The document summarizes Joshua Fenton's presentation on developing a risk framework based on liquidity rather than volatility. It discusses how the Helmsley Charitable Trust shifted its investment goals and moved away from targeting volatility. Instead, it budgets investments based on liquidity to allow for flexibility and quick adaptation to changing market conditions. Forecasting is difficult, so the framework prepares the Trust to work with what the markets offer and be ready to adapt.

1. JOSHUA FENTON, THE HELMSLEY CHARITABLE TRUST
A COMMON SENSE RISK FRAMEWORK
IN UNCERTAIN TIMES
DIRECTOR OF INVESTMENTS
OCTOBER 19, 2016

2. BUT FIRST, A MISSION MOMENT
● On September 28, 2016, the type 1 diabetes (T1D) community reached a
major breakthrough with the FDA's approval of the Medtronic hybrid closed
loop system. The system is the first ever approved to automate the dosing
of insulin to reduce high blood sugar levels.
● Further, the system kept people with T1D within their desired blood sugar
range 73.4% of the time, vs. 67.8% without the system. At night, the most
dangerous time for blood sugar highs and lows, the difference was even
more pronounced, 76.4% in range vs. 67.8% without the system.
● This month's huge leap forward would not have been possible without the
support of JDRF's many partners, notably, the Helmsley Charitable Trust,
and everyone in the T1D community who has contributed their time,
energy and financial support over the last decade

3. BUT FIRST, A MISSION MOMENT

4. BACK TO THE PROGRAM...
In 2015, inflows from the Helmsley estate were largely complete, so
Investment Staff developed a new Strategic Plan with the following goals:
● Earn 5% plus inflation
● Allow the Investment Program to take desired and necessary risks while
avoiding undesired and unnecessary risks
● Avoid volatility targets
● Avoid forecasting

5. THE PROBLEM WITH VOLATILITY…
At Helmsley, we view volatility as
• The price of earning a return: If one limits the price one is willing to pay
for something, then by definition one is limiting the universe of available
options.
• A potential investment opportunity: Volatility rises the most when the
need for action is greatest, so budgeting volatility can freeze an
organization at the worst time.
Additionally, since volatility is a statistical measure, it is 100% backward
looking.

6. THE PROBLEM WITH VOLATILITY…

7. IF NOT VOLATILITY, THEN…?
An Investment Program is at greatest risk when it cannot adapt appropriately
to changing market dynamics. Bull markets do not last forever.

8. LIQUIDITY!

9. THE BENEFITS OF LIQUIDITY BUDGETING
● Easy to measure. Often contractual (negotiable?)
● Everyone understands it.
● Investigating manager liquidity can highlight problems in their investment
strategy.
● Budgeting by liquidity forces the question “Am I being compensated
enough for the lock-up?”
● It aligns Investment with Grantmaking.

10. EXAMPLE REPORTS

11. THE HELMSLEY LIQUIDITY CONSTRUCT
Liquid Semi Liquid Illiquid
Examples:
Treasuries
Investment
Grade
Sovereign and
Corporates
Safe
Examples:
Public Long-
biased Equity:
Developed
Markets,
Emerging
Markets
Commodities
Examples:
Emerging
Markets Small
Capital,
Frontier Equity
Hedge Funds
High Yield &
Emerging
Markets Debt
Examples:
Private Equity
& Venture
Capital
Real Estate
Royalties &
Private Debt

12. HOW WRONG CAN WE AFFORD TO BE?

13. FORECASTING IS HARD
$89.1
$101.4
$93.7
$87.8 $86.2
$56.5
$0
$20
$40
$60
$80
$100
$120
2010 2011 2012 2013 2014 2015
March 31, 2016
$38.3
Crude Oil forward curve prediction for 2016

14. 4.95%
3.09%
3.88%
3.35%
2.14%
0%
1%
2%
3%
4%
5%
6%
2011 2012 2013 2014 2015
Yield(%)
FORECASTING IS HARD
April 8, 2016
1.72%
10-Year US Treasury forward yields for 2016

15. FORECASTING IS HARD

16. WORK WITH WHAT THE MARKETS OFFER
At Helmsley, we make an effort to understand what the markets are telling us,
because markets move in cycles.
We all know bull markets end, we just don’t know when.
We built our Strategic Plan around Liquidity so we can react quickly.
AND BE READY TO ADAPT!

17. Q & A

18. JFENTON@HELMSLEYTRUST.ORG
THANK YOU