2018 Endowment Report

Endowment Endow Report Repor

of the Children’s of the Ch Hospital Colorado Hospital Health SystemHealth S

For the 12-Month Period For the 12-Mo Ending December 31,Ending 2018 Dece

ng in Investing Excellence in Excellence at at en’sChildren’s Hospital Colorado Hospital Colorado

like you have Generous created donors morelike than you 50have endowed created chairs more than 50 endowed chairs 0 endowed and funds more atthan Children’s 170 endowed Hospitalfunds Colorado. at Children’s These Hospital Colorado. These nts, whichspecial honor our investments, pediatric caregivers, which honor researchers our pediatric andcaregivers, researchers and re only possible administrators, because of are donors’ only possible committed because support. of donors’ committed support.

provide aEndowment perpetual source gifts provide of funding a perpetual through long-term source of funding through long-term ngs, helping investment us to attract earnings, the brightest helpingminds us to attract in pediatric the brightest minds in pediatric ep them onmedicine the pathand to discover keep them medical on the breakthroughs, path to discover medical breakthroughs, eatments,advance raise thenovel bar for treatments, clinical care raise andthe give bar allfor children clinical care and give all children lass pediatric access care. to world-class pediatric care.

ospital Colorado The Children’s Health System’s Hospital(“the Colorado Health Health System”) System’s (“the Health System”) mittee makes Investment strategicCommittee investments makes to protect strategic theinvestments to protect the ncipal (or corpus) endowment's and toprincipal produce (or investment corpus) and income to produce investment income perations and thatprograms is used foraligned operations withand yourprograms intent. aligned with your intent.

our confiThank dence in you usfor and your for confi committing dence intousour and vision: for committing to our vision:

alth. Child Reimagined.

Health.Realized.

Reimagined. Realized.

DR. TERRY FRY

DR. TERRY FRY

Center for Cancer and Blood Disorders Center for Cancer and Blood Disorders Robert J. and Kathleen A. Clark Endowed Robert J. and Kathleen A. Clark Endowed Chair for Pediatric Cancer Therapeutics Chair for Pediatric Cancer Therapeutics

“We are, as a result of philanthropic support, one of the leading groups in implementing targeted therapy for childhood brain tumors.

There is every reason to believe that this targeted therapy will be a revolution in care."

DR. NICK FOREMAN

Center for Cancer and Blood Disorders Tanner Seebaum and Zachery Tschetter Chair in Neuro-Oncology

$137 million + University of Colorado and Children's Colorado combined child health research grants (as of 2018)

Children's Hospital Colorado has been Magnet-recognized by the American Nurses Credentialing Center for a third time, a designation only 3% of all hospitals achieve.

Commitment to Research The Children's Hospital Colorado Research Institute spearheads basic, clinical and outcome discoveries that drive the development of new medicines, devices, diagnostic approaches and other health care innovations.

Our scientists, physicians and leadership have an ambitious strategic plan to expand the scope and quality of child health research in virtually every pediatric subspecialty on our campus.

Children's Hospital Colorado consistently ranks among the best pediatric hospitals in the nation. In 2018–19, based on clinical outcomes and peer reputation, we received high marks in all 10 ranked specialties, including five in the top 10.

Endowment Spending Policy Anschutz Medical Campus 13123 E. 16th Avenue, Box 045 Aurora, CO 80045 (720) 777 - 1700 ChildrensColoradoFoundation.org

The Health System makes distributions from the endowment to restricted accounts that are used to further the goals of each fund.

These distributions must be used by the hospital in a manner consistent with the fund’s purpose and the donor’s intent.

The spending policy for fully funded endowments specifies a distribution of 5% of the average market value of the endowment investments. Additional earnings beyond the distribution rate are returned to the principal to seek growth.

The spending policy also dictates that distributions never allow the value of the endowment to fall below 80% of the principal to protect the corpus and ensure that the endowment—and the programs it fuels—continues to sustain the hospital into the future.

Endowment Management Endowment funds are invested in the Health System’s Long-Term Investment Pool (LTIP), which stood at $893 million in total assets as of December 31, 2018.

Funds are invested in a diversified investment portfolio designed to maximize impact by generating the highest return possible for current efforts, while preserving principal to generate future income.

olorado has been Children's Hospital Colorado has been y the American Magnet-recognized by the American Center for aNurses third Credentialing Center for a third nly 3% of alltime, a designation only 3% of all Following a strong year in 2017, Following capital markets a strong proved year in challenging 2017,Following capital andmarkets volatile a strong proved throughout year in challenging 2017, 2018. capital While and markets volatile globalproved throughout challenging 2018. Wh and hospitals achieve.

Endowment Performance Endowment Performance Endowment Performance

equities and the fixed income markets equitiessuff andered the losses, fixed income Children's markets equities Hospital suff andered Colorado's the fi losses, xed income Long-Term Children's markets Investment Hospital suffered Colorado's Pool losses,Long-Term Children's Hosp Inves (LTIP) returned -4.6%. Longer-term (LTIP)investment returned -4.6%. resultsLonger-term reflect(LTIP) a consistent investment returned record -4.6%. results of growth Longer-term reflectasademonstrated consistent investment record by results the of growth reflectas a consis demon LTIP's 10-year annualized rate ofLTIP's return 10-year of 8.4%. annualized As always, rate theof LTIP's Investment return 10-year of 8.4%.

Committee annualized As always, follows rate the ofInvestment areturn prudent of 8.4%. investment Committee As always, follows the Investm a prud policy, which seeks to generate policy, long-term which positive, seeks to risk-adjusted generatepolicy, long-term investment which positive, seeks performance to risk-adjusted generate through long-term investment diversifi positive, cation performance risk-adjusted and through invest div appropriate risk management. appropriate risk management. appropriate risk management.

olorado consistently Children's Hospital Colorado consistently t pediatric hospitals ranks among the best pediatric hospitals Endowment SummaryEndowment SummaryEndowment Summary –19, based onin the nation. In 2018–19, based on d peer reputation, clinical outcomes and peer reputation, Total LTIP rks in all 10 ranked we received high marks in all 10 rankedEndowment Endowment

by Type 12/31/2018

by Type Endowment 12/31/2017 12/31/2018

by Type 12/31/2017 Assets12/31/2018 five in the top specialties, 10. including five in the top 10.

Tot 12/ A

$893,167,464 $893,

Board Designated Quasi-Endowments Board Designated $ 25,996,312 Quasi-Endowments Board $ 28,396,564 Designated $ 25,996,312 Quasi-Endowments $ 28,396,564 $ 25,996,312 $ 2 Donor-Restricted Endowments Donor-Restricted $146,093,149 Endowments Donor-Restricted $ 152,583,213 $146,093,149 Endowments $ 152,583,213 $146,093,149 $ 15 as of December 31, 2018 as of Dec Total Total $172,089,461 Total $ 180,979,777 $172,089,461 $ 180,979,777 $172,089,461 $ 18

Long-Term Investment Pool (LTIP)Investment Asset Allocation Long-Term Pool (LTIP)Investment Asset Allocation Pool (LTIP) Asset Allocat g ment Policy Spending PolicyLong-Term

As of December 31, 2018 As of December 31, 2018 he emendowment makes distributions to from the endowment to e unts goals that of are each used fund. to further the goals of each fund. al ons inmust a manner be used by the hospital in a manner or’s the fund’s intent.purpose and the donor’s intent.

27%es a olicy nts specifi for fully es afunded endowments specifi

27%

of % the of the endowment average market value of the endowment 21% dditional istribution earnings rate are beyond the distribution rate are2% 2% principal to seek growth.

4%

4%

olicy ions also never dictates allow the that distributions never allow the he owment principal to fall to protect below 80% of9% the principal to protect14% ensure nd the programs that the endowment—and it the programs it he es to future. sustain the hospital into the10% future.

13%

9% 10%

As of December 31, 2018

z Domestic Equities 27% z International Equities 21% Return Absolute z 2% z Hedged Equity 4% z Fixed Income 9% 14%Equity z Private z Real Assets 10% 13% z Cash

$240,487,104 z Domestic Equities

$240,48 z Dom

$187,377,697 z International Equities

$187,37 z Inte

21% Return $126,348,954 Absolute

z $118,070,655 z Hedged Equity $ 83,551,135 z Fixed Income 14%Equity $ 78,108,297 z Private $ 38,500,276 z Real Assets 13% $ 20,723,346 z Cash

$126,34 z Abs

$118,07 z Hed

$ 83,55 z Fixe

$ 78,10 z Priv

$ 38,50 z Rea

$ 20,72 z Cas

ment ment Management

nds ystem’s are invested Long-Term in the Health System’s Long-Term lllion (LTIP), in total which assets stoodasat $893 million in total assets as , 2018.

Annualized Investment Annualized Performance Investment Annualized Performance Investment Performance

portfolio ted in a diversifi designed ed to investment portfolio designed tothe Period Ending December 31, For the Period Ending December 31, For 2018 For2018 the Period Ending December 31, 2018 ct urn bypossible generating for current the highest return possible for current 1 Year 3 Years 5 Years 110 Year Years 3 Years future eserving income. principal to generate future income.

Children’s Hospital Colorado Health Children’s System Hospital LTIP Colorado Health Children’s System -4.55% Hospital LTIP Colorado 4.23% Health 3.36% System -4.55% 8.43% LTIP Policy Index* Policy Index* Policy Index* -3.37% 5.70% 4.79% -3.37% 8.90% Active Allocation Policy Index** Active Allocation Policy Index**Active Allocation -5.25%Policy3.70% Index** 2.87% -5.25% N/A

4.23% 5.70% 3.70%

5Y

3.3 4.7 2.8

*The Policy Index is comprised of 40% S&P *The 500 Policy (U.S.Index LargeisCap comprised Equities); of 25% 40%MSCI S&P *The500 EAFE Policy (U.S. (Developed Index Large is Cap comprised Markets Equities); of Equities); 40% 25% S&P MSCI 25% 500 EAFE Treasury (U.S. (Developed Large BillsCap +5%; Markets Equities); 5% Equities); 25% MSCI 25% EAFE Trea Barclays U.S. Aggregate (Bonds); and 5%Barclays 91-Day Treasury U.S. Aggregate Bills. (Bonds); and 5%Barclays 91-Day Treasury U.S. Aggregate Bills. (Bonds); and 5% 91-Day Treasury Bills.

**The Active Allocation Policy Index consists **TheofActive a blend Allocation of indexes Policy weighted Indexto consists correspond **Theof Active a blend to Allocation theofbeginning indexes Policy weighted weighted Index to consists average correspond of ofaeach blend to asset the ofbeginning indexes class over weighted weighted time. toaverage correspond of ea The corresponding indexes employed areThe thecorresponding S&P 500, MSCIindexes EAFE, HFRX employed Hedged are The the Equity, corresponding S&PHFRX 500, MSCI Absolute indexes EAFE, Return, employed HFRXPreqin Hedged arePrivate the Equity, S&P Capital, HFRX 500, MSCI Absolute CPI, S&P EAFE, GSCI, Return, HFRX BofA Preqin HedgedPrivate Equity,Ca H Merrill Lynch U.S. Treasuries (1-3 Year) and Merrill 91-Day Lynch Treasury U.S. Treasuries Bills.

(1-3 Year) and Merrill 91-Day Lynch Treasury U.S. Treasuries Bills.

(1-3 Year) and 91-Day Treasury Bills.

le global tment Pool nstrated by the ent investment ersification and

Children’s Hosp Colorado Healt Investment Com 2019 Regular Members

Steve Kris, Chair Conundrum Capital LLC Trustee, Children’s Hospita

Katherine (Katey) Driscol Community Volunteer Trustee, Children’s Hospita

al LTIP ssets

,167,464

ember 31, 2018

Peter Calamari Platte River Equity Trustee, Children’s Hospita

David Hanson Lynwood Capital Partners,

David W. Honeyfield Ultra Petroleum Corp.

Treasurer, Children’s Hospi

John Ikard Retired Banking Executive Member, Children's Hospit

Tom McGonagle Black Creek Group Trustee, Children’s Hospita Scott Nycum J.P. Morgan Private Bank

Laura Wright OnePoint Past Chair, Children's Hosp Board of Trustees

7,104

7,697

8,954

Ex-Officio Members

0,655

Jennifer Roe Darling President and CEO, Childre

1,135

Katie Dugan Vice President, Children's H

8,297

Jeff Harrington Senior Vice President/Chie Children's Hospital Colo Trustee, Children's Hospita

0,276

3,346

Jena Hausmann President and CEO, Childre Cille B. and Ronald W. Willi Executive Leadership Trustee, Children’s Hospita

ears 10 Years

36% 79% 87%

8.43% 8.90% N/A

sury Bills +5%; 5%

ch asset class over time. pital, CPI, S&P GSCI, BofA

Fred Taylor Northstar Investment Advi Chair, Children's Hospital C Board of Trustees

Barth E. Whitham Enduring Resources, LLC Chair, Children's Hospital C

pital Children’s Hospital h System Colorado Health System mmittee Investment Committee 2019 Regular Members

Steve Kris, Chair Conundrum Capital LLC l Colorado Trustee, Foundation Children’s Hospital Colorado Foundation

l, Vice Katherine Chair (Katey) Driscoll, Vice Chair Community Volunteer l Colorado Trustee, Foundation Children’s Hospital Colorado Foundation

Peter Calamari Platte River Equity l Colorado Trustee, Foundation Children’s Hospital Colorado Foundation

Inc.

David Hanson Lynwood Capital Partners, Inc.

David W. Honeyfield Ultra Petroleum Corp. tal Colorado Treasurer, Board Children’s of Directors Hospital Colorado Board of Directors

John Ikard Retired Banking Executive al Colorado Member, Board Children's of Directors Hospital Colorado Board of Directors

Tom McGonagle Black Creek Group l Colorado Trustee, Foundation Children’s Hospital Colorado Foundation

Oversight of the Oversight of the Oversight of the Scott Nycum Endowment’s Investments Endowment’s Investments Endowment’s Investments J.P. Morgan Private Bank

The volunteer-led Health SystemThe Investment volunteer-led Committee Health System The Investment volunteer-led Committee Health System Investment Committee Laura Wright OnePoint is comprised of members of the Children’s is comprised Hospital of members of the Children’s is comprised Hospital of members of the Children’s Hospital ital Colorado Past Chair, Foundation Children'sBoard Hospital Colorado and Foundation Colorado of Directors Colorado the Children’s Board Hospital of Directors andColorado the Children’s BoardHospital of Directors and the Children’s Hospital Board of Trustees

“We are, as a result of philanthropic support, one of the leading groups in implementing targeted therapy for childhood brain tum There is every reason to believe that this targeted therap l Colorado Trustee, Foundation Children's Hospital Colorado Foundation Jena Hausmann will be a revolution in care." en’s Hospital President Colorado and CEO, Children’s Hospital Colorado The Endowment’s The Endowment’s The Endowment’s ams Endowed Cille B. and Chair Ronald in W. Williams Endowed Chair in Executive Leadership DR. NICK FOREMAN Investment Advisor Investment Advisor Investment Advisor l Colorado Trustee, Foundation Children’s Hospital ColoradoCenter Foundation for Cancer and Blood Disorders

Colorado Foundation Board of Trustees.

Colorado The Foundation Investment Board of Trustees.

ColoradoThe Foundation Investment Board of Trustees. The Investment Committee sets investment policy, Committee monitors sets investment investment policy, Committee monitors sets investment investment policy, monitors investment Ex-Officio Members performance and provides high-level performance oversightand over provides high-level performance oversightand over provides high-level oversight over Jennifer Roe Darling the endowment. The committeethe reports endowment. regularlyThe to committeethe reports endowment. regularlyThe to committee reports regularly to en's Hospital President Colorado and CEO, Foundation Children's Hospital Colorado Foundation the Board of Directors and Boardthe of Trustees, Board of as Directors well and Boardthe of Trustees, Board of Directors as well and Board of Trustees, as well Katie Dugan as to Children's hospital leadership.

The Investment as to hospital Committee’s leadership. The Investment as to hospital Committee’s leadership. The Investment Committee’s HospitalVice Colorado President, Foundation Hospital Colorado Foundation strategic aim is to achieve the dual strategic goals ofaim generating is to achieve the dual strategic goals of aim generating is to achieve the dual goals of generating Jeff Harrington income to meet the hospital’s needs income today toand meet sustaining the hospital’s needs income today to and meetsustaining the hospital’s needs today and sustaining f Financial Senior OffiVice cer, President/Chief Financial Officer, the endowment’s value to advance the progress endowment’s for the value future. to advance the progress endowment’s for the value future. to advance progress for the future. rado Children's Hospital Colorado

Fred Taylor Tanner Seebaum and Zachery Tschetter Chair in Neuro-Oncology The Health System partners with The the Health independent System partners with The the Health independent System partners with the independent sors, LLC Northstar Investment Advisors, LLC asset management firm Monticello assetAssociates management in firm Monticello assetAssociates management in firm Monticello Associates in olorado Chair, Foundation Children's Hospital Colorado Foundation Denver, Colo., to advise the Investment Denver, Committee Colo., to advise the Investment Denver, Colo., Committee to advise the Investment Committee Board of Trustees

in implementing the investmentinpolicy. implementing Foundedthe investment in policy. implementing Foundedthe investment policy. Founded Barth E. Whitham in 1992, Monticello provides a variety in 1992, ofMonticello consulting provides a variety in 1992,ofMonticello consultingprovides a variety of consulting Enduring Resources, LLC olorado Chair, Board Children's ofservices, Directors Hospital Colorado Board ofinvestment Directors including including developing services, policies developing investment services, including policiesdeveloping investment policies

and objectives, analyzing asset allocation and objectives, and analyzing asset and allocation objectives, and analyzing asset allocation and diversification, and providing due diversifi diligence cation, andand providing due diversifi diligence cation, andand providing due diligence and performance monitoring. One of performance the country'smonitoring. leading One of performance the country's monitoring. leading One of the country's leading asset management consultants,asset Monticello management Associates consultants, asset Monticello management Associates consultants, Monticello Associates serves 178 clients, including prominent serves 178 hospitals, clients, including prominent serves 178 hospitals, clients, including prominent hospitals, museums, colleges and universities, museums, with $95 colleges billionand in universities, museums, with $95 colleges billion and in universities, with $95 billion in assets under advisement as of December assets under 31, advisement 2018. as of December assets under 31,advisement 2018. as of December 31, 2018.

Anschutz Medical Campus 13123 E. 16th Avenue, Box 045 Aurora, CO 80045 (720) 777 - 1700 ChildrensColoradoFoundation.org