Page 11 - FY 20 Annual Report: Land Trusts Protection & Advocacy Office

School & Institutional Trust BENEFICIARY DISTRIBUTIONS

Annual distributions from each trust
Funds Office are constitutionally limited to 4%
of the average market value of each
310 SOUTH MAIN STREET, SUITE 1250, trust’s permanent fund over the
TRUST FUND INVESTMENT SALT LAKE CITY, UT 84101
past 12 consecutive quarters. The
investment objective of inflation
(CPI) + 5% allows funds to be
Mission Asset Allocation invested in a manner that supports
SITFO RESPONSIBILITIES the distribution policy in perpetuity
To responsibly maximize the return on the invested principal of the While different beneficiaries ultimately own the trust funds, all are managed with a while providing for intergenerational
• Manage and invest the permanent trust funds School and Institutional Trusts for the current and future benefit of similar asset allocation, as the return and risk objectives are expected to be similar. equity between current and future
• Diversify the investments of trust fund money Utah’s education programs. The asset allocation optimizes the expected return relative to the level of risk the beneficiaries.
and assets board of trustees views as acceptable. Annual distributions from the
• Decision-making based on objective research Trust Fund Investment The risk and return potential of each investment is carefully considered. The portfolio permanent trust funds provided
and thorough due diligence as a whole is expected to provide, over time, a total return greater than or equal to the more than $93.2 million dollars for
beneficiaries in FY 2020.
The School and Institutional Trust Funds Office (SITFO), an independent investment objectives of the trust, while avoiding undue risk concentrations in any
FY 2020 - CURRENT SITFO BOARD OF government agency created by the Utah Legislature in 2014, administers single asset class or category, thus reducing risk at the overall portfolio level. For more information on distributions
and distribution formulas, see page 17.
TRUSTEES AND AGENCY DIRECTOR the investment of earnings received from SITLA, derived from the sale The permanent fund asset allocation as of FY 2020 is below.
and/or lease of trust lands. SITFO invests roughly $2.5 billion permanent
funds in a globally diversified investment portfolio for the sole benefit of
their respective beneficiaries.
DEFENSIVE
SITFO is guided by an Investment Beliefs Statement and Investment 12% SITFO INVESTMENT POLICY
Policy Statement. Under the direction of its board of trustees, SITFO Systematic Convexity: 7%
manages, monitors, and evaluates the investment of the trust assets. Long US Treasury: 5% GROWTH SITFO's long-term investment
This is done in coordination with investment managers and investment Private Debt: 7% 37% objective targets an annualized
consultants. The permanent trust funds are invested in a manner Non-U.S. Debt: 5% INCOME U.S. Equity: 15% return over time of inflation (CPI) +
David Damschen Kent A. Misener that supports the distribution policy in perpetuity while providing for ILS: 4% 31% International Equity: 15% 5%. This is to maintain the purchasing
UTAH STATE TREASURER VICE CHAIR, intergenerational equity between current and future beneficiaries. Private Equity: 7% power of the fund in perpetuity,
CHAIR, BOARD OF TRUSTEES BOARD OF TRUSTEES Securitized: 8% while sustaining and growing the
Credit: 7% REAL ASSETS TIPS: 3% current distribution amount. Given
SITFO Board of Trustees and 20% Public Real Assets: 4% the perpetual time horizon of the
Private Real Estate: 9%
Agency Management Private Real Assets: 4% trusts, SITFO expects to achieve its
investment objective over the long
term, not necessarily in each year.
A five-member board of trustees provides oversight and policy direction The board recognize, over various
for SITFO’s trust fund management and investment. The state treasurer periods, that the portfolio may over
serves as an ex officio chairperson. The additional trustees are appointed SITFO Investment Process or underperform relative to indices
on a nonpartisan basis by the state treasurer from a list of qualified or peer groups.
David R. Nixon Jason Gull candidates nominated by a nominating committee, as outlined in Utah ELEMENTS & APPLICATION
BOARD OF TRUSTEES BOARD OF TRUSTEES statute. The trustees are highly experienced investment professionals. In overseeing roughly $2.5 billion
Idea Asset Allocation Asset Class Manager Portfolio & Risk in permanent trust funds, SITFO
The board appoints a director who employs a team to operate the Generation Framework Structure Selection Management focuses primarily on long-term
day-to-day functions and monitor and manage the investments of each Board Fit with Objectives Repeat Asset Strategy Fit Constraints/Sizing strategic allocations, as opposed to
trust. In addition to the investment professionals at SITFO, the board Staff Gaps/Needs Allocation Questions Marginal Contribution Monitoring short-term tactical shifts. In general,
retains investment consulting firms, to leverage outside resources for Opportunity Set SITFO’s risk tolerance attempts to
the overall framework of agency’s investment program. Consultant Portfolio Specific Investment Due Rebalancing
Optimization
Diligence:
Managers Liquidity • Desktop Review Capital Flows minimize volatility so that it is no
Contribution to • Phone/In-Person/ greater than necessary to achieve
Resources
Resources Available Complexity/ Networks • Risk Active/Passive Onsite Reviews Measuring the long-term investment objective
Complexity/Sophistication
Available
Sophistication
News Flows • Return Marginal Contribution • Fee Navigation of a 5% return after inflation.
• Liquidity
John Lunt Peter Madsen • Diversification • Diversification
BOARD OF TRUSTEES DIRECTOR Operations Due
Market
Market Environment Liquidity Diligence
Liquidity
Environment
Portfolio
Portfolio
Objectives
Objectives
MPI, eVestment,
Resources MPI, Bloomberg MPI, Bloomberg Preqin, Dynamo, Castle MPI, Bloomberg,
Dynamo, Caissa
Risk
Risk Tolerance Time Board, Staff, Staff, Consultants,
Time Horizon
Tolerance
Horizon Responsibilities Consultants Staff, Consultants Staff, Consultants Custodian
Beneficiary Needs
Beneficiary
Needs
10 School & Institutional Trust Funds Office (SITFO)