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Investment Policy

The primary investment objective is to preserve the purchasing power of LTF assets by earning an average annual real return of 5.5% over rolling ten year periods or longer. Earning an average annual real return of 5.5% permits two primary objectives:

  • Provide for current beneficiaries by increasing the annual distribution at a rate at least equal to the current rate of inflation so that real purchasing power is maintained, and
  • Provide for future beneficiaries by increasing the market value of endowment funds after the annual distribution at a rate at least equal to the rate of inflation so that future distributions maintain purchasing power as well.

Since the LTF's investment return is dependent on the GEF return, the operation and results of the GEF must be examined to determine the results of the LTF's activities for the year. The design of the GEF's portfolio is based on a combination of quantitative analysis and market judgment employed by UTIMCO's investment staff. Sophisticated statistical techniques are combined with the judgment of investment professionals to test many asset allocation alternatives, including the sensitivity of potential future results to changes in assumptions in order to make portfolio construction decisions. Investment management involves as much art as science and qualitative considerations often play an extremely important role is successful portfolio management decisions. Art and science were used to develop the target and current GEF portfolios as shown in Figure C.