Colorado Academy Board of Trustees: Endowment Advisory Committee Update for December 7, 2016

updated December 7, 2016

Presentation and Update Archive

Endowment Advisory Committee: Chris Bittman, John Ege*, John Fenley*, Paul McPheeters*, Bryan Ritz and Minyoung Sohn with Mike Davis and Heather Miller as Ex Officio members. Our Investment Consultant is Paul Schreder of Ellwood Associates.

Executive Summary of the current Investment Policy Statement. The Target Rate of Return is CPI +5%.

Endowment Value = $25,142,028

Performance: Year to date through November 30, our Endowment has gained +6.0% versus our Policy Index return of +4.3%

EAC Meeting on November 8, 2016

We reviewed the factors affecting both recent performance and long term performance. Committee also discussed the primary sources of Risk in the portfolio: (1) The Emphasis on Floating Rate Loans in our Fixed Income is our Energy and MLP investments.

Before Election Night 2016

Portfolio has been positioned to protect the Endowment from large draw downs by focusing on U.S. Equities while also maintaining high liquidity in the portfolio
November 2nd, I compared the Financial Markets to the 2012 NFL Monday Night Football "Fail Mary"
How did the actual Fail Mary game end? Prior to the catch, Tate shoved Packers cornerback Sam Shields with both hands, which the NFL later acknowledged should have drawn an offensive pass interference penalty that would have negated the touchdown and resulted in a Packers victory. The lack of a pass interference penalty and the ruling of a touchdown via simultaneous catch were widely questioned in the aftermath of the game, drawing comments from the game's announcers, NFL players, and the media. The NFL subsequently released a statement defending the touchdown ruling. source: Wikipedia

During Election Night 2016

The Dow Jones Industrial Average plunged 700 points as the Rust Belt votes were counted. Trump won the Presidential Election because he flipped Wisconsin, Michigan and Pennsylvania.

After Election Night 2016

U.S. Dollar has strengthened, moving up above "100" to the highest levels in more than a decade

The Dollar Index is shown above in the Red line. "DXY" is the trade-weighted dollar exchange rate against the major floating currencies, particularly the Euro, Yen, British Pound and the Canadian dollar.

💸 The Dollar has room to soar. U.S. Interest Rates are rising. If the Administration executes on its pro-growth policies . . . and if the rest of the world remains stuck, the dollar will climb over 2000 highs.

The Euro has introduced in 2000. In this chart, the U.S. 10-year Treasury yield is the white line.

📉 U.S. Ten Year Treasury Yields since 2009

Inflation Expectations have (finally) ticking up

Endowment Value = $25,142,028

(estimate provided by Ellwood Associates, updated through November 30, 2016)

Performance: Year to date through November 30, our Endowment has gained +6.0% versus our Policy Index return of +4.3%

Asset Allocation

Committee moved to a defensive posture with a focus on U.S. Stocks, Cash and Floating Rate Securities. Regarding Alternatives, the Committee has exited Hedge Fund investments* and focused on specific investment exposures including MLPs, Energy and Gold.

Earlier this year, the Committee voted to redeem our investment in the BlackRock Hedge Fund of Funds strategy. Notice was given in May and redemption funds were received November 1, 2016.

Asset Allocation with a Purpose

Offense, Defense & Special Teams (Alternatives)

NOTE: The Endowment Cash Position is currently holding approximately ~15% cash position. (The "9.9% Cash" is the from Redemption of our investment in BlackRock's Fund of Funds - we received the cash on November 1 - as well as the 5% cash held in money market funds).


In Q3 2016, Colorado Academy's Fixed Income Portfolio outperformed due to our Focus on Floating Rate strategies

Year to Date: CA +7.8% versus Agg +2.5%

As of November 30, 2016
Post-Election, interest rates backed up significantly. The 10-Year bond yield increased from 1.5% to 2.4%
Bond Prices move in the opposite direction of Interest Rates
The Barclays Aggregate Bond Index is depicted in white. Bonds could be at the End of a 30+ year Bull Market.


As of November 30, 2016
Year to date, our Equity Portfolio is performing in-line with the Policy Index, both up +6.1%
  • 26% of Fund is invested in Passive U.S. Index strategies, the S&P 500 ETF and Russell 3000, +9.7% and +10.5% respectively, on a YTD basis
  • 14% of Fund is invested in Vanguard Dividend Growth . . . this strategy has lagged in this rising rate environment, because the dividends have less luster versus "risk-free" rates
  • Mixed success in International and Emerging Markets


CA's "Alternative" Investments

Year to date, CA's capital at risk in the Alternatives category has returned +4.8% exceeding the HFRI Fund-of-Funds Index which returned 0.3%

CA has nearly completed the liquidation of hedge funds in the Endowment

As of November 30, 2016

Endowment Advisory Committee: Next scheduled meeting is February 7, 2017



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