Investment Management Expense

The endowment of the Valley Community Foundation is included in The Community Foundation for Greater New Haven, Inc. (the Corporation), which is a Connecticut registered investment adviser, and presents all investment performance information net of expenses.1

Net of expenses means net of the direct costs incurred in the operation of the Commingled Fund that holds the proprietary and organization funds’ endowment and endowment-like assets.

The Foundation’s FY18 (ending December 31st) externally-audited annual cost of Comingled fund expenses was sixty-two points, or 0.62%, and allocated to every component and organization fund on a pro-rata basis.

Investment Management and Spending Options:

The Community Foundation offers several investment options, depending on the type of fund.

  1. The Perpetual Fund

    The Perpetual Fund seeks to preserve the real economic spending power over the long-term. To meet this objective, a percentage of a fund's value is calculated according to a Spending Rule Policy annually and is available to make grant recommendations. An amount above the Spending Rule rate may be requested, subject to restrictions; contact The Foundation for details.

  2. The Intermediate Fund

    The Intermediate Fund is a diversified portfolio of more liquid assets that seeks to provide the opportunity for some appreciation with moderate risk. Assets are readily available for grantmaking at all times. This option is available only for Donor Advised Funds.

  3. Cash

    With the cash option, the Fund is held in cash or cash-equivalent to preserve capital without risk or appreciation, and is readily available for grantmaking at all times.

Investment Philosophy

The Community Foundation for Greater New Haven for more than ninety years has been primarily an endowment organization designed to maintain the community’s charitable assets in perpetuity. Therefore, the investment management concepts and best practices contained within Connecticut law, such as the Uniform Prudent Management of Institutional Funds Act, and the Uniform Prudent Investors Act form the basis of our investment philosophy and strategy. Specifically: In order to preserve the purchasing power and real economic spending of the endowment, The Corporation shall manage its assets in the Perpetual Fund in accordance with a total-return approach, which does not distinguish between an asset’s yield and appreciation, but rather on the total expected return of the assets over the long-term. The Corporation includes those funds held by The Community Foundation’s affiliated entity, The Valley Community Foundation.

The Community Foundation for Greater New Haven will withdraw a specific percentage of the market value from the endowment in accordance with a Spending Rule Policy, which is designed to prudently release a predictable stream of revenue during each fiscal year to meet the region’s charitable needs, while at the same time allowing for maximum flexibility and efficiency of the investment management process.

In order to achieve the spending requirements and maintain the endowment’s purchasing power, the The Corporation operates in accordance with two policies: 1) The Spending Rule Policy and, 2) The Asset Allocation Policy.

The Spending Rule Policy

Generally, and in the absence of an institution’s desire to retain the right to withdraw principal from its organization fund, the process for extracting financial resources from the Perpetual Fund to meet the charitable needs of our community is accomplished through a Spending Rule Policy, which is defined as follows:

A Spending Rate, which is determined annually by The Community Foundation's Board of Directors, equal to the greater of: a) Fixed percentage1 of the endowment assets available for investment based on a trailing five-year moving average; or b) Four and One-Quarter Percent (4.25%) (the “Floor”) of the market valuation of the endowment assets at the end of the most recent calendar quarter; provided however in no event shall The Community Foundation spend more than Five and Three Quarters' Percent (5.75%) (the “Cap”) of the market valuation of the endowment at the end of the most recent calendar quarter.

1 The Spending Rate for 2020 is equal to Five and One-Half Percent (5.5%).

Asset Allocation Policy

The Corporation'sa long-term asset allocation model1 for the Perpetual Fund is as follows:

Asset Class2 Target3 Operating Range Market Benchmark4
Equities

Global

47.5%

35% - 60%

MSCI All Country Word Index
Total Equities 47.5% 35% - 65%
Alternatives
Hedge Funds 25% 15% - 35% HFRI Fund of Funds Index
Private Assets 7.5% 0%- 15% CPI + 5%
Total Alternatives 32.5% 15% - 50%
Bonds
Global Sovereign 5.0% 2% - 8% CitiGroup World Government Bonds
Intermediate T.I.P.S. 5.0% 2% - 8% Barclays US TIPS 1-10 years
Emerging Markets 5.0% 2% - 8% JPM GBI-EM Global Diversified
US Treasuries 5.0% 2% - 8% Barclays Long Treasury
Total Bonds 20.0% 15% - 25%
Total Allocation 100%

a The Community Foundation for Greater New Haven, Inc. is a Connecticut Registered Investment Adviser
1 Approved unanimously by the Investment Committee of The Community Foundation's Corporation 26 February 2018.
2 Certified to be a true copy of the actions approved by The Community Foundation for Greater New Haven's Investment Committee and has not been amended, altered, and remains in effect.
3 Target weightings to be used to assess investment performance for Relative Benchmark, effective 1 April 2018.
4 Market benchmarks to be used to compute investment performance for the Relative Benchmark, effective 1 April 2018.

Commingled Fund Sub-Advisors

The sub-advisors are retained to perform specific asset class services in accordance with The Corporation'si long-term asset allocation model for the Commingled Fundii (The Perpetual Fund).

The sub-advisorsiii currently retained are:

Asset Class Manager Strategy / Style
Global Equity Adage Capital Partners (2006) Large Cap
Global Equity Ashe (2014) All-Cap
Global Equity Health Care Investment Fund (2012) All-Cap
Global Equity Barker LP (2016) All-Cap
Global Equity SQN Investors (2017) Small/Mid-Cap
Global Equity Acacia (2015) All-Cap
Global Equity Artisan (2012) Large Cap
Global Equity Cevian Partners (2011) Large/Mid-Cap
Global Equity Effisimo (2015) All-Cap
Global Equity Highclere (2014) Emerging Markets
Global Equity Tybourne Capital (2016) All-Cap
Global Equity Westwood (2015) Emerging Markets
Bonds Colchester Global (2008) Global Sovereign
Bonds Mondrian Partners (2010) Emerging Markets
Bonds I R & M (2010) TIPS
Bonds Vanguard (2010) Treasuries
Hedged Canyon Value, Ltd. (2013) Credit
Hedged Hengistbury Investment Partners (2017) Equity
Hedged Half-Sky (2017) Equity
Hedged Bayberry Capital Parners (2019) Equity
Hedged Kontiki Capital Management (2018) Equity
Hedged Nitorum Capital (2016) Equity
Hedged Permian Capital (2015) Equity
Hedged Soapstone Capital (2018) Equity
Private Assets 5AM (2018) Private Equity-Venture Capital
Private Assets Denham (2012) Commodities
Private Assets GEM Realty Capital (2013) Real Estate
Private Assets Eightfold Capital (2016) Real Estate
Private Assets Healthy Ventures (2017) Private Equity - Healthcare
Private Assets Juniper Capital (2016) Private Equity - Energy
Private Assets LBA Realty (2009) Real Estate
Private Assets Merit Energy (2011) Private Equity - Energy
Private Assets Altas Partners (2019) Private Equity
Private Assets Base 10 Ventures (2019) Private Equity - Venture Capital
Private Assets Brookdale Investors (2019) Real Estate
Private Assets Lakestar (2019) Private Equity - Venture Capital
Private Assets Metropolitan (2005) Real Estate
Private Assets Patron Capital Partners (2015) Real Estate
Private Assets Permit (2013) Private Equity - Credit
Private Assets Precursor Ventures (2018) Private Equity – Technology
Private Assets Raven Capital Management (2015) Private Equity - Credit
Private Assets Resource Land Holdings (2015) Private Equity - Natural Resources
Private Assets Shorenstein Fund Nine (2008) Real Estate
Private Assets TIFF Partners (1999) Private Equity - Diversified
Private Assets Varde (2008) Private Equity - Credit
Private Assets Warburg Pincus (2014) Private Equity - Energy

i A Connecticut registered investment adviser.

ii Approved by The Community Foundation's Investment Committee.

iiiAs of 7 October 2019.

Investment Management Performance Benchmarks & Assessment Process

The Corporation and The Community Foundation measure and assess its investment performance monthly, both manager-by-manager and cumulatively, through an external third party. All investment performance data, including holdings and transactions, is independently provided by each manager to The Community Foundation’s independent auditor and to Colonial Consulting LLC, a New York-based firm that provides evaluation and investment advisory services to more than seventy foundations and endowments nationally, including more than twenty community foundations. Investment performance for the Perpetual Fund is assessed against two benchmarks, as follows:

“Absolute”: The Absolute investment performance benchmark is equal to the Consumer Price Index plus effective Spending Rate.

“Relative”: The Relative investment performance benchmark is equal to fifty (50) basis points (0.5%) above the rate of return produced by specific market benchmarks, which represent the asset classes contained in the long-term asset allocation model, with such market benchmarks weighted in accordance with the model’s target allocation.