UNIVERSITYATBUFFALOFOUNDATION, INC.
Investment Performance and Policies
June 30, 2014
The Portfolio and its Management
At June 30, 2014 the market value for total investmentsof the University at Buffalo Foundation and Affiliates (UBF) amounted to $864.4million, as compared to $761.5 million at June 30, 2013 and $736.3 million at
June 30, 2012. Endowment funds included in total investments amounted to $624.8million at June 30, 2014, as compared to $554.4 million at June 30, 2013 and $511.0million at June 30, 2012. These funds are managed under the supervision of UBF’s boardinvestment committee. More than sixtyprofessional investment managers currently share in the administration of the portfolio, with performance monitored by the trustees. Included in this total are certain investments,known as the Long-Term Portfolio and having a market value of $822.7million atJune 30, 2014, which are managed and administered on a pooled basis.
Long-TermPortfolio Investment Strategy
The primary investment objective is to maximize total investment return while preserving the inflation-adjusted purchasing power of the portfolio. This should provide a relatively predictable, constant and stable (in real terms) stream of funds for current use. Total investment return is the sum of interest, dividends and capital appreciation.
Long-TermPortfolio Performance Compared to Benchmarks for Fiscal 2014
Total Return
1 Year3 Year
Long-TermPortfolio 15.8% 8.8%
Policy Benchmark 16.2% 8.2%
CPI +5% 7.3% 7.0%
1 Year3Year1 Year3Year
USEquityReal Assets
Long-Term Portfolio21.6%15.6% Long-Term Portfolio20.8% 5.9%
Dow Jones US Total25.0%16.4% S&P North American
S&P 50024.6%16.6% Natural Resources 33.1% 6.7%
NCREIF Townsend
Blended Index 13.1%13.5%
International EquityHedge Funds
Long-Term Portfolio20.1% 7.4% Long-Term Portfolio 10.8% 7.5%
MSCI AC World ex USA21.8% 5.7% HFRI Fund of Funds 7.7% 3.3%
Private Equity
Fixed Income Long-Term Portfolio 20.8%11.5%
Long-Term Portfolio 5.1% 4.6% Venture Economics
Barclays Aggregate 4.4% 3.7% All Private Equity Index 21.9%15.0%
Key to Indices
Policy Benchmark: 20% S&P 500 / 15% MSCI EAFE / 2% Barclays US TIPS / 9% Barclays Aggregate / 2% 91 Day T-Bills / 20% HFRI Fund of Funds Composite Index / 2% MSCI Emerging Markets / 4% Spliced Emerging Markets Index / 5% Citi WGBI / 5% S&P North American Natural Resources Sector Index / 2% NCREIF Townsend Blended Index / 12% Venture Economics All Private Equity Index / 2% Mercer Illiquid Natural Resources Index
S&P 500:Standard and Poors 500 Index EAFE: Europe, Australia, Far East
MSCI:Morgan Stanley Capital InternationalHFRI:Hedge Fund Research, Inc.
WGBI:World Government Bond Index
NCREIF: National Council of Real Estate Investment Fiduciaries
Investment Performance and Policies
June 30, 2014
Page 2
Long-Term Portfolio Performance Compared to Benchmarks for Fiscal 2004-2013
The accompanying chart reflects the ten-year performance for the Long-Term Portfolio in comparison with over 700 other colleges and universities across the country.
Average Annual Compounded Nominal Return
Fiscal Years Ended June 30
Total Return / NCSE Mean / UBF Percentile Rank*2013 / 12.0% / 11.7% / 44%
2011-2013 / 10.1% / 10.2% / 50%
2009-2013 / 3.5% / 4.0% / 62%
2004-2013 / 6.7% / 7.1% / 63%
* Compiled by Mercer Investment Consulting, Inc. using data published in the
NACUBO - Commonfund Study of Endowments (NCSE).
Asset Allocation Policy
The proper distribution of investments among various asset classes allows UBF to honor spending policies, maintain risk tolerance and stability, produce appropriate investment returns, and achieve long-term objectives.
Asset allocation at June 30, 2014 was as follows:
Long-Term Current Long Term
By Manager TypePortfolio Target Target
Growth Assets
• US Equity
- Large 10.9%16.0% 11.0%
- Large Quality 10.8% 8.0% 8.0%
• International Equity
- Large 16.4%16.0% 12.0%
- Emerging Markets 5.3% 6.0% 6.0%
• Growth Fixed Income 4.6% ------
• Private Equity 10.9%12.0% 20.0%
Risk Reduction Assets
• Cash 1.9% ------
• US Fixed Income 8.1% 10.0% 8.0%
• Hedge Funds 19.4% 20.0% 20.0%
Inflation Protection Assets
• US Inflation Protected Fixed 1.7% 2.0% ----
• Real Assets 10.0% 10.0% 15.0%
TOTAL100.0% 100.0% 100.0%
NOTE: Long term target is goal for 2020.
Investment Performance and Policies
June 30, 2014
Page 3
Spending Policy
Spending is defined as funds made available from the portfolio for university programs andadministrative expenses, exclusive of management, brokerage and custodial fees.
Generally, a formula governs the portion of total return made available each year for spending with an objective of maintaining purchasing power relative to inflation. This formula allows spending to increase by the predetermined annual growth rate of 3% as long as spending stays within 4% and 6% of the three-year average market value of principal. Special spending rules are followed for individual endowments where the value has fallen below historic dollar value.
Long-Term Portfolio Performance – 1995 to 2014
A $1,000,000 gift on July 1, 1995 invested in the Long-Term Portfolio would have been worth $1,516,302as of June 30, 2014, prior to the Fiscal Year 2015 distribution. In addition, $1,331,518 would have been distributed for spending needs from July 1, 1996 through July 1, 2014.
A $1,000,000 gift on July 1, 1995invested in the Long-Term Portfolio would have generated $46,896 for spending in Fiscal Year 1997, with the annual distribution growing to $65,990 for Fiscal Year 2015. This annual growth in spending is comparable to inflation rate growth over this same period.