Reflecting on the Extraordinary Impact During an Unprecedented Year
FY20 ANNUAL REPORT (July 1, 2019– June 30, 2020)
FY
HAS SURPASSED BOTH
$400,000,000 CASH AND
NEW BUSINESS
91% $MILLION 400 FOR THE 3RD YEAR IN A ROW
INVESTING IN THE UNIVERSI TY OF ILLINOIS SINCE 1935
NEW BUSINESS
FOR THE FIRST TIME IN HISTORY
CONTENTS
EXCEED
02
LETTER FROM THE BOARD CHAIR & PRESIDENT/CEO
06
85TH ANNUAL BUSINESS MEETING
08
DISTRIBUTED TO THE THREE UNIVERSITIES
$65M
TOWARD COLLECTIVE CAMPAIGN GOAL
FY20 FINANCIAL REPORT
12
FY20 NEW BUSINESS
142K+ DONORS IN FY20
14
CAMPAIGN HIGHLIGHTS
$2.83B RAISED TOWARDS THE $3.1B CAMPAIGN GOAL
22
FOR 14 CONSECUTIVE YEARS NEW BUSINESS HAS EXCEEDED 32 $250M
53K+ G I F TS I N F Y 2 0
FY20 ENDOWMENT REPORT
FOUNDATION LEADERSHIP
For the first time the Foundation's Active Endowment exceeded $2 Billion
LETTER FROM THE
BOARD CHAIR & PRESIDENT/CEO Kay Schwichtenberg & Jim Moore
2
HAPPY ANNIVERSARY! The University of Illinois
faculty, staff, and programs. If you have not seen the
Foundation is excited to be celebrating 85 years of service
Annual Meeting video, we encourage you to visit the
to the University of Illinois. Since 1935, the Foundation
Foundation website to hear how your gifts are impacting
has managed giving and philanthropy programs that help
our extraordinary university System. You can read about
donors invest in the University of Illinois.
FY20’s financial highlights in this report, but we hope you
While every year provides new opportunities and challenges, this past one was undoubtedly different
will take a few minutes to watch the virtual Annual Meeting video as well.
from what anyone could have predicted. However, we
Our three campaigns—Reaching Stellar, IGNITE, and
are always confident in predicting Illinois alumni and
With Illinois—continue to move closer to their combined
friends will step up and support our great university—no
goal of $3.1 billion. Three years into our fund-raising
matter the circumstances. The proof is within the pages
efforts, more than 166,000 donors have contributed $2.83
of this Fiscal Year 2020 Annual Report. For the first time
billion or 91.14 percent of our goal. We know the final climb
in our history, and amid the coronavirus pandemic, your
over the next two years will not be easy, but with collective
gifts allowed the Foundation to eclipse $400 million
support and commitment, we have every confidence all
in new business and $400 million in cash in the same
three campaigns will succeed.
year. On behalf of our entire university and Foundation community … Thank you!
Because of you, the altogether extraordinary University of Illinois continues to advance its mission of transforming
The global pandemic also resulted in the Foundation’s
lives and serving society on a grand scale and with
Annual Meeting being presented virtually for the first time
excellence. We could not be more grateful and hope to
this fall. Though we were unable to meet in person, we
thank and celebrate you in person at our Annual Meeting
did not let COVID-19 prevent us from celebrating your
next fall. Stay healthy and safe, and mark your calendar for
steadfast commitment to University of Illinois students,
September 30-October 2, 2021.
JAMES H. MOORE, JR. President/CEO
KAY M. SCHWICHTENBERG Chair, Board of Directors
INVESTING IN THE UNIVERSIT Y OF
In 2020, the University of Illinois Foundation celebrated the milestone of hosting 85 annual business meetings. Throughout the decades this meeting has provided us with the privilege of getting to know a diverse group of highly engaged alumni and friends from all corners of the United States and the world. From 1935 until today, the constant that remains the same is the pride, passion, and generosity of altogether extraordinary supporters of the University of Illinois. Thank you for your loyalty and for choosing to be a part of our incredible history!
ILLINOIS FOR THE PAST 85 YEARS
6
and friends for the University of Illinois Foundation’s Annual Business Meeting. We missed being able to join together for the meeting and the full, celebratory Foundation Weekend on the campus of the University of Illinois at Urbana-Champaign. We are certainly disappointed that this turn of events in 2020 did not
FY20 ANNUAL REPORT
THIS YEAR, DUE TO COVID-19, we were unable to host alumni
allow us the opportunity to reconnect and reunite. We hope you all are staying safe and well during the coronavirus pandemic. The Foundation still held its annual meeting, and, for the first time ever, it was a virtual meeting. A video version of the meeting was shared on Thursday, October 22, 2020. It includes remarks from Foundation representatives including President/CEO Jim Moore, Board Chair Kay Schwichtenberg, Chief Financial Officer Christy Devocelle, Chief Investment Officer Ellen Ellison, as well as special remarks from UI System President Tim Killeen. To watch the Foundation’s 85th Annual Business Meeting, please visit: uif.uillinois.edu/AM2020.
SAVE THE DATE: The 86th Annual Business Meeting and Foundation
Weekend is scheduled for September 30–October 2, 2021.
7
FINANCIAL REPORT FISCAL YEAR 2020
For the first time, both cash and new business exceed $400 million; Campaign progress 91 percent toward goal
8
THE UNIVERSITY OF ILLINOIS SYSTEM and the
gory. (The “other” category includes giving vehicles such
University of Illinois Foundation announced an impres-
as donor advised funds, which continue to grow in popu-
sive fundraising report for Fiscal Year 2020 (July 1, 2019
larity with individual donors. The "other" category grew
through June 30, 2020) that includes both cash and new
106 percent in 2020.)
business figures surpassing $400 million.
The Foundation’s financial report for FY 2020 was
Fundraising for FY 2020 recorded $462.1 million in
announced via a video version of the Foundation’s 85th
new business, comprised of new gifts, grants, pledges, and
Annual Business Meeting. Due to the COVID-19 pandemic,
deferred commitments. This figure is the third largest on
the meeting was held virtually for the first time. The Foun-
record, following $498.5 million in 2018 and $462.9 million
dation’s annual business meeting is a cornerstone event
in 2019. The Foundation first reached the $400 million
held to share the impact of private support for the Univer-
milestone in FY 2013 with $434.9 million in new business.
sity of Illinois System. This year the Foundation is cele-
Of the new business total, $150.4 million was contributed
brating 85 years of investing in the University of Illinois.
by alumni, $60.8 million by friends, $56.3 million by family
“In a time of historic challenges, our donors have
foundations and foundations, $102.5 million by corpora-
responded in historic ways. I am so grateful for their gener-
tions, and $92.1 million was recorded in the “other” cate-
osity, and their commitment to the power our universities
of historic challenges, our donors have responded in historic ways.” TI M K I L L E E N P re side n t, U n i ve r s i ty o f I l l i n o i s Syste m
FY20 ANNUAL REPORT
“ In a time
9
hold to help lead the way through this crisis and to drive
remaining 38.26 percent was contributed by friends, foun-
new waves of progress on the other end,” said Timothy
dations, and the category of “other.”
L. Killeen, president of the University of Illinois System.
Donors designated their cash to a number of categories, including $79.1 million for research, $67.7 million for student support, $27.3 million for facilities, $26.4
—JIM MOORE, PRESIDENT/CEO OF THE UI FOUNDATION
support, $11.9 million for public service, and $8.9 million for other areas. Of the $420.5 million total, $183.9 million was directed by donors to a university, college, department or program for its unrestricted use at the discretion of the dean or unit head. The majority (60.1 percent, or $252.9 million) of the $420.5 million was designated as current use funds (to be used during the current fiscal year), while 38.9 percent ($163.7 million) was designated for the endowment and 1.0 percent ($3.9 million) was designated for annuity/life income funds. The University and U of I Foundation combined active endowment stood at $2.92 billion as of June 30, 2020. “Despite all of the uncertainty that we have seen in 2020, there are some things that even a global pandemic can’t change and those are the rich tradition of excellence and innovation the University of Illinois exemplifies, and, of course, our ever loyal and true alumni and friends,” said U of I Foundation President/CEO James H. Moore, Jr. “The generosity of our donors in contributing more than $400 million in both cash and new business is awe inspiring and helps our three campaigns — With Illinois, IGNITE, and Reaching Stellar — make progress toward their goals.” The University of Illinois System is ahead of pace amid its most ambitious $3.1 billion fundraising initiative, which is comprised of three unique fundraising campaigns— Urbana, Chicago, and Springfield. As of September 30, 2020 the campaigns are collectively 91.14 percent toward the goal, together having raised an impressive $2.825 billion. The individual campaign progress for each of the universities through September 30, 2020 is as follows:
For the first time in the Foundation’s history, the cash flow for a single fiscal year exceeded the $400 million mark by reaching $420.5 million, far surpassing previous records of $298.7 million in 2019 and $302.6 million in 2018. Included in this figure are outright cash gifts, pledge payments, annuity/life income gifts, and estate distributions.
FY20 ANNUAL REPORT
“...there are some things that even a global pandemic can't change and that is the rich tradition of excellence and innovation that the University of Illinois exemplifies, and, of course, our ever loyal and true alumni and friends”
million for academic programs, $15.3 million for faculty
WITH ILLINOIS: THE CAMPAIGN FOR ILLINOIS
$2.13 billion raised or 94.87 percent toward goal IGNITE: THE CAMPAIGN FOR UIC
$574.5 million raised or 76.60 percent toward goal REACHING STELLAR: THE CAMPAIGN FOR UIS
$36.8 million raised 91.89 percent toward goal
Of this fiscal year’s cash totals, the greatest contribu-
(The campaign progress figure of $2.825 billion also includes
tions came from family foundations (27.28 percent), corpo-
additional gifts to the U of I Foundation, the U of I System,
rations (17.29 percent) and alumni (17.17 percent). The
and the U of I Alumni Association.)
11
FY20 NEW BUSINESS
New Gifts, Grants, Pledges, & Deferred Gift Commitments
$462.1 MILLION 71.9%
25.5%
1.1%
1.5%
$332.2 Million
$118.1 Million
$5.0 Million
$6.8 Million
URBANA-CHAMPAIGN
CHICAGO
SPRINGFIELD
SYSTEM
FY 2016–2020 NEW BUSINESS GROWTH $498.5M
12
$286.2M
$286.3M
2016
2017
2018
Fiscal Year (July 1–June 30)
$462.9M
$462.1M
2019
2020
FY20 NEW REVOCABLE & IRREVOCABLE COMMITMENTS
$78.8M
90%
Revocable Estate Plan Commitments $71,054,455
$400M+ 4TH TIME IN HISTORY
*Irrevocable gift arrangements administered by UIF
4%
Charitable Remainder Trusts* $3,055,908
6%
Charitable Gift Annuities* $4,698,928
Fiscal Year 2020 (July 1, 2019–June 30, 2020)
FY20 NEW BUSINESS SOURCES
33%
13%
12%
22%
20%
ALUMNI
FRIENDS
FOUNDATIONS
CORPORATIONS
OTHER
$150.4 Million
$60.8 Million
$56.3 Million
$102.5 Million
$92.1 Million
FY20 NEW BUSINESS DESIGNATIONS
FOR 14 CONSECUTIVE YEARS NEW BUSINESS HAS SURPASSED
DONORS IN FY20
FY20 ANNUAL REPORT
Research $99.7M Facilities $66.8M Student Support $83.3M Academic Programs $54.8M Public Service $13.5M Faculty Support $14.1M Other $8.9M Unrestricted $121.0M
13
GIFTS IN FY20
$250,000,000 142K+ 53K+
14
The University of Illinois Board of Trustees meets every other month, typically at one of the three universities in Urbana-Champaign, Chicago, and Springfield. Due to COVID-19, the group has been meeting online to conduct their important business in support of the University of Illinois System. For more information, including how to watch live webcasts of the meetings, visit bot.uillinois.edu.
OVERALL CAMPAIGN GOAL
$3.1 BILLION 91.14%
PROGRESS AS OF 09.30.20 To learn more about the U of I System visit ullinois.edu. To learn more about the campaign progress visit the Foundation's site at uif.uillinois.edu.
FY20 ANNUAL REPORT
OF GOAL
The power of the University of Illinois System is fueled by the passionate commitment and dedication of donors. The generosity of our alumni and friends has driven innovation and fostered excellence for our students and faculty for over a century. To support this legacy, a set of philanthropic campaigns were launched in 2017: With Illinois, IGNITE, and Reaching Stellar. The University of Illinois Foundation is reporting that as of September 30, 2020, the campaigns have collectively raised an impressive $2.8 billion. This figure pushes the total to just over 91 percent toward the $3.1 billion goal. “The goal for these campaigns was set as the largest in the University of Illinois’ history,” said James H. Moore, Jr., president and CEO of the University of Illinois Foundation. “And now, in the third year of the campaigns, I can report that we are on track to meet or exceed our goals by the 2022 end date. Thanks to our donors for their passion, pride, and generosity for propelling us toward the finish line.”
UILLINOIS.EDU
15
16
The University of Illinois at Urbana-Champaign offers faculty, staff, and students free on-campus COVID-19 walk-up testing at sites across campus, including the State Farm Center (pictured). The sites administer an innovative saliva-based test, a process developed by the university’s COVID-19 SHIELD: Target, Test, Tell team. Unlike conventional nasal testing, saliva samples are collected non-invasively, without requiring skilled health care workers.
WITH ILLINOIS CAMPAIGN GOAL
$2,250,000,000 94.87%
With Illinois, the campaign for the University of Illinois at Urbana-Champaign, has made tremendous progress toward reaching its impressive $2.25 billion goal. Together, with you, the campaign raised $2.13 billion as of September 30, 2020. This figure puts the campaign at nearly 95 percent toward completion, making it almost certain its ambitious goal will be met—or exceeded—by the 2022 campaign end date. The broad priorities of this campaign include support for a diverse body of students, world-renowned faculty, interdisciplinary research, capital projects, and programs in colleges, centers, and institutes. “Philanthropy is a driving factor that makes the University of Illinois one of the world’s premier institutions,” said Barry Benson, vice chancellor for institutional advancement at the University of Illinois at Urbana-Champaign. “The support we receive from our loyal and generous donor community continues to advance our excellence, creating a lasting and powerful impact, not only during this campaign, but for generations to come.”
With You. With Illinois.
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WITH.ILLINOIS.EDU
PROGRESS AS OF 09.30.20 To learn more about the With Illinois campaign, visit with.illinois.edu or contact the University of Illinois Office of Institutional Advancement at vcia@illinois.edu or (217) 333-9174.
FY20 ANNUAL REPORT
OF GOAL
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The Academic and Residential Complex (ARC) opened in July of 2019. The ARC provides the campus with a state-of-the-art living-learning community as Chicago’s only public research university continues to show record enrollment gains.
IGNITE CAMPAIGN GOAL
$750,000,000 76.6%
It all started with a single spark in fall, 2017. Since then, IGNITE: The Campaign for UIC has recorded $574.5 million toward its $750 million goal. It’s thanks to the partnership, shared vision, and commitment of alumni and friends. Their contributions are critical to UIC achieving its mission and supporting students, empowering faculty, driving discovery and strengthening connections to its communities. This past year, philanthropy supported new spaces where learning, discovery, and healing occur, including Medicine’s Surgical Innovation & Training Laboratory and UI Health’s Outpatient Surgery Center. Donors also showed their loyalty by backing caregivers and staff as they served on the front lines of COVID-19, and students who experienced financial challenges brought on by the pandemic. Each dollar helps us create access and deliver excellence. “It has been incredible to see UIC alumni and friends supporting the IGNITE campaign, and propelling us to more than 75 percent of our ambitious goal,” said Tom Wamsley, vice chancellor for advancement at UIC. “This is a crucial time for UIC, when the backing of our alumni and friends truly can help us prove how education should work for the world.”
It all starts with a single spark.
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IGNITE.UIC.EDU
PROGRESS AS OF 09.30.20 To learn more about the IGNITE campaign, visit ignite.uic.edu or contact the UIC Office of Advancement at advance@uic.edu or (312) 413-8272.
FY20 ANNUAL REPORT
OF GOAL
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Guests gathered at the grand opening of the Sangamon Experience on January 30, 2020. The on-campus exhibition space presents the history of the Sangamon Region through online projects and community collaborations. The Sangamon Experience was made possible by a major private gift to UIS.
REACHING STELLAR CAMPAIGN GOAL
$40,000,000 91.89%
The Reaching Stellar fundraising campaign for the University of Illinois at Springfield made great strides during the past fiscal year by securing approximately $5 million in gifts in that time period. Thanks to the generous support from donors, the university’s cumulative campaign total reached $36.8 million—or more than 91 percent toward its $40 million campaign goal. Gifts to Reaching Stellar support the campaign’s five priorities: scholarships, academic excellence, the Center for Lincoln Studies, public good, and facilities and technology. “Our donors have helped us realize some of our big dreams and ideas in a relatively short period of time. The building of the Student Union was brought forth in part by private giving of all levels from hundreds of individuals and organizations,” said Jeff Lorber, vice chancellor for advancement at UIS. “Sangamon Experience, the interactive exhibition space that opened earlier this year at UIS and celebrates the history and impact of the local region, was initiated through a single multi-million-dollar gift.”
The stars are aligned.
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UIS.EDU/REACHINGSTELLAR
PROGRESS AS OF 09.30.20 To learn more about the Reaching Stellar campaign, visit uis.edu/reachingstellar or contact the UIS Office of Advancement at advancement@uis.edu or (217) 206-6058.
FY20 ANNUAL REPORT
OF GOAL
ENDOWMENT REPORT Ellen J. Ellison, CFA, Chief Investment Officer
ECONOMIC AND MARKET REVIEW
22
The fiscal year began against the backdrop of a turbulent
firming energy and other commodity prices reacted posi-
environment that included global trade concerns, polit-
tively to the prospect of a better economy with lower trade
ical partisanship and economic weakness. The United
tensions between the two largest global economies. Not
States-China trade conflict was the main cause of worries
since 1991 had there been such large year-to-year swings in
around the globe as evidenced by a large decline in Euro-
asset prices and returns. Whereas in 2018, global stocks and
pean manufacturing and exports in the summer. Brexit
bonds fell in tandem, in the final quarter of 2019, they did
talks continued and were another meaningful driver of
the exact opposite. Although investor psychology was far
economic and market uncertainty. Central Bankers did
from euphoric, one did experience some relief in thinking
their part to support the global economy. In particular,
ahead to the second decade of the 21st century.
the U.S. Federal Reserve cut short-term interest rates
That was then.
twice during the quarter, a fact that helped stocks eke out
Anxiety about the U.S. trade dispute with China was
a small gain.
displaced by global concern about the impact of COVID-
In anticipation of a stronger global economy, value
19. This novel coronavirus began in China's Wuhan prov-
stocks made a dramatic (albeit brief ) comeback in Septem-
ince in December and arrived in the U.S. sometime during
ber when they appreciated 4.1% as compared to 0.7% return
the first quarter. The U.S. economy dropped -5% in the
from global growth stocks. The investment rationale was
first quarter and a record -9.5% in the quarter ending June
that once the first phase of the trade pact with China was
30, 2020. Any expectation of a cyclical recovery in early
signed, the longest economic expansion on record could
2020 disappeared. Health officials in China, Europe, and
continue into 2020. As a result, 2019 ended with a far
the U.S. believed that a complete shutdown of economic
clearer macroeconomic outlook supported by a decisive
and social activity was the only viable way to cope with
U.K. vote for Boris Johnson that signaled strong support
the deadly virus given the severe limitations of existing
for Brexit. Global equity markets finished the year strong:
healthcare infrastructure and the general lack of fore-
$2.03 BILLION UI FOUNDATION ACTIVE ENDOWMENT
80.1%
14.2%
0.9%
4.8%
$1.63 Billion
$288.2 Million
$17.8 Million
$97.1 Million
CHICAGO
UI FOUNDATION ENDOWMENT POOL
93.6% of the Active Endowment
SPRINGFIELD
OTHER
$1.9 BILLION
DISTRIBUTED TO THE UNIVERSITY OF ILLINOIS SYSTEM
$65M+
80.1%
15.7%
$52,141,418 Urbana-Champaign
$10,201,098 Chicago
1.0%
3.2%
$688,914 Springfield
$2,092,620 Other
FY20 ANNUAL REPORT
URBANA-CHAMPAIGN
23
24
sight and planning for the first global pandemic since
ballooning of the Fed’s balance sheet from $4 trillion at the
1918. Equity markets were extremely volatile: the S&P 500
start of the year to $7 trillion as of June 30, 2020. The U.S.
Index dropped -32% from peak to trough from February 19
fiscal deficit now stands at close to 140% of GDP, a level not
– March 23, 2020. Perhaps the most unsettling for inves-
seen since World War II. Defensive growth stocks outper-
tors was the pace of the decline: it only took 16 days for the
formed. Six technology companies (Facebook, Amazon,
U.S. stock market to go from a record high into bear market
Netflix, Microsoft, Apple, and Google) gained 32% whereas
territory, handily beating the previous record of 42 days
the other 494 companies in the S&P 500 declined -7.7%.
set in 1929. Experts have attributed this rapid about-face
Despite the strong V-shape, markets bounced off the
to our now highly indexed world where people can sells
March 23 low by the end of June. Yet, it was still hard to
ETFs with a simple push of the button. Passive products
hold much conviction about the market's future direction
dominate daily trading volumes and, as a result, have a
given the uncertain path of the health crisis and its impact
meaningful impact on many aspects of financial markets
on a full re-opening of the U.S. and global economies. The
including rapid decision-making that allows investors to
unprecedented amount of monetary and fiscal support
shoot first and ask questions later.
was critical and key swaths of the labor force were able to adapt (with mixed results for working families) to working from home (WFH). We concur with a number of strategists who note how much the financial and banking sector have (with or without a vaccine) is not likely to occur without bank stock participation. The Nasdaq Bank Index is still approximately 30% off its previous high. By this measure, investors are not out of the woods as we enter the fall. It is challenging to ascertain where we are in the market cycle since there has never been a bear market associated with a recession (especially one this severe) that lasted merely one month! Although the current strength has few signs of an exhausted market peak, the whiplash caused by the past
FY20 ANNUAL REPORT
“For the past several years, we have gradually moved to “hurricaneproof ” the portfolio and prepare our diverse fiduciaries and constituents for greater market volatility.”
lagged the overall market; a sustained economy recovery
six months makes it unclear what lies ahead. FISCAL YEAR IN REVIEW The following commentary refers to the Foundation’s pooled endowment that approximated $2.0 billion at fiscal year-end with a specific focus on the ex-legacy assets. Last year, we wrote, “For the past several years, we have gradually moved to “hurricane-proof” the portfolio and prepare our diverse fiduciaries and constituents for greater market volatility. We are in a transitional moment when it seems logical to act with even greater caution than normal as this business cycle matures, financial markets lose steam, and geopolitical actions confound.”
Debt and overnight funding markets stopped function-
Although we did not predict the pandemic and its result-
ing for several weeks in March prior to the Fed stepping
ing economic and health impacts on the portfolio, we were,
in with strong monetary support. In contrast to the global
as the previous quote shows, concerned about the age of
financial crisis, the government response this time came at
the bull market and economic expansion. In December,
warp speed in the form of the $2 trillion CARES Act and a
with the support of the Investment Policy Committee, the
25
UIF investment team ran a number of scenarios on the
The endowment’s second step is to re-balance the portfo-
portfolio’s liquidity profile in order to forecast our ability
lio within its strategic ranges: during the months of March
to weather a prolonged period of market dislocation and
through June, we added funds to those areas the most nega-
reduced gift inflows. At that time, we determined that the
tively impacted by the market drawdown and, at the same
Foundation’s endowment had reserves in the form of short
time, trimmed exposures that were highly valued on a rela-
duration bonds and other safe fixed income instruments
tive basis. For the full year, the portfolio was re-balanced
that equaled close to three years of regular distributions.
eight times, the bulk of which occurred between Janu-
This was important because securing liquidity is the first
ary and June.
step to meeting a crisis head on and with a plan. We were
Our third consideration was to sift through the market
confident to meet all of our financial obligations—even
and determine if there were any other opportunities for
in a negative net flow environment—that would cover all
our “dry powder” beyond the requisite capital calls and
capital calls, spending distributions to the University, and
re-balancing activities. The bar to invest precious liquidity
Foundation administrative fees.
is high during a crisis: we moved incrementally because it
The above exercise stood us in good stead when the
was (and remains) a challenge to predict with confidence
pandemic-induced volatility arrived in March since we
how long the pandemic will last, and its impact varies
were prepared and understood our liquidity profile. During
dramatically across geographies and asset classes. For the
the first months of the market crisis, we funded large capi-
full fiscal year, we terminated two and added two manager
tal calls from our credit (distressed) managers as well as
relationships within the public portfolio. We funded three
several private equity funds that identified opportunities
new private equity managers, one venture capital fund
in March and April.
and made one co-investment alongside one of the private
FY 2020 ASSET CLASS RETURN
As of June 30, 2020
US EQUITY NON-US DEVELOPED MARKETS EQUITY EMERGING MARKETS EQUITY
26
GLOBAL EQUITY PRIVATE EQUITY2,3 GLOBAL DIVERSIFYING GLOBAL RATES GLOBAL INFLATION-LINKED BONDS REAL ESTATE2 NATURAL RESOURCES2 -18%
-14%
ASSET CLASS RETURN1
-10%
-6%
-2%
2%
6%
10%
POLICY BENCHMARK RETURN
1 Asset class returns are shown net of external investment management and incentive fees. 2 Asset class returns for Private Equity are preliminary and reflect June 30, 2020 statement values for all but one investment. 3 Policy Benchmark Return for Private Equity is preliminary.
14%
18%
equity funds. We continue to search for additions to the
The endowment is well diversified, but its value bias
Emerging Market Equity allocation, primarily in Southeast
within the publicly traded emerging market and global
Asia and India, to move closer to the policy target of 10%.
equity managers hurt relative performance, as did the
The chart on page 26 shows that four out of ten asset
small allocation to public and private energy. Natural
classes within the endowment outperformed their
Resource Equities were the worst performing sector of
specific benchmarks: Private Equity (10.9% versus -1.3%);
the global markets. The portfolio lacks significant exposure
Global Diversifying (2.1% versus 1.0%); Non-U.S. Devel-
to the large capitalization growth or “stay at home” tech
oped Markets Equity (-3.8% versus -5.1%) and Natural
winners, especially in the U.S. and China. Large technology
Resources (-16.5% versus -17.4%. Asset class underper-
stocks dominated performance for most of the year as has
formers included: Global Equity (-4.2% versus 2.3%);
been widely reported in the financial media. In general,
Global Inflation-Linked Bonds (4.1% versus 5.5%); U.S.
the fiscal year saw the continuation of performance trends
Equity (1.3% versus 6.5%); and Emerging Markets Equity
established in 2017-2018: large over small capitalization
(-17.0% versus -4.0%); Real Estate (-0.6% versus 2.7%); and
shares, growth/momentum factors led value, defensive
Global Rates (2.7% versus 4.6%).
“safe” sectors over cyclical industries and the U.S. over the trends will change, we know that they will not continue
“A TALE OF TWO HALVES”
indefinitely since cycles always end. In the meantime, we
The first half of the year started very well with strong
have adjusted the portfolio that will, it is hoped, improve
performance through calendar year-end. The UIF endow-
performance while we wait. In the past year, the invest-
ment hit a new high in December 2019 with more than
ment team made tremendous progress in the private asset
$2 billion in assets. The trailing twelve-month perfor-
program. However, with an average age of 3.8 years, the
mance was +15.3%, a result that exceeded the policy bench-
young private portfolio has yet to contribute meaning-
mark. After the large market declines in the spring, the final
fully to top line performance. Across 14 manager rela-
fiscal quarter yielded a nice performance bounce of +11.3%,
tionships in private equity, venture capital, private real estate, energy and agriculture, we have committed approximately $600 million and invested $430 million or 23% of ex-legacy assets of $1.9 billion. We anticipate that despite
The UIF endowment hit a new high in December 2019 with more than $2 billion in assets.
FY20 ANNUAL REPORT
rest of the world. Although it is hard to predict when these PRELIMINARY PERFORMANCE ATTRIBUTION:
the pandemic, the private asset program will mature and become cash flow positive in 3-5 years. We also expect to slowly increase our venture and private equity allocations over time and add several new funds to the portfolio mix. The chart on page 28 shows the total fund performance relative to the internal benchmark. If we eliminate the impact of comparing an immature private asset allocation to its fully mature benchmark and create an “apples to apples” comparison, we are pleased with the progress shown in the three and five year numbers. We are on the right path to success over the next few years. CURRENT ASSET ALLOCATION & THE POLICY PORTFOLIO
however, this increase was not sufficient to bring the full
The policy portfolio benchmark represents the returns
year’s return into the positive column. For the full year, the
that hypothetically would have resulted if each asset class
endowment realized a return of -1.24%. This compares to
had been weighted at its policy target weight and generated
the policy benchmark’s return of 0.10%.
the average asset class return. The Foundation’s Invest-
27
ment Policy Committee, based on input and recommen-
do not matter anymore. We should instead focus exclu-
dations from the CIO and the investment team, reviews
sively on top line revenues because if real interest rates are
the policy annually, and in June 2020 voted to maintain
expected to be negative for a long time, the terminal value
the current targets. The policy portfolio is the theoretical,
of any asset approaches infinity. Trees can in fact grow to
dynamic, long-term mix of assets that will best support
the sky according to this line of reasoning. As proof, the
the program’s “intergenerational equity” or the balance
six tech stocks (FANMAG) that led the market this year
between current spending distributions and future prin-
just keep going up independent of their lofty valuations.
cipal growth that can support spending in perpetuity. It
Investors need not worry if their profits are growing as
is not a completely investable benchmark, nor can it be
long as their revenues keep getting bigger. We understand
easily replicated especially as it pertains to its private asset
the math involved here but it makes little sense in the real
components. However, it seeks to come as close as possible
world and smacks of the type of thinking that occurred in
to a passive proxy for the endowment’s strategic policy.
the 1970s “Nifty-Fifty” era as well as the late 1990s dotcom
The policy portfolio is reviewed and discussed annually
bubble. Speculative bubbles thrive on this type of “new age”
within the context of both expected returns (on a 10-year
thinking that posits the rules of history do not apply and
forward basis) and estimated risk, but does not typically
it is different this time. I guess it is old-fashioned to think
change dramatically from year to year unless financial
that capitalism requires a (+) cost of capital.
conditions or the University’s financial goals change radi-
Is value investing dead? No, but it is easy to see why one
cally. Although the investment team is highly attuned to
might think that based on the last three years. Growth
the current forces shaping the market, our primary goal is
factor has outperformed value by the largest dispersion in
to manage around the long-term or strategic policy target
history according to Dimensional Fund Advisors who track
allocations within the established ranges. Having an estab-
this data going back 100 years. It is not that value invest-
lished long-term target within a reasonable range allows us
ing has been poor in an absolute vacuum, but rather that
to re-balance the portfolio after significant market moves
its performance since 2009 pales in comparison to growth
such as the one we experienced earlier this year.
investing that has gone through the roof. Clearly, low interest rates and the influence of passive indexing have been big
THREE ISSUES TO CONSIDER IN
headwinds to value and to the detriment of fundamental
THE YEAR AHEAD
equity research. As rough as it has been since 2018, we think
Beware of “new era thinking” We hear more and more
that a sustained economic recovery into 2021 combined
frequently from many smart people that corporate profits
with real interest rates that begin to move in a positive
28 ENDOWMENT POOL COMPARISON TO BENCHMARKS
Presented in years as of June 30, 2020 1
ONE
THREE
FIVE
TEN
Total Return (net of fees) 2
-1.1%
3.3%
4.4%
7.3%
Total Portfolio Benchmark
1.1%
4.9%
5.0%
8.1%
-2.3%
-1.6%
-0.6%
-0.8%
5.2%
5.1%
5.2%
5.3%
Relative +/Budgeted Effective Total Spending Rate 3
1 Returns for periods greater than one year are annualized returns expressed in percent per year. 2 Performance is preliminary and is presented net of external investment management and incentive fees and includes legacy assets no longer relevant to the ongoing strategic management of the portfolio. 3Includes Administrative Fee. Spending is pursuant to the Foundation's policy and in consultation with the University. The policy is reviewed annually by the Foundation's Board of Directors. The Foundation currently distributes 4.0% of a six-year moving average of the corpus of most endowment accounts to the University. For 2020, the budgeted total effective spending rate of 5.2% consists of a 3.9% spending rate and 1.3% administrative fee.
29
FY20 ANNUAL REPORT
“ ...it is always
30
important to remember that investing counter-cyclically is exactly what endowments should be doing...�
direction will be catalysts for value to return to favor with
CONCLUDING REMARKS
investors. Although history is a very imprecise tool to apply
The recent year’s results are sobering as well as a disap-
to the future, we note that value tends to have explosive
pointment for the entire investment team. Although we
initial periods of strong performance—highly compressed
have not yet been rewarded by thinking and investing
and spring-loaded —and catches up and surpasses other
against the grain, it is always important to remember that
factors once a new investment regime starts.
investing counter-cyclically is exactly what endowments
Balance and low leverage in our portfolio construction: UIF
should be doing in periods of dislocation. Compared to
has growth represented within the private equity portfo-
individual investors with a finite time horizon, the UIF
lio that consists of lower middle market and growth equity
endowment has the luxury of thinking and investing as
strategies. This will provide a nice counterweight to the
a perpetuity instead of in quarters or years. We always
public portfolio with its more cyclical or value tilt. We have
consider periods of negative volatility as a potential
also increased exposure to core or quality style managers
opportunity to add to those areas that are suddenly more
who seek out high quality firms with strong franchises that
attractively valued. We are trained at “leaning into” those
rebuff easy competition. This type of company demon-
assets and strategies that appear under siege to the aver-
strates greater resilience during economic hard times.
age investor. Finally, we do not try to predict economic
Finally, avoiding strategies that require high amounts of
cycles; we are opportunistic yet avoid big tactical shifts;
financial leverage to succeed allows the UIF endowment
and we are macro-aware but not macro-driven in our
to be patient until its out of favor cyclical strategies come
investment decisions.
ACTUAL FY 2020 VS. POLICY PORTFOLIO ASSET ALLOCATION
As of June 30, 2020
UIF ACTUAL
CURRENT TARGET1
GLOBAL EQUITY
59.4%
63.0%
US Equity
15.9%
14.0%
Non-US Developed Markets Equity
11.9%
12.0%
Emerging Markets Equity
5.3%
10.0%
Global Equity
14.7%
17.0%
Private Equity2
11.5%
10.0%
18.3%
17.0%
18.3%
17.0%
22.3%
20.0%
Global Rates3
6.6%
4.0%
Global Inflation-Linked Bonds
4.2%
4.0%
Real Estate
6.0%
6.0%
Natural Resources4
5.4%
6.0%
100.0%
100.0%
GLOBAL DIVERSIFYING Credit/Absolute Return/Distressed MACRO RISK HEDGES
TOTAL *Chart refers to ex-legacy assets. 1 As affirmed by the Investment Policy Committee in June 2020. 2 Includes LBO, Mezzanine, M&A, Growth Equity, International, and Venture Capital. 3 Includes short duration liquidity assets resulting from portfolio and gift cash flows. 4 Includes energy (oil and gas), timber, and agriculture.
FY20 ANNUAL REPORT
back into market favor.
31
FOUNDATION LEADERSHIP
OFFICERS OF THE BOARD
A. Helen McGrath ’77, MS ’78
Doris K. Christopher ’67
Gayl S. Pyatt ’64
CHAIR Kay M. Schwichtenberg ’84
(Retired) Vice President, AT&T Inc.
Samuel Mendenhall ’88, JD ’91
Founder & Chairman, The Pampered Chef, Ltd.
(Retired) Attorney, Gayl Simonds Pyatt, Attorney at Law
Richard G. Cline ’57
Mark A. Pytosh ’86
Chairman, Hawthorne Investors, Inc.
President & CEO, CVR GP, LLC
James R. DeBord ’69, MS ’71, MD ’74
Jane Hayes Rader ’54
President & CEO, Central Life Sciences
CHAIR ELECT Anthony G. DiTommaso ’74, MS ’77
Saul J. Morse ’69, JD ’72
Managing Partner, Ecvall, LLC
Senior Managing Director, Madison Industries
IMMEDIATE PAST CHAIR Alan D. Feldman ’74, MBA ’76 (Retired) Chairman, President & CEO, Midas, Inc.
PRESIDENT/CEO James H. Moore, Jr. SECRETARY Jacquline N. Schweighart ’03, EdM ’09 TREASURER & CFO Christine C. Devocelle MBA ’13 CHIEF INVESTMENT OFFICER Ellen J. Ellison ASSISTANT TREASURERS Kelly L. Bennett ’04, MAS ‘05 Michelle S. Bolger MBA ’14 LEGAL COUNSEL Wesley W. Curtis ’83, JD ’86
GOVERNING DIRECTORS Shakeeb A. Alam ’97 Co-founder & President, East Bridge Capital Management
Attorney, Brown, Hay & Stephens, LLP
Richard C. Osborne MBA ’73
Deborah A. Paul, PhD MS ’79 (Retired) Biochemist/Director, Business Development & Licensing, Abbott Laboratories
(Retired) Professor of Surgery, University of Illinois College of Medicine Peoria
Jane Phillips Donaldson ’65, MS ’67 Partner, Phillips Oppenheim
David J. Downey ’63, JD ’66
(Retired) Commissioner, Illinois Human Rights Commission
Edwin A. Scharlau II ’66, MS ’68, PhD ’74 (Retired) Vice Chairman, Busey Bank
George T. Shapland ’55
President, The Downey Group, Inc.
President, Shapland Management Company
(Retired) Corporate Attorney & Assistant Secretary, Federal Signal Corporation
W. Robert Felker ’74
Bernard Shaw ’66
Partner, Gator Trading
(Retired) Principal Washington Anchor, CNN
José L. Santillan ’80
President, F2 Family Foundation
Mary Ellen Penicook ’81, JD ’87
(Retired) Senior Securities Compliance Examiner/Industry Expert Division of Enforcement, US Securities & Exchange Commission
Khawar M. Siddique ’94, MD ’98
Juanita F. Francis ’70 Louis A. Friedrich ’67 (Retired) Principal, Bernstein Global Wealth Management
John A. Georges ’51
Michael T. Tokarz ’71, MBA ’73 Chairman, The Tokarz Group, LLC
Carl L. Vacketta ’63, JD ’65 (Retired) Senior Counsel, DLA Piper, LLP (US)
CEO, Beverly Hills Spine Surgery, Inc.
(Retired) Chairman & CEO, International Paper Company
Paul T. Tucker ’70, MS ’71, PhD ’75
EXECUTIVE OPERATIONS TEAM
Phillip C. Goldstick ’53
James H. Moore, Jr.
(Retired) Chairman of the Board, G. Equity Investment Group, Ltd.
President/CEO
Barry Benson
G. Stephen Irwin MD ’77
Senior Vice President; Vice Chancellor for Advancement, UIUC
(Retired) Corporate Vice President, Computer Sciences Corporation
EX-OFFICIO DIRECTORS Donald J. Edwards ’88 Chair, University of Illinois Board of Trustees; Chief Executive Officer, Flexpoint Ford LLC
(Retired) President & Chairman, The Center for Outpatient Medicine
Wesley W. Curtis ’83, JD ’86
Mannie L. Jackson ’60
Vice President and General Counsel
(Former) Chairman, Harlem Globetrotters
Richard H. Darnell, Jr.
(Retired) Partner, Hewitt Associates
Senior Vice President for Campaigns, Marketing & Communications and Engagement
Avijit Ghosh
Shahid R. Khan ’71
Christine C. Devocelle MBA ’13
Managing Member & Chief Investment Officer, Intrinsic Edge
Vice President, Chief Financial Officer and Comptroller, University of Illinois System
Robert Klaus ’57
Laura L. Fraley ’77, MS ’79
William D. Forsyth III ’86
Donald E. Bielinski ’71
32
Partner, Winston & Strawn, LLP
Managing Partner, SMB Interim Management, LLC
Mark D. Coe ’84
Principal, Greenway Family Office, LLC
Karen M. Golz ’76 (Retired) Global Vice Chair, Ernst & Young Global Limited
Timothy L. Killeen President, University of Illinois System
Chair, University of Illinois Alumni Association; President and Founder, Frontier Partners, Inc.
James H. Moore, Jr. President/CEO, University of Illinois Foundation
Mary Kay Haben ’77 (Retired) President, North America, William Wrigley Jr. Co.
LIFE DIRECTORS
Stuart L. Levenick ’76 (Retired) Group President, Caterpillar, Inc.
Leon J. Loichle MA ’71 (Retired) Global Personnel Development Manager, Ford Motor Company
Jean M. Manning ’72, MBA ’78, JD ’83 Emeritus Chief Counsel for Employment, United States Senate
Gail Veasman Kellogg ’65
President, Flex-N-Gate Corporation President, Klaus Companies
Gregory B. Lykins ’69 Vice Chairman, First Busey Corporation; Co-Founder and Partner, Amory Capital LLC
Senior Vice President for Financial & Administrative Operations/CFO
Ellen J. Ellison, CFA Chief Investment Officer
Edward F. Ewald Executive Vice President
Shari M. Fox
Of Counsel, Sidley Austin, LLP
Senior Vice President for Principal Gifts, Gift Planning, & Trust Services
William C. Merchantz ’79
Jeffrey D. Lorber
R. Eden Martin ’62
(Retired) President & CEO, Lakeview Technology, Inc.
Senior Vice President; Vice Chancellor for Advancement, UIS
Chairman, Benson Botsford, LLC
Steven L. Miller ’67
Gary K. Bielfeldt ’58, MS ’59
Chairman & President, SLM Discovery Ventures, Inc.
Jacquline N. Schweighart ’03, EdM ’09
James M. Benson ’68
Managing Partner, Bielfeldt & Company, LLC
Henry B. Blackwell II ’52 (Retired) Counsel, Baker & Daniels, LLP
Alice C. Campbell JD ’43 (Retired) Treasurer, The Robert Campbell Company
Joseph A. Piscopo ’65 (Retired) Chairman, Pansophic Systems, Inc.
Roger L. Plummer ’64 President, Plummer & Associates Consulting
Vice President for Board & Donor Relations
Thomas F. Wamsley Senior Vice President; Vice Chancellor for Advancement, UIC
The University of Illinois Foundation, established in 1935, is an independent Illinois not-for-profit membership corporation dedicated to securing and administering private gifts for the University of Illinois System and its three universities. More than 150 Foundation professionals develop and support the vision and efforts of the advancement teams at each university. As the primary repository of private support to the University of Illinois System, the Foundation is committed to best practices, continuous improvement, quality service, upholding our fiduciary responsibility, and—most importantly—honoring donor intent. O U R VA LU E S : Exemplify Integrity // Practice Civility // Embrace Collaboration // Inspire Innovation // Create Impact Learn more about the University of Illinois Foundation at uif.uillinois.edu.
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