The Foundation’s investment portfolio had appreciated to approximately $550 million at the end of 2013. Spending for grants, administrative expenses and taxes totaled $26 million. Total return on the investments, income plus realized and unrealized capital gains, was about 14 percent. Audited financial statements were not completed in time for this printing, but will be available on the Foundation’s Web site.
The Foundation’s investment objective continues to be securing maximum long-term total return on its investment portfolio in order to maintain a strong grants program, while assuring consistent growth of its assets at a level greater than the rate of inflation.
Global equity markets generally posted strong gains in 2013. The MSCI EAFE index rose 22.8 percent, and the S&P 500 added 32.4 percent, which marked its fifth consecutive year of gains and the strongest return since 1997. However, emerging markets equity declined slightly for the year. Credit markets delivered mixed results during the year; high-yield bonds gained 7.5 percent while the Barclays Treasury index suffered a loss of 2.8 percent and local emerging market debt declined 9.0 percent. As a result, the portfolio’s one-year performance, which benefited significantly from the exceptional performance of U.S. equities, far outpaced the inflation plus spending rate in 2013.
In order to best meet its fiduciary obligation, the Foundation has outsourced its investment management function since the beginning of 2009. Goldman Sachs, the Foundation’s current investment advisor, has collaborated closely with the Foundation to redesign its asset allocation guidelines and implement significant portfolio changes by employing both passive and active strategies since August, 2012. The current portfolio remains liquid and well-diversified, providing it with the ability to capitalize on investment opportunities as well as to better weather market turbulence in the future.
At year-end 2013, the liquid portion of the portfolio was generally in line with the long-term target allocation, whereas illiquid funds will take longer to achieve their targets due to the timing and pace of new commitments and distributions. Over the course of 2013, the Foundation added exposure to long-only equities, tactical tilts, and non-core fixed-income, while reducing its allocation in hedge funds and private equity. At the end of the year, the Foundation’s asset mix was 40 percent long-only equities, 12 percent fixed-income, 4 percent cash, 16 percent hedge funds, 8 percent tactical tilts and a total of 20 percent in private equity and real estate funds, compared with 29 percent public equities, 7 percent fixed-income, 4 percent cash, 20 percent in hedge funds, 5 percent tactical tilts, and 35 percent in non-marketable alternatives as of the end of 2012.
The Finance Committee and the Board of Trustees meet regularly with Goldman Sachs to review asset allocation, investment strategy and the performance of the underlying investments. Northern Trust Corporation is the custodian for all the Foundation’s securities. A complete listing of investments is available for review at the Foundation offices.