Investment Strategy

Viewpoint: Responsible Investing – Read All About It

Posted by Commonfund Institute on Aug 10, 2018

Topic: Industry Knowledge | Investment Strategy | Responsible Investing

The new and newsworthy in this year’s Council on Foundations–Commonfund Study of Investment of Endowments for Private and Community Foundations® (CCSF) is headlined by responsible investing. No other area of inquiry showed as much year-over-year change or as much change over the past few Studies; to be clear, the changes would not be considered dramatic, but they are consistent and the trend line is easily discernible.

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Five Questions to Ask Your Advisor:
Costs of Portfolio Management

Posted by Amy Harlacker, Keith Luke on Jul 24, 2018

Topic: Investment Strategy | Outsourced Investing

Costs matter. With expectations for lower market returns over the coming years, every basis point of net performance is particularly important. Furthermore, the compounding effect of high fees can significantly impact spending for mission over time, so understanding the true cost of portfolio management is vital, but also a challenge.

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The Four P’s of Investment Decisions:
Lessons from the Commonfund Institute

Posted by Cathleen M. Rittereiser on Jul 12, 2018

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

Three days after becoming Executive Director of the Commonfund Institute, I found myself giving welcoming remarks at our annual program. The agenda focused on the key responsibilities and decisions fiduciaries make, starting with policy decisions and leading into execution. The most important lessons I learned ...

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Inaugural Corporate Responsibility Report and 2018 Mid-Year Letter

Posted by Mark J.P. Anson, Commonfund on Jul 12, 2018

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Responsible Investing

We are pleased to share with you our inaugural Corporate Responsibility Report. Since our founding in 1971, Commonfund has pursued a singular mission – to enhance the financial resources of our clients by delivering exceptional performance, service and insight. Beyond our focus on investment excellence . . .

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Equity Portfolio Construction – Through a Risk Factor Lens

Posted by David Scarozza on Jun 28, 2018

Topic: Equities | Industry Knowledge | Investment Strategy | Market Commentary | Risk Management

At Commonfund, we aim to build multi-manager, active risk equity portfolios with a clear objective of consistent outperformance versus passive policy benchmarks. Our approach is to take intentional and measured “risk away from the benchmark” by allocating to a variety of managers who employ active risk strategies...

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What are the Differences Between SRI and ESG?

Posted by Commonfund Institute on Jun 19, 2018

Topic: Industry Knowledge | Investment Strategy | Responsible Investing

There are many terms referring in some way to practices related to responsible investing: socially responsible investing; mission-related investing; impact investing; integrated reporting; and investing according to environmental, social and governance principles. These terms are often grouped under the same category of responsible investing, but this generalization is misleading..

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Bonds: Unwanted and Unloved but not Unnecessary

Posted by Timothy T. Yates, Jr., Mark J.P. Anson on May 30, 2018

Topic: Industry Knowledge | Investment Strategy | Market Commentary

Well, the party may finally be over. Like the college dean who shuts down the campus party, the Fed has finally taken away the interest rate punch bowl that investors have enjoyed for so long. It may be hard to believe, but we have been in a secular interest rate decline for over thirty years...

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Diversity and Emerging Managers

Posted by Commonfund Institute on May 21, 2018

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Responsible Investing

The benefits of diversity are widely recognized in the work place and among educational institutions and other nonprofits. Yet, the concept of investment management firms that are minority owned and operated lags, partly because of the challenge of attracting investors’ capital . . .

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Inflation Expectations are Rising. How Can Investors Protect Portfolios?

Posted by Ivo C. Nenin, Kristofer Kwait on May 14, 2018

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Market Commentary | Real Assets

In March, capital markets entered their tenth year of post-crisis recovery. For diversified portfolios, these have been some of the most profitable times, characterized by strong returns, positive correlations between equities and bonds and robust illiquidity premiums from private programs . . .

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After the G-Zero: Overcoming Fragmentation (login required)

Posted by Commonfund on May 7, 2018

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Market Commentary

In this Commonfund Forum 2018 general session, featured speaker Ian Bremmer shares his insights and views to help us understand the broader global issues we need to consider as we formulate policy portfolios for the years ahead.

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ESG Investing Becomes Mainstream

Posted by Commonfund Institute on May 4, 2018

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Responsible Investing

Can a sustainability strategy be tied to better financial outcomes? The subject of ESG, or investing in accord with environmental, social and governance principles, arose in several sessions at Commonfund Forum 2018. One session, in particular, was devoted to the ongoing evolution of responsible investing, with a focus on ESG.

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Private Capital: Key to Unlocking Growth in Emerging Markets

Posted by Commonfund Institute on Apr 25, 2018

Topic: Industry Knowledge | Investment Strategy | Market Commentary | Private Capital

After a turbulent period, emerging markets have delivered double-digit returns in recent years. Private investments in emerging markets offer a way to diversify beyond the public markets and, in general, have also been a source of strong returns...

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Investing in Diversity

Posted by Caroline Greer on Apr 3, 2018

Topic: Industry Knowledge | Investment Strategy | Responsible Investing

At Commonfund, we scour the globe to find investment managers that we believe have the ability to consistently produce excess returns (alpha) over and beyond their benchmark. But alpha alone is not enough. We also dig deeply into the sources of those returns to understand the underlying factors driving the strategy. Through our construction process we look to combine uncorrelated sources of return, thereby reducing overall portfolio risk. This search for uncorrelated alpha sources requires finding managers that are different from the crowd.

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10 Key Takeaways from
Commonfund Forum 2018

Posted by Commonfund Institute on Apr 2, 2018

Topic: Industry Knowledge | Investment Strategy | Market Commentary

Commonfund recently hosted its 20th annual Commonfund Forum in Orlando, Florida. The event brought together 400 institutional investors from the U.S., Puerto Rico, the Virgin Islands, Canada, Chile and the United Kingdom in a 2.5 day conference. Sessions explored cyclical and tactical investment trends and, importantly, strategies to help institutions support their missions. More than 60 experts from investment firms, academia, public policy and think tanks convened in general sessions, major addresses and breakout sessions. Here are 10 key takeaways from Commonfund Forum 2018.

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Evolving Asset Allocation and Policy Portfolios

Posted by Commonfund on Mar 27, 2018

Topic: Asset Allocation | Equities | Industry Knowledge | Investment Strategy

In this Forum 2018 general session, Commonfund experts share research findings and techniques we employ to help investors understand not just the characteristics of their portfolio in isolation but also the broader considerations and pressures that should shape risk, drawdown and recovery expectations over the long haul.

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Building Resiliency

Posted by Commonfund on Mar 23, 2018

Topic: Asset Allocation | Equities | Industry Knowledge | Investment Strategy | Market Commentary

In this keynote presentation from Commonfund Forum 2018, CEO Catherine Keating shares insights into the investment philosophy and practices that may enable institutions to build resiliency into their portfolios.

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Manager Spotlight: Ariel Investments

Posted by Commonfund on Mar 22, 2018

Topic: Industry Knowledge | Investment Strategy | Partners | People

Commonfund Chief Executive Officer, Catherine Keating, interviews Mellody Hobson, President of Ariel Investments. This wide-ranging discussion covers topics such as Ariel’s investment philosophy and process, their current market outlook, as well as Mellody’s thoughts on diversity and her career experiences.

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5 Private Capital Concerns

Posted by Ralph P. Money, Peter Burns on Mar 9, 2018

Topic: Industry Knowledge | Investment Strategy | Private Capital

At the end of the year we sent out a short survey to learn more about investors’ headline concerns about the private capital markets today. Investors also shared their expectations about returns and where they see their allocations to various private strategies trending.

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Baring Their Teeth –
FAANGs Take a Bite Out of Equities

Posted by Mark J.P. Anson, Mark Bennett on Mar 2, 2018

Topic: Equities | Industry Knowledge | Investment Strategy

Narrow markets are not uncommon to equity investors. They tend to manifest themselves during the best of times, as bull markets lengthen and thematic elements of investing gain popularity. Prior narrow market environments existed in the late 1990s (the historic tech bubble that many remember) and also in 2007, prior to the global financial crisis. The most recent narrow market has been dominated by the headlines of FAANGs — Facebook, Amazon.com, Apple, Netflix and Alphabet, formerly known as Google. These five business models are disrupting all sorts of industries, and with it, their stock prices have soared.

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A Gap In Reality

Posted by Timothy T. Yates, Jr. on Feb 13, 2018

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Outsourced Investing

With the release of the annual NACUBO-Commonfund Study of Endowments (NCSE) comes the obligatory comparison of 1-year returns. “How did we do relative to the 12.2 percent average return” is a question frequently asked at many committee meetings and while it is certainly important to understand what peers are doing, the most recent 1-year return may be the most overrated number in the 127 page study.

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Volatility Returns to
the Equity Markets

Posted by Kristofer Kwait, Steve Snyder on Feb 7, 2018

Topic: Equities | Investment Strategy

During the course of the recent selloff in the equity markets and spike in volatility, many of our investors have questioned whether this significant drop experienced over a few trading days portends the beginning of a bear market, or a shorter term correction (albeit a violent one).

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When Leaks Turn into Floods:
Challenges Facing Higher Education

Posted by Timothy T. Yates, Jr. on Jan 19, 2018

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Operating Assets | Outsourced Investing | Risk Management

2017’s tax legislation is the latest in a growing list of challenges facing higher education. The new excise taxes on endowment earnings of the largest private universities, coupled with...

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Bonds May Not Be Loved, But They Shouldn’t Be Forgotten

Posted by Roman Moravec, James Meisner, Vincent Kravec on Jan 10, 2018

Topic: Asset Allocation | Fixed Income | Investment Strategy

Most institutional portfolios have strategic allocations to core (investment grade) fixed income, and for good reasons. Core fixed income can serve as an anchor during times when risk assets such as equities and lower grade credit are under assault.

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Year-End Update and 2018 Outlook | Rational Resiliency

Posted by Catherine Keating on Dec 14, 2017

Topic: Asset Allocation | Equities | Fixed Income | Governance and Policy | Industry Knowledge | Investment Strategy

As we come to the end of 2017 and look forward to 2018, we are approaching the tenth year of the post-crisis recovery. With synchronized global growth for the first time in a decade, equity markets near all-time highs, and a year of strong double-digit portfolio returns, investors should be feeling exuberant. And yet we find the exuberance of most institutions with whom we work tempered by concerns about the future.

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Spending Policy: Is Yours Ready for the Next Downturn?

Posted by Timothy T. Yates, Jr. on Nov 7, 2017

Topic: Governance and Policy | Investment Strategy | Operating Assets | Outsourced Investing

In most Investment Policy Statements there is often a reference to two important, but conflicting, objectives: one, to preserve the purchasing power of the long-term portfolio in real terms, and two, to provide a stable. predictable and hopefully growing source of income to the institution that the long-term portfolio supports. Why the conflict? Because in order to generate returns that will sustain real purchasing power in perpetuity, the portfolio must be exposed to risk which often means volatility and thus potential instability or unpredictability in the income stream...

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Emerging Market Equities Turn the Corner

Posted by Mark Bennett on Nov 1, 2017

Topic: Equities | Investment Strategy

As we progress through calendar year 2017, we have witnessed the continuation of the equity bull market started in 2009. One difference however, is that leadership has turned (finally!) to non-U.S equity markets.

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What’s the Difference? Time-Weighted Return vs. Internal Rate of Return

Posted by Commonfund on Oct 27, 2017

Topic: Industry Knowledge | Investment Strategy

Investors often ask about the difference between time-weighted return (“TWR”) and internal rates of return (“IRR”). In general, TWR is used by the investment industry to measure the performance of funds investing in publicly traded securities. By contrast, IRR is normally used to gauge the return of funds that invest in illiquid, non-marketable assets—such as buyout, venture or real estate funds. This article will explain why public and private investment returns are reported differently and how the calculation methodologies differ.

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Top Ten Insights for Foundation Investors in a Mature Market

Posted by Catherine Keating on Oct 17, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Responsible Investing

Last week I had the honor of moderating a panel at the 2017 Council on Foundations Endowments & Finance Summit. In the session, “Foundation Investing in Mature Markets: Challenges and Rewards,” I was joined by three esteemed colleagues, representing foundations with over $3 billion in endowed assets and close to three centuries of combined history. My colleagues: Mary Greenebaum, CIO, New York Community Trust; Sherry P. Magill, PhD., President of the Jessie Ball duPont Fund; and Jeremy Tennenbaum, CFA, Chief Financial Officer of the Altman Foundation. Each of these institutions is a pillar of its community, supporting programs that enrich quality of life and . . .

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On Complacency | Why Risk Management Always Matters

Posted by Dana Moreau, Brian Rondeau on Sep 14, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Risk Management

Like nearly everything in the financial markets, risk is cyclical. History repeats itself. The echoes of past crises are always heard in present ones, yet new crises are rarely predicted and not always properly planned for. We are in the midst of one of the longest economic expansions in U.S. history, 98 months and counting, trailing only the 120 month and 106 month expansions of the 1990s and 1960s, respectively. There have been bumps along the way, but this has been an extended benign period for risk in the capital markets.

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A Primer on Outsourced Investment Management

Posted by Commonfund Institute on Aug 31, 2017

Topic: Industry Knowledge | Investment Strategy | Outsourced Investing

Once seen primarily as a solution for small institutions with limited resources, outsourced investment management is now widespread, with a broad range of long-term investors – including those with more substantial investable asset pools – turning to the outsourced chief investment officer model. Properly implemented, outsourcing can help institutions to address portfolio complexity and risk management challenges, speed decision-making and contend with an increasingly rigorous regulatory environment, while enabling trustees to focus on improving institutional governance.

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Mark Anson Discusses Asset Allocation Strategy with Bloomberg Markets

Posted by Commonfund on Aug 28, 2017

Topic: Asset Allocation | Hedge Funds | Investment Strategy | Private Capital

Mark Anson, Commonfund chief investment officer, discusses his asset allocation strategy with Bloomberg's Vonnie Quinn and Simone Foxman on "Bloomberg Markets." (Source: Bloomberg)

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Hedge Fund Land:
An Expensive Amusement Park?

Posted by Mark J.P. Anson on Aug 16, 2017

Topic: Asset Allocation | Hedge Funds | Industry Knowledge | Investment Strategy

In a series of articles, we have addressed two recent investment “fatigues” experienced by institutional investors: Active vs. Passive; and Global (ACWI) vs. US benchmarks. In this article, we tackle the third and last “fatigue”— Hedge Funds. Hedge funds have come under extreme criticism lately for their expensive fee structure, lack of performance, and too much “beta” wrapped up in an “alpha” fee structure. It appears that hedge funds are run more for the amusement of the hedge fund manager and less for the benefit of the hedge fund’s clients. These are all legitimate concerns but we still believe that there is value to be found in Hedge Fund Land.

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How Much Beta is in Your Equity Portfolio?

Posted by David Scarozza on Jul 18, 2017

Topic: Asset Allocation | Equities | Investment Strategy | Risk Management

It’s undeniable that every active equity manager’s chief competitor these days is the passive alternative against which its investors measure their performance. This is as true for a singularly focused equity mandate manager as it is for an organization like Commonfund, who assembles multi-manager active risk equity portfolios that seek to exploit the potential advantage of scouring the globe in pursuit of strategies that offer both the possibility for excess returns and excess return source diversification.

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Avoid the Home Run Derby

Posted by Ryan Driscoll, Michael Strauss on Jul 12, 2017

Topic: Investment Strategy | Market Commentary

We do not look for a repeat of the “home run” 18 to 20+ percentage point relative outperformance from stocks versus bonds (which was registered in three of the last five fiscal years) in the upcoming fiscal year. And, unlike Aaron Judge at MLBs Home-Run Derby, investors should aim for singles and doubles going forward as we expect a lower return environment.

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Making the Case for Natural Resources Investing

Posted by Ethan Levine, Paul Von Steenburg on Jul 11, 2017

Topic: Asset Allocation | Investment Strategy | Private Capital | Real Assets

The natural resources sector is often characterized as cyclical, as producers and service providers experience underlying exposure to and commensurate volatility of commodities in the oil and gas, mining and agriculture sectors. After a couple of years of challenging sector returns, some institutional investors are questioning what the role of natural resources should be in a portfolio and if now is a good time to invest in the asset class.

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Implications of New York’s Excelsior Scholarship Program

Posted by Commonfund Institute on Jun 6, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

While opening opportunity to many New York families, the recently enacted Excelsior Scholarship Program will likely stress the financial resources of small private colleges and universities in New York State, particularly those with a high percentage of state resident students, modest endowments and high tuition discount rates. With revenues from tuitions facing pressure, the importance of endowment in support of operating budgets and scholarships will increase.

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Flexing your Global Portfolio can lead to ACWI Fatigue

Posted by Mark J.P. Anson on Jun 6, 2017

Topic: Asset Allocation | Industry Knowledge | Investment Strategy

Like the build-up of lactic acid in your muscles after a strenuous workout, the underperformance of Morgan Stanley Capital International All Country World index (ACWI) vs. the Standard & Poor’s 500 (S&P 500) – or any U.S. equity benchmark, for that matter – for the last several years has been building up to a painful point. This pain threshold has pushed investors to the limits of their global endurance resulting in what we call “ACWI Fatigue.” ACWI Fatigue is most acute with institutional investors who use the MSCI ACWI as their equity benchmark and, as a result, have a globally-oriented equity portfolio.

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Active Fee Management: Notes from the Front Lines

Posted by Mark Bennett on May 30, 2017

Topic: Industry Knowledge | Investment Strategy

Few topics get investor’s attention as much as fees. We wouldn’t be human if we all didn’t want to know, in detail, how much something costs. In the world of investing, fees are an even more important topic, as they directly relate to your investment performance...

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The Fed Still on “Autopilot”

Posted by Ryan Driscoll, Michael Strauss on May 26, 2017

Topic: Industry Knowledge | Investment Strategy | Market Commentary

The latest FOMC minutes show that the Fed believes that the growth and inflation slowdown in 2017:Q1 will prove to be transitory...

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Catherine Keating Delivers UVA Law’s 2017 Commencement Address

Posted by Commonfund on May 22, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | People

Catherine Keating Delivered UVA Law’s 2017 Commencement Address on Sunday, May 21, 2017.

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The Misperception of Illiquid Investments

Posted by Kent Scott, Paul Von Steenburg, Timothy Yates, Jr. on May 15, 2017

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Outsourced Investing | Real Assets | Risk Management

With many market participants expecting low nominal returns across traditional asset classes in the coming years, investors may be looking to increase their exposure to illiquid asset classes such as private equity and venture capital. This article addresses head-on, investors’ misperception about illiquid investments: they aren’t as illiquid as many fear.

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Maintaining Purchasing Power in Today’s Environment | CPI + 5%

Posted by Keith Luke, Paige L. Rabalais on Apr 24, 2017

Topic: Asset Allocation | Industry Knowledge | Investment Strategy

At Commonfund, we understand the challenge institutions face of maintaining the purchasing power of their endowment. In fact, achieving a rate of return sufficient to cover inflation, distributions and investment costs – typically CPI + 5 percent – is much harder today than previously.

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Is the Endowment Model a Crowded Trade?

Posted by Mark J.P. Anson on Apr 11, 2017

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Risk Management

With core tenets of the endowment model seemingly under stress for the last several years, some investors have questioned the long-term viability of the model. At issue: Are too many investors piling into the same ideas and thus squeezing out opportunities for better returns? In this 2017 Commonfund Forum Spotlight, three CIOs tackled questions designed to surface concerns about the model and provide insight based on their long experience.

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The Crowded Liquidity Trade

Posted by Ryan Driscoll, Jon Speare, Michael Strauss on Apr 10, 2017

Topic: Fixed Income | Investment Strategy | Operating Assets

Over the past few months, we have seen a massive shift of investor assets from prime to government money market funds in response to post-crisis regulatory amendments that have been years in the making. Surprisingly, the market reaction happened quickly and dramatically, even though the changes were widely known. In October 2016, SEC rule amendments were implemented to prevent the possibility of cash investments, specifically prime money market mutual funds, from “breaking the buck” and resulting in liquidity panics in the future.

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Commonfund Returns
to New York City

Posted by Commonfund on Apr 4, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

Commonfund, a prominent investment manager for endowments, foundations and public pension investors, announced today it has returned to New York City with the opening of a new office at 280 Park Avenue. The firm’s New York office will enhance access to clients and investment managers, as well as expand the firm’s footprint in the region. In addition to New York, Commonfund has offices in Connecticut, San Francisco, London, and Beijing.

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10 Key Takeaways from
Commonfund Forum 2017

Posted by Commonfund Institute on Mar 29, 2017

Topic: Industry Knowledge | Investment Strategy | Market Commentary

Commonfund recently hosted its 19th annual Commonfund Forum in San Antonio Texas. The event brought together about 450 institutional investors from the U.S, Puerto Rico and Canada to engage in a 3-day conference to explore cyclical trends and tactical opportunities that can help support the missions of their institutions. More than 60 experts in academia, public policy and government convened in General Sessions, Major Addresses and Breakout sessions. Here are 10 key takeaways from Commonfund Forum 2017.

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Long-Term Trends for Long-Term Investors

Posted by Commonfund on Mar 27, 2017

Topic: Industry Knowledge | Investment Strategy | Market Commentary

As long-term investors, nonprofit institutions have the distinct advantage of having the longest time horizon of any investors – often perpetuity. This affords an opportunity to consider investments based on secular trends that may take years to play out but can also prove to be very profitable. Recently at Commonfund Forum 2017, a panel convened to discuss their expert insights into some of the most compelling long-term trends...

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Mark Anson on CNBC’s Power Lunch

Posted by Commonfund on Mar 22, 2017

Topic: Investment Strategy

These words—to protect, preserve and defend—come from the oath of office sworn by the President of the United States. At CNLM, they refer to an unwritten but nonetheless essential element in the American value system: a legacy, in perpetuity, of natural lands, native species and functioning ecosystems.

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Meeting the
Challenge of CPI +5%

Posted by Commonfund on Mar 21, 2017

Topic: Asset Allocation | Equities | Industry Knowledge | Investment Strategy | Private Capital

Despite the fact that the economy is expanding and the S&P 500 has been up for eight straight years, many nonprofit investors haven't been feeling the benefits as the main tenets of the endowment model of investing have been hampered by the market environment. In this Commonfund Forum 2017 session, Commonfund President & CEO, Catherine Keating, provides insight into the challenges of meeting CPI + 5% for fiduciaries. To obtain a copy of the slides shown in this presentation, please contact your Commonfund relationship officer.

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What do the Cable Television and Hedge Fund Industries Have in Common?

Posted by David Scarozza on Feb 28, 2017

Topic: Asset Allocation | Hedge Funds | Investment Strategy | Risk Management

These industries may seem an odd pairing, but both are in the midst of a disruption-led, industry-wide rationalization process. The two industries share in common a historically evolved “bundling” price structure, heavily favoring the sellers, that is breaking down due to the recent proliferation of distribution alternatives. This is giving consumers the option to be far more choosey about the prices they are willing to pay for varying levels of content.

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Private Credit Opportunities

Posted by James Meisner, Vincent Kravec on Feb 8, 2017

Topic: Asset Allocation | Fixed Income | Investment Strategy

Much has been made of the challenges endowment, foundation and nonprofit investors face in achieving a CPI+ five percent return target. One way to improve the probability of attaining this goal is to take advantage of the so-called “liquidity premium.”

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Active vs. passive: There is no debate

Posted by Mark J.P. Anson on Jan 31, 2017

Topic: Asset Allocation | Equities | Fixed Income | Investment Strategy | Risk Management

Like King Kong vs. Godzilla, the investment debate of active vs. passive continues. I really enjoyed those cheesy old movies from Japan that pitted the two big monsters of science fiction. But as I recall, there was never a clear winner: Sometimes King Kong won the battle, sometimes Godzilla.

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Does Your Investment Policy Statement Account for Risk?

Posted by Commonfund Institute on Jan 20, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Risk Management

In the past, many investment policy statements gave relatively cursory treatment to risk, its quantification and its potential impact on the asset pool. Market collapses and credit crises demonstrated that many institutions’ portfolios carried unacknowledged risks, that their risk profiles in general were higher than they thought, and that the risk tolerance of their fiduciaries was lower than acknowledged. Today, then, it is entirely appropriate to put risk at the top of the process of investment policy development.

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Healthcare Endowment Management: 3 Questions to Consider

Posted by Commonfund Institute on Jan 10, 2017

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

The healthcare business model is changing. Mounting cost pressures are forcing small and mid-sized nonprofit healthcare organizations to consider adopting endowment management practices similar to those used elsewhere in the nonprofit sector. In the face of declining reimbursement from insurance companies and governmental payers, nonprofit healthcare organizations are confronted with an unprecedented series of challenges.

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Year-End Letter & 2017 Investment Outlook

Posted by Catherine Keating on Jan 3, 2017

Topic: Asset Allocation | Investment Strategy

We would like to wish you the very best in the New Year, and we are pleased to share with you our year-end letter and comprehensive investment outlook for 2017. For a more detailed look at our expectations and portfolio positioning going forward, download our Year-End Letter and 2017 Investment Outlook | Thriving in a Diverging World.

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Taking Away the Punch Bowl

Posted by Ryan Driscoll, Michael Strauss on Dec 19, 2016

Topic: Governance and Policy | Investment Strategy | Market Commentary

A combination of better economic growth, including stronger labor conditions and signs of a bottoming in inflation, provided the Fed with an opportunity to restart the normalization process by raising short rates 25 basis points at the mid-December FOMC meeting in what “Fed-watchers” from decades ago might term “taking away the punchbowl just when the party is warming up”. . .

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Drafting Your Investment Policy Statement: 10 Critical Issues

Posted by Commonfund Institute on Dec 12, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

There is no single ‘right’ investment policy statement; each institution’s board must craft a statement that responds to the needs of the institution and the preferences and risk tolerances of the trustees. Annual review of the statement by the board can help to ensure...

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The Investment Policy Statement

Posted by Commonfund Institute, John Griswold on Dec 9, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

Successful investing for long-term funds requires a strategic plan. This is true despite – indeed, because of – the fact that the future is unknowable. The plan must be specific, embodying in concrete terms the best thinking of the board of trustees about the investment pool, its goals and purposes; but it also needs to be sufficiently flexible to guide the board through environments that may be very different from those prevailing at the time of its adoption.

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Venture Capital – Looking Forward and Upward

Posted by Aaron Miller, Kent Scott on Dec 5, 2016

Topic: Investment Strategy | Private Capital

Beginning in the second half of 2015, there was growing caution that started to impact pricing and investment activity in early 2016. This valuation cooling period and subsequent shift in mindset appears to have been brief and private valuations have generally held steady, particularly in early-stage. The market appears to be bifurcating where companies in large markets that are growing with attractive unit economies are able to close financings at high valuations while companies with average performance are experiencing protracted fundraisings at mixed valuations. As a result, we continue to see more money going into fewer and higher profile winners.

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A False Sense of Diversification?

Posted by David Scarozza on Nov 29, 2016

Topic: Asset Allocation | Equities | Investment Strategy

As we have undergone the process of re-underwriting all of Commonfund’s equity managers and funds over the last 6 months, we have tackled anew the age old question of how many funds does one multi-manager equity portfolio require to offer appropriate levels of diversification? While there is no single universally appropriate answer, our research has indicated that, upon closer inspection, many multi-manager equity portfolios may not be quite as diversified as intended from a potential excess return perspective.

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Commonfund Election Update: Missions and Markets

Posted by Catherine Keating on Nov 11, 2016

Topic: Governance and Policy | Investment Strategy | Market Commentary

Commonfund is a firm that marries mission and markets in a unique way. And so today we assess the implications of last night's Presidential election on our clients' nonprofit missions as well as on the markets that we invest in together. There were many headlines about markets today, but few about mission. Yet we think that this is an important moment for mission-based organizations.

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Quant Corner: Understanding Active Risk and Tracking Error

Posted by Jess Gaspar on Nov 7, 2016

Topic: Asset Allocation | Investment Strategy | Risk Management

Investors frequently focus on the total return they experience in their portfolios. In periods when absolute returns are high, they feel good; in periods when absolute returns are low, they feel bad. Yet good performance and bad performance should not be evaluated in a vacuum, they should be evaluated relative to the risks undertaken in their portfolios.

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The Fiduciary Case for Carbon Exposure Management Now

Posted by Commonfund Institute, Jess Gaspar on Oct 18, 2016

Topic: Investment Strategy | Responsible Investing

The year 2015 featured a wealth of global warming headlines: the December Paris Agreement on climate change, the Pope’s Encyclical, the collapse of oil prices, the Obama administration’s Clean Power Plan, France’s mandatory carbon reporting and the New York Attorney General’s subpoena of Exxon Mobil. It was also the warmest year on record.

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Hedge Fund Strategies 2.0

Posted by Caroline Greer, Kristofer Kwait on Oct 10, 2016

Topic: Asset Allocation | Hedge Funds | Investment Strategy

The old mantra of using hedge funds for downside protection and upside participation hasn't worked. During this webcast, we examine the why and the how of hedge funds - why invest in them and how to invest in them effectively within institutional portfolios.

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Real Estate – Rates, Rates, Rates

Posted by Paul Von Steenburg on Sep 30, 2016

Topic: Investment Strategy | Real Assets

“There are three things that matter in property: location, location, location”. While the age-old adage still holds in many respects, real estate risks...

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It’s Not Easy Being Active

Posted by Mark Bennett on Aug 30, 2016

Topic: Equities | Investment Strategy

It's not easy being an active equity manager these days. We’ve had the great financial crisis of 2007-2008, a technology/internet bubble in 1998-1999 culminating with a sharp and prolonged bear market from 2000-2002, and most recently the European crisis in 2011. What made 2016 worse than those prior periods? There is not one easy answer to that question, but a series of shifts in the investment landscape that deserve mentioning.

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Commonfund Roundup
07-29-16

Posted by Commonfund on Jul 29, 2016

Topic: Equities | Industry Knowledge | Investment Strategy | Market Commentary | Responsible Investing

Commonfund's July Roundup features the Commonfund Study of Responsible Investing: Foundations Survey and Press Release; a webcast on the FY2016 Equity Performance Review, hosted by Mark Anson, Chief Investment Officer, Kris Kwait, Head of Investments, and Keith Luke, President, Commonfund Securities, Inc.; along with the latest weekly economic podcasts by Chief Economist, Michael Strauss.

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Equity Performance Review: Fiscal Year 2016

Posted by Keith Luke, Mark J.P. Anson, Kristofer Kwait on Jul 21, 2016

Topic: Asset Allocation | Equities | Investment Strategy

Our latest webcast reviews equity performance for fiscal year 2016 and the positioning for the portfolio going forward.

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Responsible Investing Study of Foundations Released

Posted by Commonfund Institute on Jul 14, 2016

Topic: Governance and Policy | Investment Strategy | Responsible Investing

The Council on Foundations-Commonfund Study of Responsible Investing was issued jointly today by the two representative organizations. The study, believed to be the most comprehensive and detailed to date on the topic among private and public foundations, analyzed the policies, practices and attitudes with respect to responsible investing among 186 U.S. private and public/community foundations representing a total of $39.7 billion in endowment assets as of December 31, 2014.

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Commonfund Study of Responsible Investing: Foundations Survey

Posted by Commonfund Institute on Jul 14, 2016

Topic: Asset Allocation | Investment Strategy | Responsible Investing

The Council on Foundations - Commonfund Study of Responsible Investing for Foundations analyzes the investment management and governance practices of U.S. foundations, both private and public. Data is excerpted from the Council on Foundations - Commonfund Study of Foundations (CCSF).

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Integration of ESG Factors in Practical Steps

Posted by Commonfund Institute on Jul 1, 2016

Topic: Asset Allocation | Governance and Policy | Investment Strategy | Responsible Investing

In the current climate of slow global economic growth and resource constraints at many institutions, integration of ESG considerations in an organization’s investment portfolio may be perceived as a luxury or an unacceptable distraction. ESG implementation does not, however, need to be an all or-nothing decision. A sliding scale of engagement is available for institutions that decide to explore ESG...

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Commonfund Roundup
06-29-16

Posted by Commonfund on Jun 29, 2016

Topic: Asset Allocation | Governance and Policy | Industry Knowledge | Investment Strategy | Market Commentary | Responsible Investing | Risk Management

In this month’s Commonfund Roundup, active management and risk are leading topics. Featured articles include: an interview in Institutional Investor with CEO, Catherine Keating, where she discusses the active-versus-passive debate and more; and “Active Management Fatigue and What to Do About it,” co-authored by Kristofer Kwait, Head of Investments; Jess Gaspar, Head of Asset Allocation and Research; and John Delano, Head of Analytics. Also included, the new white paper, "Striking the Balance: A Fiduciary Approach to Risk and the Investment Policy"; the latest weekly economic podcasts and more.

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Brexit: Order from Disorder

Posted by Mark J.P. Anson, Michael Strauss on Jun 24, 2016

Topic: Investment Strategy | Market Commentary

The UK’s vote to leave the European Union (EU) has sent shock waves through the capital markets throughout the day today. The 52%/48% vote to leave the EU was a significant surprise, as most polls had the “remain” camp winning.

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Active Management Fatigue and What to Do About It

Posted by John Delano, Jess Gaspar, Kristofer Kwait on Jun 14, 2016

Topic: Asset Allocation | Investment Strategy

Active management has struggled for several years, raising questions about whether active management can ever outperform again. Traditional active manager style tilts, like value and size, have detracted from performance in recent periods. Over the long run, these tilts tend to mean revert around positive trends, creating reasons to be optimistic about active management’s prospects. On the other hand, only 30 percent of managers truly deliver positive alpha after controlling for typical active management style tilts.

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Responsible Investing for Foundations

Posted by Commonfund Institute on Jun 13, 2016

Topic: Asset Allocation | Investment Strategy | Responsible Investing

Commonfund and Council on Foundations are thrilled to announce the release of the 2016 Council on Foundations – Commonfund Study of Responsible Investing. It is the largest and most detailed survey to date on practices, policies and attitudes relating to socially-responsible investing (SRI), environmental, social and governance integration (ESG) and impact or mission-related investing (MRI) among U.S. private and public founda­tions. The Study encompasses both the policies of foundations that have adopted any of the responsible investing practices listed and the attitudes toward responsible investing of those that have not.

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Catherine Keating speaks with Institutional Investor

Posted by Institutional Investor on Jun 10, 2016

Topic: Asset Allocation | Investment Strategy | Market Commentary

Catherine Keating sits down with Institutional Investor to discuss the investment edge for nonprofits in a low-interest-rate environment and the active-versus-passive debate.

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What’s Next for Cash Investors?

Posted by Commonfund on Jun 7, 2016

Topic: Asset Allocation | Investment Strategy | Market Commentary | Operating Assets

In the static low-rate environment of recent years, it seemed as though there was no “what’s next” for cash. Today, that has changed, as there are major forces reshaping the regulatory and interest rate regimes.

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Common Concerns about Responsible Investing

Posted by Commonfund Institute on Jun 6, 2016

Topic: Governance and Policy | Investment Strategy | Responsible Investing

Discussions about whether responsible investing strategies help or hurt investment performance are complicated by the fact that, there are several broad categories of responsible investing practice and they influence portfolios in different ways. Many institutions have concerns about whether and how to apply ESG investing practices to their portfolio. These reservations stem partly from their past experience with SRI and partly because ESG investing has only recently become more widespread. While there are many concerns about responsible investing, the most common concerns...

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Operating Charity Implements Risk-Based Investment Policy

Posted by Commonfund Institute on May 31, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Risk Management

Operating charity in the Northeast is in the process of implementing a risk-based investment policy for its $30 million endowment. The seven-member investment committee is comprised of individuals with experience at leading securities and investment firms. In drafting its IPS, the committee created a separate section entitled "Risk Tolerance"...

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Striking the Balance: A Fiduciary Approach to Risk and Investment Policy

Posted by Commonfund Institute on May 31, 2016

Topic: Asset Allocation | Governance and Policy | Investment Strategy | Risk Management

In formulating an investment policy, fiduciaries frequently treat risk as an output of portfolio construction and asset allocation processes, giving priority to return objectives. Fiduciaries would do better to acknowledge risk as a primary input which guides and constrains those charged with institutional governance and investment policy formulation. Download this paper to help determine practical methods to assign risk when formulating an investment policy for your institution.

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Time to Temper Interest Rate Risk in Operating Portfolios

Posted by Jon Speare, Michael Strauss on May 25, 2016

Topic: Investment Strategy | Market Commentary | Operating Assets

Given the changing tone coming from Fed officials the last two weeks and the latest FOMC minutes, it appears that our monetary policy leaders are looking for an opportunity to restart the normalization process for short rates. As we highlight in our latest web commentary “When Doves Change Their Feathers”, Fed officials are trying to correct the financial market’s assessment of the most likely path for monetary policy.

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Carbon and Investment Implications for Fiduciaries

Posted by Mark J.P. Anson, Jess Gaspar, Catherine Keating on May 23, 2016

Topic: Investment Strategy

Commonfund Xchange Webcast | Carbon and Investment Implications for Fiduciaries

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Betting on the Megatrends:
Thematic Investing

Posted by Commonfund on May 23, 2016

Topic: Investment Strategy | People

Commonfund President and CEO Catherine Keating was a panelist at the 19th annual Milken Institute Global Conference on May 2, 2016. The panel was entitled, “Thematic Investing and Portfolio Strategies: Betting on the Megatrends”.

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Thematic Investing:
Betting on the Megatrends

Posted by Milken Institute on May 23, 2016

Topic: Industry Knowledge | Investment Strategy | People

View Commonfund President and CEO Catherine Keating on a panel entitled, “Thematic Investing and Portfolio Strategies: Betting on the Megatrends” at the 19th annual Milken Institute Global Conference on May 2, 2016. The panel was moderated by Stephen Foley, U.S. Investment Correspondent of the Financial Times, and included an impressive group of asset management thought leaders...

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Is Value Investing Dead?

Posted by AJO Partners on May 20, 2016

Topic: Equities | Investment Strategy | Market Commentary

AJO Partners' Jocelin Reed explores the current debate about value investing in a thoughtful manner, uncovering sector biases that exist with style investing. Is Value Investing Dead? We think not, but it might seem so. In fact, we observe a bizarrely large influence of sectors (versus stocks) in the latest value/growth regime.

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Deciding on an OCIO Provider: Three Factors to Consider

Posted by Commonfund Institute on May 17, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Outsourced Investing

One of the most important aspects of the success of an organization’s OCIO model is defining the respective roles and responsibilities of the institution’s board, staff, investment committee and the outsourced CIO. Investment committees should think carefully about the institution’s ultimate goals in order to articulate objectives that are understandable and clear.

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Ideas for Next Gen Energy Investing

Posted by Commonfund on May 17, 2016

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Responsible Investing

Advances in alternative energy technologies promise to reduce the world’s dependence on fossil fuels. Largely, however, they remain just that—a promise. So, where are the opportunities to invest in the evolving energy environment? At Commonfund Forum 2016, a panel discussion took on this question.

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Unhedged Commentary:
The $3 Trillion Question

Posted by Mark J.P. Anson, Ryan Driscoll on May 5, 2016

Topic: Hedge Funds | Investment Strategy

The growth of the hedge fund industry over the past decade has been tremendous, with more and more institutional and retail investors allocating capital to investment strategies that fall outside the boundaries of traditional stock and bond funds.

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Investment Management
Principle 5: Risk Management

Posted by Commonfund Institute on May 3, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Risk Management

In this installation of Commonfund's 7-part series of Principles of Investment Management, we will review Principle #5: Risk Management. Risk can be defined broadly as anything that can result in the objectives of the portfolio not being met. The process of risk management seeks to enable fiduciaries to make the best possible investment decisions in the face of uncertainty and to maximize the likelihood that your portfolio objectives will be achieved.

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The Big Picture: Integrating Investments, Finance and Development

Posted by Commonfund on May 3, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

Most things function a lot better when all the moving parts work together—nonprofit institutions included. The synergies afforded by collaboration across organizational boundaries may be the most underutilized way to leverage your organization’s resources.

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Asset Allocation with Private Equity

Posted by Commonfund on May 2, 2016

Topic: Asset Allocation | Investment Strategy | Private Capital

Private assets such as private equity and venture capital have long been a thorn in the side of asset allocators and chief investment officers. Their lack of liquidity makes it hard to model their return streams as an input to an asset allocation model, risk budget, or optimization function. Typically, asset allocators make assumptions based more on intuition and expectation than fact.

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Shaping the Future of Responsible Investment

Posted by Commonfund on Apr 27, 2016

Topic: Investment Strategy | People | Responsible Investing

Commonfund CEO and President Catherine Keating was a panelist at the PRI 10-year Anniversary Conference & Dinner in New York City. The panel, entitled “Is responsible investment ready to impact the world?” was moderated by Michael Wursthorn, Reporter, The Wall Street Journal.

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Investment Management
Principle 4: Manager Selection

Posted by Commonfund Institute on Apr 22, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

In this installation of Commonfund's 7-part series of Principles of Investment Management, we will review Principle #4: Manager Selection. In the past trustees did the investing themselves or assigned the task to one or two all-purpose managers. During the last three decades, that model has been superseded by one in which fiduciaries delegate management of the portfolio to a variety of specialized investment managers, seeking those with a demonstrated record of exceeding their benchmarks.

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What is Outsourced Investment Management?

Posted by Commonfund Institute on Apr 14, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy | Outsourced Investing

Outsourced investment management, once primarily a solution for small institutions with limited resources, is now used by a broad range of long-term investors. When properly implemented, outsourcing can help institutions with both large and small asset pools to address portfolio complexity and risk management challenges.

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Emerging Markets:
Balancing Risk and Reward

Posted by Commonfund on Apr 13, 2016

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Risk Management

Investors poured $2 trillion into emerging economies between 2009 and 2014. Then prices for a basket of commodities fell—dragging crude oil down to levels not seen in a decade and dashing investors’ hopes at the same time. What now?

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Investment Management
Principle 3: Asset Allocation

Posted by Commonfund Institute on Apr 7, 2016

Topic: Asset Allocation | Governance and Policy | Industry Knowledge | Investment Strategy

In this installation of Commonfund's 7-part series of Principles of Investment Management, we will review Principle #3: Asset Allocation. Arguably one of the most important investment-related decisions, asset allocation will largely determine the level of risk-adjusted return you are seeking. A key responsibility of the governing board, your strategic asset allocation policy will set the course for investing the fund for many years to come. But determining an optimal asset allocation for your institution’s portfolio involves more than numbers.

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Is Currency an Asset Class?

Posted by Mark J.P. Anson on Mar 29, 2016

Topic: Governance and Policy | Investment Strategy | Risk Management

Currency risk can best be described as the surprise impact that currency exposure has on an investment portfolio. Although currency risk typically confounds investors, it is easy to measure – it is the difference in the return to an unhedged portfolio position versus that portfolio position hedged back to the investor’s domestic currency. So simple to measure, yet so difficult to figure out.

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Rethinking Risk and Diversification

Posted by Mark J.P. Anson, Catherine Keating, Bruce Zimmerman on Mar 23, 2016

Topic: Asset Allocation | Industry Knowledge | Investment Strategy | Risk Management

Asset allocation is still the foundation on which better risk-adjusted returns are built. But asset allocation has changed, along with all the associated tools for pursuing return and managing risk. Have you kept up?

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Xchange Webcast: Risk, Return and Volatility

Posted by Mark J.P. Anson on Mar 22, 2016

Topic: Asset Allocation | Equities | Fixed Income | Investment Strategy | Market Commentary | Risk Management

Xchange Webcast: Risk, Return and Volatility with Chief Investment Officer Mark Anson

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Investment Management
Principle 2: Payout Policy

Posted by Commonfund Institute on Mar 17, 2016

Topic: Governance and Policy | Industry Knowledge | Investment Strategy

In this installation of Commonfund's 7-part series of Principles of Investment Management, we will review Principle #2: Payout Policy. Determining how much of the fund can be transferred each year to the operating budget or to designated beneficiaries while still maintaining the fund's ability to support its mission in the future.

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