Investing to Ensure Long-Term Support
The overall objective of the Foundation's investment strategy is to preserve the purchasing power of the endowment that provides a dependable source of income for the University of Oklahoma. With that objective in mind, offered below is a summary of issues that are always important, but have been noteworthy the past few years.
Risk and Diversification
To accomplish its objective, the Foundation must take investment risk and remain in the market. As a result, the Foundation's investment committee and staff members adhere to the following principles of investing:
1. Diversification: One of the tenets of modern portfolio theory is diversification of assets. The Foundation has five major asset classes in its portfolio as well as an opportunistic allocation. Each is designed to perform a different function within the portfolio. Growth assets contribute significantly to returns over long periods of time but may be volatile in the short-term. Hedges for inflation and deflation (which serve as portfolio insurance) generally detract from returns in periods where markets are strong but serve as buys when the economy is not.
2. Equity Bias: The Foundation's portfolio is heavily biased toward equities rather than bonds because we would rather be long-term owners of assets than lenders to assets. While asset owners bear more risk in the short-term, they are also compensated for that risk over the long-term while lenders merely earn an interest rate.
3. Private Investments: For a long-term investor, private limited partnerships provide one of the best opportunities to build equity in assets. In an effort to seize the premium offered through private investments, the Foundation has been on a course of patiently and selectively building a portfolio of top-tier, vintage-year-diversified private equity managers.
4. Opportunistic Investments: The Foundation's Investment Committee seeks to make occasional unique investments that exhibit an asymmetric risk/return profile. That's exactly what the opportunistic portfolio has provided in recent years, and significant value has been added to the endowment portfolio’s returns through carefully selected and sized opportunities that do not otherwise fit within the other major asset classes.
If you'd like to learn more about our investing strategy, philosophy and performance, consider attending our annual investment forum.