Investment Philosophy
Long-Term Focus
Good Governance
Disciplined Process
People
Diversification
INVESTMENT MANAGEMENT COMPANYInvestment Strategy
June 2011 Japan CFA Society 5
Asset Allocation
ThemesManager Selection
Risk Management
INVESTMENT MANAGEMENT COMPANYAsset Allocation
June 2011 Japan CFA Society 6
60%
10%
30%
Fixed Income
Real Assets Equity
INVESTMENT MANAGEMENT COMPANY
June 2011 Japan CFA Society 7
Asset Allocation
As of December 31, 2010 Long-Term Past Past
History(1) 20 Years 10 Years
Real Return of Equities 6.7% 5.3% 1.4%
Real Return of Reits 7.6% 5.5%
Real Return of Bonds 2.7% 4.3% 4.5%
Policy Portfolio(2) 5.5% 5.2% 2.7%
Inflation 2.1% 2.5% 2.3%
Nominal Market Return 7.5% 7.7% 5.0%
Value Added 4.9% 2.9%
Total UVIMCO Return 12.6% 7.9%(1) Long-term history consists of past 130 years. Source: Shiller data.(2) UVIMCO's policy portfolio compositon of 60% equities/10% Reits/30% bonds reasonably represents the investable universe.
INVESTMENT MANAGEMENT COMPANY
June 2011 Japan CFA Society 8
Current Themes
Investment environment compared to 10, 20, or 30 years ago
Increasing inflation and interest rates
Quality bias in equities
Emerging markets
Frontier markets
Natural resources and other real assets
INVESTMENT MANAGEMENT COMPANY
June 2011 Japan CFA Society 9
Manager Selection
Possess competitive edge and expertise
Employ an independent, fundamental-driven research process
Pursue a transparent and understandable strategy
Are properly motivated and rewarded
Have unquestioned ethics and integrity
UVIMCO develops long-term relationships with world-class managers
who:
INVESTMENT MANAGEMENT COMPANY
June 2011 10Japan CFA Society
Manager Risk
Liquidity Risk
Market Risk
Risk Management
Understand Risks
Measure Risks
o Quantitatively
o Qualitatively
Manage Risks
Risk Framework
UVIMCO only takes risk if it is properly compensated
INVESTMENT MANAGEMENT COMPANYCurrent/Future Issues
Tail Hedging
Direct Investing
New Approach to Investing in Privates
Tactical vs. Strategic Asset Allocation
Liquidity
June 2011 Japan CFA Society 11