Page 11 - Caltech Endowment Brochure_FY19

CALTECH ENDOWMENT REPORT 2019 CALTECH ENDOWMENT REPORT 2019
MANAGEMENT OF THE ENDOWMENT INVESTMENT PORTFOLIO

The Caltech Investment Office reports jointly investment policies, new investments, and portfolio
to the Institute’s president and the Board of performance. To discuss specific investments and
Trustees’ Investment Committee, which has other opportunities as they arise, the committee also
primary responsibility for setting investment policy, interacts frequently between meetings. The members
overseeing policy implementation, and approving bring extraordinary expertise in both specific asset
major investments. The committee meets at least classes and the investment industry in general.
quarterly to discuss and review asset allocation,
This 2006 image from the Spitzer Space Telescope reveals hundreds of
thousands of stars gathered in dust clouds at the center of the Milky Way The Investment Office
galaxy. The telescope was retired in January 2020 after more than 16 years The Investment Office develops recommendations global trends and investment opportunities that may
studying the universe in infrared light. (credit: NASA/JPL-Caltech)
on investment policies, strategies, and asset develop over many years. While quarter-to-quarter
allocation for review and approval by the Investment performance is closely monitored, and appropriate
Committee. With the general guidelines in place, the portfolio adjustments are made from time to time, the
INVESTMENT PRINCIPLES Investment Office then identifies investments and primary goal is to earn long-term rates of return that
support the annual endowment payout and maintain
what it considers to be best-in-class asset managers
around the world who can effectively implement the the endowment’s inflation-adjusted purchasing
Asset Allocation and Risk Management Endowment Liquidity adopted investment strategies. The office focuses power, allowing it to support Caltech’s activities for
The asset allocation policy for Caltech’s endowment Caltech’s endowment investment pool is closely on medium- to long-term performance, identifying generations to come.
investment pool emphasizes diversification across asset managed and monitored for liquidity. We define
classes, investment styles, and geographic locations, liquidity as the ability to realize and access cash INVESTMENT COMMITTEE MEMBERS INVESTMENT OFFICE STAFF
striving to achieve strong long-term investment from an investment in a timely manner. Liquidity is Timothy J. Sloan, Chair Scott H. Richland
performance while avoiding highly concentrated risks. desirable for five primary reasons: Retired Chief Executive Officer and President, Chief Investment Officer
Wells Fargo & Company scott.richland@caltech.edu

Portfolio risk management focuses on market 1. The portfolio has financial obligations such Dr. Ronald K. Linde (MS ’62, PhD ’64), Vice Chair Pasy Wang
correlations and sensitivity (beta), interest-rate risk, and as investment fund capital calls, which often Vice Chair, Caltech Board of Trustees Senior Managing Director, Investments
Independent Investor
pasy.wang@caltech.edu
expected volatility as well as liquidity. In addition, the must be satisfied with relatively short notice. Chair, The Ronald and Maxine Linde Foundation Darren Artura
portfolio is subjected to analysis that models how it is Founder and Former Chief Executive Officer, Managing Director, Real Estate and Insurance Operations
expected to act in situations comparable to the Great 2. The ability to implement changes in tactical Envirodyne Industries, Inc. darren.artura@caltech.edu
Financial Crisis, the 2001 tech wreck, the September 11 and/or policy allocations requires liquidity. Joshua S. Friedman, Member* Douglas MacBean
tragedy, and other scenarios. The portfolio responses 3. From time to time, unusual investment Co-Founder, Co-Chairman, and Co-Chief Executive Officer, Managing Director, Public and Alternative Securities
Canyon Partners, LLC
to these scenarios are monitored over time, and opportunities arise—driven by market or other B. Kipling Hagopian, Member doug.macbean@caltech.edu
adjustments may be made if the projected portfolio forces—that cannot be seized without liquidity. Managing Partner, Apple Oaks Partners, LLC Brian Chen
drawdown is larger than anticipated. G. Bradford Jones, Member Director, Private and Alternative Securities
brian.chen@caltech.edu
4. In periods of economic downturn, the Founding Partner, Redpoint Ventures Alistair Thistlethwaite
Strategic asset allocation ranges are established by endowment investment portfolio must be Dr. David L. Lee (PhD ’74), Member Director, Public Securities and Natural Resources
Caltech’s Investment Committee and are subject to prepared for a potential reduction in cash Chair, Caltech Board of Trustees alistair.thistlethwaite@caltech.edu
periodic review. In addition, tactical adjustments are inflows while maintaining its payout to the Managing General Partner, Clarity Partners, L.P. Jayden Pantel
made by the Investment Committee and the Investment Institute, which is essential to achieving A. Michael Lipper, Member Investment Analyst
Office in response to current or anticipated shorter-term Caltech’s mission. President and Chief Executive Officer, jpantel@caltech.edu
Lipper Advisory Services
market conditions. Kirk Kawasawa
5. Unrestricted endowment investment pool Li Lu, Member Senior Managing Director, Investment Operations
Founder and Chairman, Himalaya Capital
kirk.kawasawa@caltech.edu
At the end of fiscal year 2019, the endowment funds may need to be tapped to assist in Dr. Thomas F. Rosenbaum, Member Gabriela Magana
investment portfolio was tactically underweight in maintaining operating continuity in cases of President, Sonja and William Davidow Presidential Chair, Manager, Investment Operations
traditional investment-grade fixed income and real emergency or financial disruption. and Professor of Physics, Caltech gabriela.magana@caltech.edu
assets and overweight in private equity relative to our The Caltech endowment investment pool is quite Susan Schnabel, Advisory Participant Brett Kiesel
strategic allocation guidelines. The underweight position liquid, with more than 21 percent of the assets Co-Founder and Co-Managing Partner, Operations Associate, Administration
in fixed income (which has been the case for nearly 10 currently convertible to cash within one to two weeks aPriori Capital Partners brett.kiesel@caltech.edu
years) continued due to the low level of interest rates and nearly 30 percent convertible to cash within a Robert V. Sinnott, Advisory Participant Lynda Lander
Co-Chairman, Kayne Anderson Capital Advisors
Senior Administrative Assistant
and the expectation that rates at some point will revert calendar quarter under normal circumstances. The lynda.lander@caltech.edu
to more “normal” levels; the real assets’ underweight Institute’s additional sources of liquidity include Lance N. West (MS ’83), Advisory Participant Aileen Liu
Retired Chairman and Chief Executive Officer,
position reflects continued weakness from low substantial funds that have been raised from issuing Centerbridge Partners Europe, L.L.P. Operations Associate, Compliance
commodities prices. aileen.liu@caltech.edu
bonds over the last five years as well as committed
lines of credit provided by commercial banks. * Past Investment Committee Chair
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