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FIU Investment Program Overview
- 1. FINANCE AND AUDIT Operating Funds Investment Program 1
- 2. Operating Funds Investment Program History March 2005 Concluded competitive solicitation for investment consultant June 2005 BOT approved the original investment policy March 2006 Implemented with Wilshire Consulting 2 Prior to the implementation of the current investment program, all FIU operating funds were invested with the Florida State Treasury’s Special Purpose Investment Account (SPIA)
- 3. Operating Funds Investment Program Governance Florida Statute 218.415, Local Government Investment Policies • Requires written investment policy • Prioritizes safety of capital, liquidity and return • Requires prudent and ethical standards • Recognizes risk and diversification Investment Policy • BOT approved original and all subsequent amendments • Eight revisions since 2005 • Most recent amendment, January 2015, added Credit Fixed Income and Master Limited Partnerships 3
- 4. Operating Funds Investment Program Governance (continued) Audit Review • Policy and procedures audited by the State’s Auditor General in 2013 • Concluded the investments were made in accordance with BOT policy and F.S. 218.415 • Noted that policy did not explicitly require continuing education although requirement was fulfilled • Resolved by amending policy to include annual certification of CE requirement Committee • Designee of the BOT: Gerald C. Grant, Jr. • CFO of the University: Kenneth A. Jessell, Ph.D. • Treasurer of the University: P. Tony Vu • Representative from Academics: Chun-Hao Chang, Ph.D. • Community Expert: William Welch, Ph.D. (optional, up to two) 4
- 5. Operating Funds Investment Program Governance (continued) Consultant Wilshire Consulting • Continuous monitoring of markets and managers • Quarterly reviews Custodian Regions Trust • Monthly statements • Transactions verification • Market values validation 5
- 6. Operating Funds Investment Program Diversification Market Value, June 30, 2015: $294.2 million 6 21% 27% 23% 20% 9% Broad Markets Exposure Across Several Asset Classes A. Working Capital Pool ($76.1 M) •SPIA, Money Markets, Depository Account B. Fixed Income ($73.6 M) •Investment Grade Core, High Yield, Credit C. Real Assets ($63.4 M) •TIPS, Commodities, Global REITs, MLPs D. Equities ($54.5 M) •US Large Cap, US Small Cap, Non-US, Private A B C D E
- 7. Operating Funds Investment Program Working Capital Pool Market Value, June 30, 2015: $76.1 million 7 $54.0M $6.0M $5.1M $5.0M $5.9M Focus on Safety and Liquidity A. State of Florida Special Purpose Investment Account B. Commonfund Treasury Access C. Morgan Stanley Institutional Liquidity Fund D. Regions Bank E. Bank of America Depository Account A B C D E
- 8. Operating Funds Investment Program Strategic Capital and Reserve Pools Market Value, June 30, 2015: $218.1 million Focus on Diversification and Risk-Adjusted Returns for Funds Not Needed Short Term 8 $73.6M $63.4M $54.5M $26.6M A. Fixed Income B. Real Assets C. Equity D. Absolute Return A B C D
- 9. Operating Funds Investment Program Diversification and Safety of Capital 9 SPIA (Benchmark)
- 10. Operating Funds Investment Program Performance as of June 30, 2015 10 * Benchmark based upon target asset allocation. The actual asset allocation of the portfolio is typically overweight to the Working Capital Pool due to seasonality. 1.8% 1.7% 2.1% 2.8% -0.5% 3.9% 4.6% 4.3% -0.6% 3.1% 4.2% 4.2% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% FYTD Trailing 3 Year Trailing 5 Year Since Inception SPIA FIU Benchmark*
- 11. Operating Funds Investment Program Contribution to University’s Unrestricted Net Position 11 $146.8 $143.5 $132.5 $119.5 $97.6 $87.3 $10.7 $13.2 $6.0 $8.2 $9.1 $9.3 $21.1 $41.4 $44.2 $54.7 $75.8 $69.2 $0 $50 $100 $150 $200 $250 2010 2011 2012 2013 2014 2015e Committed Fund Balances SPIA Performance Treasury Performance
- 12. FINANCE AND AUDIT University Investment Committee 12
Editor's Notes
- Thank you to you and the committee for your interest in the work of the Investment Committee and the operating funds investment program.
- As a quick refresher, the FIU created the program in early 2005 and approved the investment policy by mid-year. With the investment policy in place, the we implemented the program fully by the first quarter of 2006 with the help of our consultants, Wilshire.
- 1011.42 -> 218.415 “1011.42 (5): (5) Funds awaiting clearing may be invested in investments earning interest in a qualified depository, in the State Treasury, and in the State Board of Administration. Investments of university funds shall comply with the requirements of Florida Statutes for the investment of public funds by local government. Due diligence shall be exercised to assure that the highest available amount of earnings is obtained on investments.” The investment program is governed by Florida Statutes which requires the aforementioned investment policy. Prioritizes: 1. SAFETY or RISK 2. LIQUIDITY 3. RETURN Prudent person requirement. As you can see, the policy is not stagnant. We made eight amendments since the original and all amendments are reviewed and approved by the investment committee, this finance and audit, and the full Board of Trustees.
- Also, as part of the normal process, the state audited the investment program, policy and procedures. The auditor noted that the policy did not explicitly have a requirement for continuing education. However, we were in full compliance in practice and continue to be in compliance every year. We added the continuing education requirement to the policy at our earliest chance. I’d like to take this opportunity to welcome Trustee Grant to the investment committee. I have worked briefly with Trustee Grant on the Foundation side and look forward to taking advantage of his financial and investment experience and knowledge.
- We rely on experts to assist us in managing the portfolio. We have here today: Nick Sefchok from Wilshire consulting. Oscar Herrera from Regions Bank. Chris Monte from Regions Trust. They and their organizations are a trusted and reliable part of our investment process.
- On to the portfolio. As mentioned, we’re driven by the priorities of the statutes. The first priority is safety. We accomplish this through diversification. As you can see, we investment in a wide spectrum of asset classes and sub-classes.
- Zooming in to the Working Capital Pool. We keep an large part of the liquidity in this part of the portfolio. Balances in this pool range from just below this balance of $76 million, up to $200 million depending on the time of the year. For example, as of yesterday, the Working Capital Pool balance was $152.8 million.
- In the Strategic Capital and Reserve Pools, we have funds that not needed for immediately by the university. Here, we look to diversify and seek risk-adjusted returns to increase the OVERALL performance of the portfolio.
- Now backing up again, we can see that separately our expected risk for the Working Capital Pool is low (green dot) but so is the expected return. Conversely, our Strategic/Reserve Pool risk and return are both higher (blue dot) Together, for the ENTIRE investment program (red dot), is on the efficient frontier of our asset choices. MOST importantly, the expected RISK is lower and the expected RETURN is higher for our portfolio than it is for the main alternative, the State Treasury’s investment pool.
- As you can see in the long term, our portfolio has outperformed SPIA by 150 basis points. Over 3- and 5-years, we more than doubled the performance of SPIA. How does this translate from basis points into dollars?
- Over the last five years, the investment program has added almost $70 million in uncommitted, unrestricted assets to the university’s bottom line versus the SPIA alternative OR Almost $80 million OVERALL.
- Again thank you for your time and attention. Are there any further questions at this time?