Board of Directors
FINANCE AND AUDIT COMMITTEES
April 24, 2025
Finance Committee Agenda
University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc.
Thursday, April 24, 2025
3:30 - 4:45 p.m.
South Building, Room 105
I. Finance Committee Minutes October 4, 2024 (action item)
II. Resolution to Update Fund Purpose (action item)
a. Hammond Medal in Dramatic Arts
b. John J. Fisher and Nancy Sue Himelick Fisher Endowment Fund
III. Arts and Sciences Foundation, Inc. Budget Review
a. FY 2024-2025 (3rd Quarter as of March 31, 2025)
b. FY 2025-2026 Proposed Budget (action item)
IV. Coates Hall Renovation Project
V. UNC Investment Management Report
Arts and Sciences Foundation Board of Directors
Minutes of the Finance Committee Meeting
October 4, 2024
On Friday, October 4, 2024, the Finance Committee of the Arts and Sciences Foundation Board of Directors met in the Chancellor’s Conference Room (105) of South Building at 1:15 p.m. The following directors, staff and guests were present:
Board of Directors
Matt Guest
Alec McLean
Staff Members
Jacob Bacharach
Katy Galbraith
Guests
Bimal Shah
Ken Smith (Chair)
Angela O’Neill
Nela Parsons
Jonathon King (UNC Management Company)
Rob Lewis (Balance & Strategy Advisors, CPAs LLP)
Call to Order
The meeting was called to order at 1:15 p.m. by Ken Smith.
Fiscal Year 2024 Audit Report
Ed Story
Jim White
Kristen Rogister
Alison Yerger
Finance Committee Chair Ken Smith called on Rob Lewis from Balance & Strategy Advisors to present the fiscal year 2024 Audit Report for the period ending June 30, 2024.
Balance & Strategy Advisors also gave an overview of the Foundation’s financial statements for the periods ending June 30, 2023 and June 30, 2024. They gave the Arts and Sciences Foundation an unmodified opinion, finding that the Foundation’s financial statements for the periods ending June 30, 2023 and June 30, 2024, present fairly, in all material respects. The financial position of University of North Carolina at Chapel Hill Arts and Sciences Foundation, Inc., and the changes in its net assets and its cash flows for fiscal years 2023 and 2024 ended in accordance with accounting principles generally accepted in the United States of America.
The audit notes the following investment returns:
Other key points include: The mortgage for Buchan House was refinanced in December 2022 with an interest rate of just 2%. Expenses increased due to increased support for the College.
The Finance Committee approved the Audit Report for FY24 ending June 30, 2024, and will recommend that the full board vote to accept the audit at the plenary session.
Approval of the Minutes
The Finance Committee approved the minutes from the Finance and Audit Committees meeting held on April 25, 2024.
Fiscal Year 2024 Budget Report and Summary (Fourth Quarter)
The Finance Committee reviewed the FY24 budget report. Jacob Bacharach, senior associate dean of operations and strategy, reported on the budget for the period that ended June 30, 2024. Revenues are relatively flat compared to the last fiscal year due to market performance during FY23. Based on the approved budget for FY24, the Foundation utilized 76.4% of the expense budget.
For the period ending 06/30/24, total revenue was $7,768,944 and total expenses were $6,338,336.
Revenue Highlights Include:
Arts and Sciences Fund contributions, as of June 30, 2024, totaled $2,159,687, exceeding the $1.9 million fiscal year goal. As noted in the budget, $1,906,253 was posted to the annual fund ledger as of June 30, 2024.
Endowment Administration Fee (EAF) was similar to fiscal year 2023: 60 basis points to the College of Arts and Sciences (owning unit), 20 basis points to University Development, and 20 basis points to the One Carolina Development Investment Fund, which is now directed to University Development.
Foundation interest income in the fourth quarter remains at $11,455, the correcting allocation for theFY23 investment income. The foundation anticipates another investment income allocation for fiscal year 2024 that will post in the fiscal year 2025 ledger.
Truist Money Market/Investment Income, as of the fourth quarter, earned $90,210. Retroactive to June 2023, Truist corrected the Foundation’s money market interest rate from 3.44 percent to 4.64 percent in December 2023. To maintain short-term earnings alongside low-risk liquidity, the Foundation has purchased treasury bonds with expected redemptions this year and will assess cash liquidity needs before future purchases.
Expense Highlights Include:
Personnel costs are under budget due to a pause in the employer transition and position vacancies that occurred during late FY23. Positions are being filled and promotions are being recommended. The Foundation will continue to fill open and new positions into early FY25. During the first quarter, the state of North Carolina passed a budget which included a 4 percent raise for all state employees effective 7/1/23, which was implemented in October. In addition, the Foundation submitted market rate increases for select employees during the second quarter. In the fourth quarter, the Foundation paid bonuses to select employees.
Travel is below budget for the fiscal year because of vacant development officer positions. As the Foundation hires these positions, an increase in travel expenses is anticipated.
Building Debt Service, Building Maintenance, Special Events/Entertainment, Communications and Postage, Legal Expenses, Services, Supplies, and Insurance are at or below expected levels.
More significant expenses in FY25 for building maintenance are anticipated due to HVAC issues in Buchan House.
The Dean’s Discretionary Grant is an allocation at the end of each fiscal year from unrestricted contributions to the Arts and Sciences Fund. For FY24, the entire amount raised was allocated to the Dean’s Discretionary Fund. There was an adjustment to the FY24 beginning balance from the previous 2024 quarterly reports as a result of a corrected clerical error.
Fiscal Year 2025 Operating Budget as
of September 30, 2024 (First
Quarter)
Jacob Bacharach gave a high-level report on the first quarter of the FY25 Arts and Sciences Foundation budget. The budget is on track and being well managed.
Personnel, Travel and Special Events expenses are all expected to increase after the first quarter as the Foundation continues to increase staff. The Foundation professional hired professional search firm Witt/Kiefer to aid in the search for a senior director of development. The Foundation hired a new senior director/vice president of operations and strategy. During FY24, the state of North Carolina passed a budget which included a 3 percent raise for all state employees effective 7/1/24, impacting first quarter expenses.
The Supplies and Building Maintenance expenses are expected to be higher due to computer needs, HVAC repairs, and a new A/V system to be installed in the Buchan House Board Room.
UNC Investment Management Report
Chair Ken Smith called on Jonathon King, president and CIO of the UNC Management Company, to present the performance report for the UNC Investment Fund (UNCIF).
The Fund’s primary objective is to maintain the purchasing power of its underlying funds after accounting for spending distributions and inflation over the long term. Annualized returns in excess of approximately +8.0 percent are deemed to have achieved this target. The most important and difficult challenge remains striking the proper balance between upside participation and downside protection.
The UNC Investment Fund returned +12.6 percent for FY24 following a weak FY23 (-.4 percent) driven by strong performance from private equity and hedge funds.
The Fund’s 3-, 5-, 7-, 10- and 20- year returns rank in the top quartile of the 60 largest endowments in the U.S.
For the period ending June 30, 2024, the Fund’s 5-, 7- and 10-year annualized returns exceed 9.4 percent, beat SIPP, significantly beat the Global 70/30 Portfolio, and are in the top decile relative to peers over the medium and long term. The Fund has achieved its return objective across time periods. 1 Year 3 Years 5 Years 7 Years 10 Years
UNCIF has generated top quartile returns with lower levels of volatility and better downside protection.
The U.S. economy shows signs of slowing and that along with falling inflation have made it increasingly likely that the Fed will cut interest rates again at its November meeting. The labor market
is also showing signs of weakness with unemployment increasing from 3.7 percent in December to 4.2 percent. Risks remain on the horizon with the uncertainty of the Presidential election and with continuing tensions in the Middle East as the Israel/Hamas war continues. With market uncertainty persisting, UNCIF maintains its disciplined approach and long-term focus.
Adjournment: With no other discussion needed, the meeting adjourned at 2:45 p.m.
ARTS AND SCIENCES FOUNDATION, INC.
RESOLUTION TO UPDATE FUND PURPOSE
HAMMOND MEDAL IN DRAMATIC ART APRIL 25, 2025
Whereas, the Hammond Medal in Dramatic Art Fund was established by Betty Kenan with a donation of $12,750 on July 22,1998, in recognition of the contribution of Professor David Hammond to the Department of Dramatic Art; and
Whereas, the gift agreement purpose specified that the income paid out of the Fund would be used by the Department of Dramatic Art to support the Hammond Medal in Dramatic Art, given annually to an undergraduate or graduate student with the highest meritorious accomplishments in dramatic art, further indicating that the income paid out of the Fund be returned to principal until such time as it was necessary to order additional medals; and
Whereas, the endowment principal of Kenan’s original gift has grown to a market value of more than $80,000; and
Whereas, Kenan left a $100,000 bequest to the endowment in August 2023 to continue honoring Hammond through her estate, bringing the total market value of the endowment to more than $180,000, with an estimated annual payout exceeding $9,000 annually; and
Whereas, the cost of ordering custom medals is significantly less than the annual payout generated by the endowment; and
Whereas, the Virginia and George Ferguson Award Fund in Honor of David Hammond was established on June 7, 2000, to provide a monetary award to the recipient of the Hammond Medal in Dramatic Art, and produces a payout of approximately $4,400 annually; and
Whereas, the Department of Dramatic Art wishes to expand the purpose of the Hammond endowment to honor both an undergraduate and graduate student each year while also providing additional award funds to recipients; and
Whereas, the gift agreement includes the clause language that “If, in the opinion of the Board of Directors of the Foundation, all or part of the gift cannot appropriately be used in the manner herein described, the Board may use the gift for other purposes as nearly aligned to the Donor’s original intent as the Board deems appropriate under the circumstances”; and
Whereas, the absence of action by the Arts and Sciences Foundation board will result in a significant amount of unspent endowment payout; and
Whereas, updating the purpose language for the Hammond Medal in Dramatic Art Fund to honor both an undergraduate and graduate student each year while also allocating funds to supplement the amount awarded by the Ferguson Award would continue to respect Kenan’s wishes to honor David Hammond while recognizing the work of additional students;
Resolved, that the purpose of the Hammond Medal in Dramatic Art Fund be updated to the following: “Distributions from the Fund shall be used by the Dean of the College of Arts and Sciences, after consultation with the chair of the Department of Dramatic Art, to support the Hammond Medal in Dramatic Art, which will typically be given each year to an undergraduate and a graduate student with the highest meritorious accomplishments in Dramatic Art as determined by the Chair of the Department of Dramatic Art or his or her designee. In years where there are no qualified recipients for one category, the Hammond Medal could be given to two undergraduates or two graduate students at the discretion of the Chair. In addition to being used to purchase Hammond Medals, distributions may be combined with funds from the Virginia and George Ferguson Award Fund in Dramatic Art to provide monetary awards to Hammond Medal recipients.”
ARTS AND SCIENCES FOUNDATION, INC. RESOLUTION TO UPDATE FUND PURPOSE
JOHN J. FISHER AND NANCY SUE HIMELICK FISHER ENDOWMENT FUND APRIL 25, 2025
Whereas, the John J. Fisher and Nancy Sue Himelick Fisher Endowment Fund was documented by Nancy Sue Himelick Fisher on November 3, 1993, with a planned gift consisting of half of her trust estate; and
Whereas, Nancy Sue Himelick Fisher died on July 5, 2014, leaving a total of $304,484 to establish and endow the fund; and
Whereas, the purpose of the Fund states the following: “The income paid out of the Fund shall be used to support the Department of Geology at the University of North Carolina at Chapel Hill. Disbursement shall be at the discretion of the Chair of the Department and it is the Donor’s preference that the income be used for faculty support.”; and
Whereas, the Departments of Geological Sciences and Marine Sciences merged in 2021 to become the Department of Earth, Marine and Environmental Sciences; and
Whereas, John J. Fisher received master’s and Ph.D. degrees in geology from the University of North Carolina at Chapel Hill in 1962 and 1967, respectively, and went on to conduct research that dealt extensively with coastal and environmental issues in relation to topics of geology, including his publication of the book Field Guide to Coastal Environmental Geology of Rhode Island’s Barrier Beach Coastline; and
Whereas, the Department of Earth, Marine and Environmental Sciences is in need of funds to support faculty across the entire department; and
Whereas, broadening the purpose of the Fisher Fund to include the entire Department of Earth, Marine and Environmental Sciences would bolster support for all faculty in the department while still honoring the memory of John J. Fisher and his research interests; and
Whereas, the gift agreement includes the clause language that “If, in the opinion of the Board of Directors of the Foundation, all or part of the gift cannot appropriately be used in the manner herein described, the Board may use the gift for other purposes as nearly aligned to the Donor’s original intent as the Board deems appropriate under the circumstances”;
Resolved, that the purpose of the John J. Fisher and Nancy Sue Himelick Fisher Endowment Fund be updated to the following: “The income paid out of the Fund shall be used to support the Department of Earth, Marine and Environmental Sciences at the University of North Carolina at Chapel Hill. Disbursement shall be at the discretion of the Chair of the Department and it is the Donor’s preference that the income be used for faculty support.”
Beginning Fiscal Year Balance
UNC-CH Arts and Sciences Foundation, Inc.
Operating Budget
Fiscal Year 2024/2025
As of March 31, 2025
FY 2024-2025
Balance as of 03/31/2025
FY 2023-2024
The Arts and Sciences Foundation, Inc.
Operating Budget
Fiscal Year 2024/2025
as of March 31, 2025
Enclosed is a summary of the operating budget performance through the third quarter of fiscal year 2024-2025 (ending March 31, 2025).
Summary
Revenue:
Arts and Sciences Fund
As of March 31, 2025, the Arts and Sciences Fund raised $1,856,671. This amount includes all gifts that have been processed on the accounting ledger as of March 31, 2025.
Endowment Administration Fee (EAF)
The fiscal year 2025 (FY25) EAF distribution maintained the same rates as the previous years: 60 basis points to the College of Arts and Sciences (owning unit), 20 basis points to University Development, and 20 basis points to the OneCarolina Development Investment Fund, which is directed to support University Development
The Arts and Sciences Foundation continues to maintain a checking and money market account with Truist Bank, although most of the balances are held within treasury bills or high-yield money markets
University Interest Income
We anticipated another investment income allocation for fiscal year 2024 during the fourth quarter The investment income distribution was misallocated. The fiscal year 2024 investment income posted to the ledger in August 2024 in the amount of $14,159.12.
Truist Money Market/Investment Income
To maintain short-term earnings alongside low-risk liquidity, the Foundation purchased $4.5 million in treasuries using the balances held within the Truist Bank money market account in January 2024. In August and November 2024, the Foundation redeemed our second and third treasury bills at $1.25 million and $2.5 million, respectively. With these redemptions, we purchased additional bills and invested $205,377 into the Lighthouse Group’s money market account with a 5.10% rate for additional liquidity. There were additional redemptions in January 2025 and February 2025. During each redemption period, we assess cash liquidity needs prior to purchasing additional treasuries. There is one outstanding treasury that matures in August 2025.
Expenses:
Personnel is under budget as of the third quarter due to ongoing efforts to hire additional staff In June 2024, the Foundation contracted with WittKieffer, a search firm, to recruit a senior director of development. The contract was paid in the second quarter, and the goal is to have the position filled by the end of the fourth quarter. There have been numerous personnel actions over the course of the fiscal year. Since the October 2024 meeting, a Director of Development for Honors Carolina started in January, a Director of Development was promoted to Senior Director of Development and Assistant Vice President in February, and an Associate Director of Development was promoted to Director of Development in March. The new Foundation Accountant started in April. Active recruitments in March and April include finalizing the hiring processes for one Senior Director of Development and Assistant Vice President, as well as two Directors of Development. We anticipate recruitment for the Assistant Director of Annual Giving and an Associate Director of Development before the end of the fiscal year.
During FY24, the state of North Carolina passed a budget that included a 3% raise for all state employees, effective 7/1/24, which was implemented during the first quarter
Travel is below budget at the close of the third quarter as the Foundation continues to hire staff Donor travel continues to increase through the end of the fiscal year
Building debt service is at budget
Special events/entertainment is below budget as of the third quarter The Arts and Sciences Foundation hosts the biennial donor celebration event and the Foundation’s 50th anniversary on April 24, 2025.
Communications and Postage expenses are at budget. These include all postage charges for development, stewardship, gift acknowledgment, and phonathon/solicitation costs.
Building maintenance is expected to be just above budget. We anticipated larger expenses into the first quarter attributable to HVAC issues in July 2024. Recently, there has been landscaping and exterior improvements at Buchan House. Significant upcoming projects include the removal of several damaged trees, as well as safety and security improvements to replace existing exterior doors with new hardware, security enhancements, and improved ADA accessibility requirements.
Legal/accounting expenses have exceeded budget These costs and fees include payments for the audit, the 990 preparation costs, state registration fees, and the annual charge from the University for the associated entities agreement, which covers support from central Accounting Services The University has charged $14,000 for the associated entity services, but there is an expected increase moving forward. Though outside counsel fees were included in the budget, we have exceeded the anticipated expenses for FY25. This line also includes ad hoc costs for miscellaneous outside counsel.
Office supplies/equipment are above expected levels. In June 2024, the Foundation upgraded several computers; these expenses hit in July 2024. A new AV system was installed in the Buchan House boardroom. Some of these costs may flow into the building maintenance budget line.
Other services/miscellaneous expenses are over budget. This category includes subscription services used for prospect research; broadcast emails and stewardship of top donors; professional development
opportunities for employees; and Truist banking fees. University Development no longer absorbs the 3% credit card transaction fee, so this unbudgeted expense comprises a significant portion of the increased expense.
Insurance is at expected levels. We pay for liability, property, and umbrella coverage monthly.
The Dean’s discretionary grant is allocated at the end of each fiscal year and comes from unrestricted contributions to the Arts and Sciences Fund. We anticipate allocating the entire amount raised to the Dean’s discretionary fund
Projected Beginning Balance
UNC-CH Arts and Sciences Foundation, Inc. Fiscal Year 2026 Proposed Budget
Projected Ending Balance
THE ARTS AND SCIENCES FOUNDATION, INC.
PROPOSED 2025-2026 OPERATING BUDGET
The Foundation’s budget request for fiscal year 2026 (FY26) reflects an overall increase from the approved budget for FY25 This is attributable to significant hiring and Foundation restructuring plans that will ultimately position the Foundation to raise more money for the College of Arts and Sciences
Among budget highlights:
• This budget incorporates the projected beginning balance for FY26. This projection includes prior-year balances.
• The FY26 revenue goal for the Arts and Sciences Fund will increase to $2.15 million.
• The FY26 endowment administrative fee will remain flat
• The administrative fee breakdown shows the full fee charged to each unit, less the 20 basis points allocated to University Development and the 20 basis points allocated to OneCarolina, which supports University Development. The net amount reflects the 60 basis points that fund the Foundation. The funding model for the upcoming campaign has not been finalized at this time.
• Anticipated University interest income and Truist investment income are estimated at $19,500. There is one treasury investment return in August, and additional treasuries are expected to be purchased in the first half of the fiscal year.
• Personnel costs show an anticipated increase based on FY25 projections but an overall decrease from the FY25 proposed budget due to planned organizational growth alongside current restrictions on personnel activity. These restrictions may impact the budget, which we have accounted for.
• Non-personnel expenditures will increase to account for additional costs detailed below.
Revenue:
Arts and Sciences Fund
The FY26 revenue goal for the Arts and Sciences Fund will increase to $2.15 million. The Foundation expects to transfer the full amount to support the Dean’s discretionary grant.
Endowment
Administration Fee (EAF)
We anticipate that the FY26 EAF distribution will maintain the same rates as previous years: 60 basis points to the College of Arts and Sciences (owning unit), 20 basis points to University Development, and 20 basis points to the OneCarolina Development Investment Fund, which supports University Development.
The Arts and Sciences Foundation anticipates starting the fiscal year with roughly $5 6 million in balances within the Truist bank account and treasury investments.
University Interest Income
We are anticipating $14,000 in University Interest Income for FY26.
Truist Money Market/Investment Income
For FY26, we anticipate small earnings in the Truist money market account. This estimate is based on a money market rate of 4.10% and treasury returns throughout FY26. The liquidated treasuries remain in a high-yield money market. We are anticipating a modest $5,500 in interest earnings. Below is the current treasury return in FY26.
Expenses:
Personnel – The FY26 budget reflects a modest decrease from the FY25 budget. The Foundation has budgeted for organizational growth that includes additional frontline fundraiser positions, increased business operations, communications, and stewardship support. Three positions will be split with their focused departments: the Director of Development for Honors Carolina, the Director of Development for the Institute of the Arts and Humanities (IAH), and the Director of Development for the Shuford Program in Entrepreneurship The increase in staffing is designed to position the Foundation to raise additional funds in the upcoming campaign.
Travel – Though we may be under budget for FY25 projected expenditures, we anticipate increased travel during FY26. Accordingly, we have reduced the FY26 travel budget slightly, by $10,000.
Building Debt Service – This is the debt service on Buchan House, and this cost remains the same during FY26.
Special Events/ Entertainment – This budget has a nominal decrease. It includes both foundation board meetings, two Dean’s Arts and Sciences Leadership Council meetings, regional events, and other donor gatherings.
Communications and Postage – This category includes postage charges for development, donor stewardship, and phonathon solicitation costs. Stewardship and donor relations focuses on donor stewardship and endowment reports, major and principal gift proposals, donor acknowledgments, and producing custom solicitation materials. This budget line will remain the same in FY26.
Building Maintenance – This category includes operating maintenance for Buchan House. For improved facility management and unexpected occurrences, we maintain larger balances for unforeseen events. As the Foundation team continues to scale, there are plans to construct additional offices and conference rooms The exterior door replacements and tree removal expenses contracted in FY25 may flow into FY26 expenses.
Legal/Accounting – The FY26 proposed budget includes auditing and tax preparation fees, annual state solicitation renewals, and the annual charge from the University for the associated entities operating agreement which covers support from central Accounting Services. The associated entities operating agreement will be renewed in FY26, and we anticipate an increase to the regular $14,000 annual cost. The Foundation will continue the contract with Copilevitz, Lam & Raney, P.C. in processing the state solicitation renewal forms. For FY26, there is an increase for additional legal counsel.
Office Supplies/Equipment – Primary expenses are for general office supplies and computers/printers.
Other Services/Miscellaneous – This category includes the budget for prospect management research tools and staff professional development, as well as for employee engagement activities. We anticipate exceeding the budget in FY25. The FY26 budget line has been increased to account for projected credit card processing fees.
Insurance – Due to the anticipated annual increase in costs, we have budgeted a 2% increase to this budget line, totaling $26,110 This includes new cyber security insurance coverage.
The Dean’s discretionary grant (A&S Fund) is made at the end of each fiscal year and comes from unrestricted contributions to the Arts and Sciences Fund.
UNC Investment Fund, LLC
Presentation to: Arts & Sciences Foundation
Jonathon King: Chief Investment Officer, UNC Management Company
April 24, 2025
Confidentiality Notice
These materials contain confidential information and may include trade secrets as defined in Section 66-152(3) of the North Carolina General Statutes. For that reason, no part of these materials may be reproduced, distributed, transmitted, displayed or published without prior written consent of UNC Management Company, Inc.
UNC Investment Fund (“UNCIF” or “Fund”)
returned +11.0% for CY 2024(1)
Relative to Benchmarks:
Outperforms SIPP (+8.7%) by a wide margin
Underperforms traditional Global 70/30 Portfolio(2) (+12.4%)
‒ CY 2024 was the second consecutive year when “traditional” stock / bond portfolios performed well relative to more diversified funds
Relative to Peers(3):
Solidly second quartile, just shy of +11.3% top quartile cutoff
CY 2024 Performance (12 months)
Solid absolute and relative performance
Absolute Performance: UNCIF’s +11.0% return boosted by:
Strong public equity markets (MSCI ACWI +17.5%)
Exceptional performance from Long/Short Equity allocation (+24.2%)
Relative Performance Drivers:
Long Short Equity +24.2% vs. +11.9% benchmark
Private Equity +12.2% vs +6.1% benchmark
Fixed Income +8.4% vs +1.8% benchmark
Public Diversifying Strategies +10.7% vs +5.9% benchmark
UNCIF’s 12/31/24 Market Value is $11.5 billion
UNCIF’s hedge funds (Long/Short Equity + Public Diversifying Strategies) generated very strong performance
Financial Markets Summary: CY 2024 (12
Domestic equity markets provide a strong tail wind
UNCIF Asset Class Returns: CY 2024 (12
months)
Return Summary
UNC Management Company
Where we add value
Portfolio Construction
We actively manage portfolio diversification to reduce drawdowns in periods of financial market stress
- In periods when equity market indices are down >10%, UNCIF typically suffers less than 1/3 of the decline in equity market indices
- UNCIF performs well relative to other university endowment funds during periods of negative returns
Manager Selection
We have a consistent long-term track record of selecting external investment managers that have outperformed their benchmarks, particularly in alternative asset classes (hedge funds, private asset classes)
- UNCMC staff continuity (average tenure of investment team ~10 years)
- Existing manager relationships and networks are used to identify new managers
- In depth due diligence process
UNCMC adds value through portfolio construction and manager selection processes
UNCIF Asset Class Returns: 5 years
UNCIF Asset Class Returns: 10 years
UNCIF: 20-Year Track Record
UNCIF outperformed primary return objective (CPI + 5.5%) and benchmarks
Note: Data through December 31, 2024
Relative Long-Term Performance
Fund has achieved its return objective across time periods
Diversification & private investments required: a traditional equity/bond portfolio fails to meet its objective
Note: Annualized performance for periods ending December 31, 2024
Positioning Relative to SIPP
As of December 31, 2024
Significant overweight to Private Equity remains Underweight to defensive public asset classes
Private Equity: 4.9% overweight
Public Equity: in line with target (Long + Long/Short Equity)
Defensives: 4.5% underweight (Div. Strat., Fixed Income, Cash)
Overweight to Private Equity persists
Long/Short Equity Top-performing asset class in CY 2024
Strong absolute performance of +24.2%
Significantly outperformed HFRI EH benchmark by +12.2%
Outperformed global equities (MSCI ACWI) by +6.7%
Performance broad-based across managers
‒ 11 of 14 managers outperformed HFRI benchmark
‒ All but 1 manager had double digit returns and 9 managers had > 20% returns
Performance of underlying stock contributors was also broadbased(1), not concentrated in a few names or in Mag-7
‒ Top three contributors for overall portfolio, on a weighted average basis, were NSE (National Stock Exchange of India) +3.6%, Sea +1.6%, and United Airlines +1.0%
UNCIF’s managers had a strong long/short spread: 21% on average with 3 best managers having l/s spreads of 48.4%, 42.8%, 34.9%, respectively
Note: Contribution by manager holdings based on managers’ top 5 contributors/detractors
1) See next slide
Very little overlap among managers’ top 5 contributors 52 companies represented
Note: Based on the top 5 contributors for each of our managers for calendar year 2024
Long/Short Equity Downside Protection
During past five years, UNCIF’s Long/Short Equity portfolio:
Provided significant downside protection while generating strong double-digit returns
Outperformed HFRI benchmark by ~4% annually
Beat global equities (MSCI ACWI) and captured >80% of S&P 500 Index return
5 Years Ended December 31, 2024 (all 60 months)
Diversifying Strategies
Diversified exposure to underlying risk factors
Discretionary Macro is largest exposure due to strong performance, but Equity Market Neutral (EMN) is catching up due to combination of strong performance and new allocations
– Discretionary macro managers differ in market focus, length of investment, and implementation leading to each being relatively uncorrelated to the others
– Quant managers differ in research philosophies, investment horizons, risk controls, and levels of leverage
Diversifying Strategies has become increasingly diversified across underlying return drivers
While many strategies use leverage, underlying diversification alleviates risk of individual strategies
Note: As of December 31, 2024
Public Diversifying Strategies
Downside Protection
During the past five years, UNCIF’s Public Diversifying Strategies portfolio:
Generated a net positive return in periods of declining equity markets
Outperformed HFRI benchmark by 3% annually
Diversifying
Diversifying Strategies’ Role in UNCIF
Capital protection during equity market drawdowns
Diversifying Strategies has provided consistent downside protection even on a monthly basis
UNCIF’s Quantitative Managers
Quants and non-quants are complementary
Note: Composite between August 2016 and December 2024 for current quant and non-quant managers
by 27%
UNCIF’s Quantitative Managers
Strong absolute and relative performance
Absolute Performance:
UNCIF’s quantitative managers returned +13.1% for CY 2024
4 funds returned >+14.5%
Longer-term returns also attractive:
‒ 3-year: +12.7%
‒ 5-year: +8.9%
Relative Performance:
UNCIF’s quantitative managers outperformed benchmark by +7.2% for CY 2024 (+13.1% vs. +5.9%)
Strong longer-term outperformance:
‒ 3-year: +12.7% vs. +4.3% benchmark
‒ 5-year: +8.9% vs.+ 4.9% benchmark
Note: Data through December 31, 2024
UNCIF’s Quantitative Managers
Strong manager partnerships
• UNCIF has a very good reputation in the quant space
‒ Continuity of staff
‒ Built a strong reputation and expertise since starting to invest in quants 8 years ago, which was and remains relatively rare in E&F community
• Portfolio not easily replicable
‒ Most funds are closed to new LPs
‒ Built out over time
‒ Managers are diversified across fund size, stage of life cycle, team background, and strategy/approach (e.g., time scale, target volatility, asset classes traded, etc.). Firm locations include London, Paris, New York, and South Florida
Average pairwise correlation of 0.24
Average pairwise downside correlation is lower at -0.03
‒ Long-term relationships and experience lead to new manager sourcing and conviction in ongoing due-diligence
Note: Correlation calculated for 8 current quant funds over the last 36 months ending December 31, 2024
Private Portfolio: CY 2024 Performance
Outperformance driven by Venture Capital portfolio
Venture Capital significantly outpaced its benchmark generating top quartile performance
Private Portfolio Performance: 10-Year
The Long Game: Manager selection has led to significant outperformance
All UNCIF Private Portfolio asset classes have outperformed their benchmarks over the last ten years led by exceptionally strong +24.4%
Venture Capital return
U.S. Economic Outlook: Policy Uncertain
Tariffs could complicate Fed’s efforts to lower inflation to target
Economic vital signs healthy with December 2024 CPI YoY at 2.9% and unemployment rate stable at 4.1%...
…however, policy risks loom
Labor market is resilient
− Though unemployment rate has risen from a 50-year low of 3.7% to 4.1% as of December 2024, job growth has outpaced expectations
− Nonfarm payrolls grew by 256,000 in December, well above the consensus forecast of 155,000
Tariffs could disrupt the Fed’s glidepath just as the soft landing appears within reach
− Mexico, China, and Canada, the targets of the first round of tariffs, collectively account for more than 40% of U.S. trade
− Tariffs could stoke inflation and pose a downside risk to growth, which could force the Fed to pause or even raise rates once again
Starting Jan. 1971
or 70s Redux?
Starting Dec. 2018 Note: Data through December 31, 2024
Relative Pricing within Markets Imbalanced
Note: Data through December 27, 2024
Our Fundamental Beliefs
Over the long term, the Fund has achieved its objectives
Maintaining conviction in our investment approach and philosophy has led to the Fund achieving its long-term objectives
− Maintain a long-term time horizon
− Portfolio diversification is a key component in managing risk
− Focus assets with our highest conviction investment managers
− Alternative asset classes play a significant role
− Tactical portfolio shifts can be utilized selectively to capture shorter-term opportunities
− Downside protection matters
The most important and difficult challenge remains striking the proper balance between upside participation and downside protection
Wrap-Up
CY 2024: Solid absolute and relative performance
With domestic equity markets providing a strong tailwind, UNCIF returned +11.0% for CY 2024
As of December 31, the Fund’s 5-, 7- and 10-year returns:
- Exceed +9.5% annualized (5- and 7-year returns still > +10%)
- Beat SIPP by > 2% annually
- Significantly beat the Global 70/30 Portfolio(1)
- Top decile relative to peers(2)
UNCIF has achieved its primary return objective across time periods (while the Global 70/30 Portfolio has not)
As market uncertainty persists, we maintain our disciplined approach and long-term focus