Investment Management of Delaware Community Foundation Funds


Investment Management of Delaware Community Foundation Funds
Management of
Delaware Community
Foundation Funds
March 31, 2015
All funds established at the Delaware Community
Foundation (DCF) are managed as provided by the
Investment Policy Statement approved by the Board
of Directors. The Investment Committee oversees
the process and selects and monitors investment
managers. A copy of the DCF’s Investment Policy
Statement is available upon request.
Delaware Community Foundation
Investment Committee
Robert N. MacGovern Jr., CFA, MBA, Chairman
Retired Chief Investment Officer, Nuclear Electric
Insurance LTD
Matthew C. Beardwood
Vice President, Glenmede Trust Company, N.A.
Paul H. Harrell Jr.
Immediate Past Chairman, Harrell Resources, Inc.
Kathleen Hawkins
Wealth Management Advisor, Merrill Lynch & Co.,Inc.
Cynthia A. Hewitt
First Vice President, Global Private Client Group,
Merrill Lynch & Co.
Joseph M. Schell, MBA
Retired Investment Banker
Valerie J. Sill, CFA
President and CEO, DuPont Capital Management
Philip C. Timon
Chief Investment Officer, Endowment Capital Group, LP
Thomas D. Wren
Past Chairman, DCF Board of Directors
Market Review
This quarter proved how monetary policy can impact
markets. The European Central Bank (ECB) launched its
bond buying program and just over a week later the Fed
removed the word “patient” from its forward guidance.
While the language shift was not unexpected, it portended
the reality of future rate hikes. Currencies reacted
accordingly with a continuation of the U.S. dollar (USD)
rally. The USD was broadly higher against most currencies
with the exception of a select few. Gains in the greenback
masked positive local currency gains among international
equity markets, and it continued to exert downward
pressure on commodity prices. This heightened market
activity proved to be beneficial for hedge funds, which
protected against volatility across equity markets.
For the trailing one-year period, many international equity
markets experienced gains in local currency terms.
However, when translated back to USD, many of the
returns turned negative, driven by the strength of the dollar
relative to most other currencies. For the month, the MSCI
EAFE Index rose 1.3% in local terms, bringing year-to-date
(YTD) results to 10.9%. In USD terms, the March return for
the Index was −1.5%, with YTD returns of 4.9%. Both the
euro and pound lost approximately 4% of their value
versus the USD
Emerging markets have also been influenced by currency
moves, both for the month and over the trailing year.
However, much of the currency moves within emerging
markets have been primarily driven by country specific
factors, rather than broad central bank action.
We posted a negative 0.7% for the quarter ending March 31,
2015, compared to a negative 0.7% for the policy benchmark
by which we rate our performance. Calendar year-to-date,
investment results are up 2.2%, compared to our policy
benchmark’s results of 2.1%.
The DCF Investment Committee continues to take steps to
balance the risk and return profile of the portfolio and is
monitoring manager performance and asset allocation
closely in this challenging investment environment.
DCF Investment Managers
John W. Bristol Equity Fund I – Greenbrae, California
(inception 07.04.14)
Domestic Equities. All cap growth manager. John W.
Bristol believes that above-average long-term earnings
and dividend growth generally provide the most effective
long-term investment results. As a result the investment
team’s process is research-intensive, emphasizing a
company-by-company approach in determining the key
drivers of long-term growth. The performance benchmark
is the S&P 500 Index.
The Delaware Community Foundation strives to provide
the highest level of stewardship possible to our
fundholders. Because we pool our resources for
investment purposes, your funds have access to the
best performing money managers at a competitive fee.
Approximately 62% of our assets are invested in global
equities, 17% in flexible capital, 18% in fixed income
instruments and 3% in alternative asset classes. The
DCF portfolio is monitored by the DCF Investment
Committee, which is made up of community leaders with
investment expertise and Prime, Buchholz & Associates,
Inc. Strategic changes are made as necessary, while
taking a long-term view of the market.
Parametric Tax-Managed Emerging Mkt. Fund – Rye
Brook, New York (inception 09.28.11)
International Equities. The Parametric Emerging Markets
strategy is designed to capture the long-term returns
provided by the equity markets of developing countries.
Parametric employs a systematic investment approach
emphasizing diversification and has developed a
quantitative equally-weighted, tiered approach to country
allocation. The performance benchmark is the MSCI EM
Net Index.
Vanguard Institutional Index Fund Institutional
Shares – Valley Forge, Pennsylvania (inception 06.30.09)
Domestic Equities. Large cap blend fund. The fund
employs a “passive management”—or indexing—
investment approach designed to track the performance
of the Standard & Poor’s 500 Index which is dominated by
the stocks of large U.S. companies. The fund attempts to
replicate the target index by investing all, or substantially
all, of its assets to the stocks that make up the index. The
performance benchmark is the S&P 500 Index.
Lazard Emerging Markets Equity Portfolio – New
York, New York (inception 09.22.08)
International Emerging Markets Equities. The portfolio
seeks long-term capital appreciation by investing in
companies with strong, sustainable financial productivity
at attractive valuations. The performance benchmark is
the MSCI Emerging Markets Net Index.
Westfield Capital Management – Boston,
Massachusetts (inception 06.21.00)
Domestic Equities. Small cap growth manager. Westfield
applies fundamental research to companies in diverse
industries with consistent or accelerating earnings
growth. The managers perform extensive, in-depth
research that includes company on-site visits and
meetings with management. The performance
benchmark is the Russell 2000 Growth Index.
Sanderson International Value – London, UK
Sanderson seeks to invest in companies whose
discounted future profits are attractive relative to their
current stock prices utilizing a bottom-up, value
approach to investing. Sanderson is a long-term investor
with typical holding periods of 3-5 years. Exposure to
emerging markets is capped at 20%, the strategy's
historical average is ~10% and typically includes the
more developed emerging economies. The performance
benchmark is the MSCI EAFE (Net).
Marathon International Equities – London, United
Kingdom (inception 04.01.11)
The fund is centered on the long-term capital cycle.
Marathon believes that the prospect of high returns will
attract excessive capital, resulting in increased
competition and capacity, pushing returns lower.
Conversely, the expectation of low returns can lead to
consolidation and decreased capacity, which may in turn
increase the return potential. Marathon utilizes this
approach to identify areas of the market where they feel
competition is in retreat, there are significant barriers to
entry, or growth is underappreciated. The resulting
portfolio is highly diversified across. The performance
benchmark is the MSCI EAFE Index.
AEW Global Properties Securities – Boston, MA
(inception 04.01.11)
The fund manages real estate securities based on
proven, research intensive, and value oriented approach
to real estate securities. AEW Global takes a value
based approach to the construction and management of
the portfolio, and fully integrates the capabilities of
AEW's research, real estate, and equity securities
professionals. Management ultimately believes the
majority of its excess returns over its benchmark
originate from underlying security selection. The
performance benchmark is the UBS Real Estate
Fixed Income
Flexible Capital
Loomis & Sayles Investment Grade Bond Fund
Class Y – Boston, MA (inception 06.01.06)
Fixed Income. A flexible, fixed-income strategy seeks to
deliver strong, long-term performance without taking on
excessive risk. A high-quality, 5-star fund, Loomis &
Sayles Investment Grade Bond Fund complements an
investment grade portfolio with a flexible, multi-sector
approach to offer added exposure to international and
below-investment grade bonds. The performance
benchmark is the Barclays U.S. Govt/Credit.
Forester Diversified LTD – Greenwich, CT
(inception 07.01.11)
Alternative Asset Class. The fund seeks to achieve
medium- to long-term returns that are superior to the
broad market averages while assuming less risk.
The fund is diversified in an effort to mitigate risk of
investing in a single fund or strategy and seeks to be
diversified by strategy, have long and short exposure to
equity and credit markets, and be geographically
diverse. The performance benchmark is the HFRI Fundof-Funds Index.
Vanguard Total Bond Market Index – Valley Forge,
PA (inception 01.09)
Fixed Income. The fund seeks to track the performance
of a broad, market-weighted bond index. The index
measures a wide spectrum of public, investment-grade,
taxable, fixed-income securities in the United States,
including government, corporate and international dollardenominated bonds, as well as mortgage-backed and
asset-backed securities with maturities of more than one
year. The performance benchmark is the Spliced Total
Bond Market Index.
Weatherlow Offshore Fund I – Evanston, IL
(inception 04.01.11)
A diversified fund of hedge funds that seeks to generate
equity-like returns with bond-like volatility. The manager
blends quantitative modeling and qualitative review to
build the portfolio. The fund will typically be made up of
15-30 managers, and the aim is for no single fund to
account for more than 15% of capital. The performance
benchmark is the HFRI Fund-of-Funds Index.
UBP Multi-Strategy Hedge Fund – Switzerland and
New York, NY (inception 06.26.06)
Alternative Asset Class; Hedge Funds. The fund goal is
to achieve long-term risk-adjusted capital appreciation
by investing in a diversified portfolio of hedge funds,
managed by some of the industry’s most experienced
managers. The performance benchmark is the HFRI
Fund-of-Funds Composite Index.
Vanguard Inter-term Treasury – Valley Forge, PA
(inception 04.01.11)
Intermediate Term. The fund must invest at least 80% of
its assets in U.S. Treasury securities. The fund is
designed to capture the performance of the
intermediate-term segment (5-15 year maturities) of the
U.S. Treasury market. The fund’s weighted-average
maturity will range from 5-10 years and the duration will
range from 4-7 years, although the duration will be
adjusted to reflect the portfolio manager’s near-term
interest rate outlook, the shape of the yield curve, and
other factors. The performance benchmark is the
Barclays Capital U.S. 5-10 Year Treasury Index.
Anchorage Capital Partners Offshore, Ltd. – New
York, NY (inception 04.15.15)
Anchorage Capital Partners is a debt-focused special
situations fund that seeks to earn superior risk-adjusted
returns while emphasizing preservation of capital. The
performance benchmark is HFRI ED:
Distressed/Restructuring Index
Colchester Global Fixed Income – London, UK
(inception 04.01.11)
Colchester’s team forecasts inflation for each country
and attempts to find markets that offer a real-yield
advantage on a relative basis. The majority of the
portfolio comprises sovereign bonds. In addition to G7
countries, the investable universe currently includes the
domestic sovereign debt of the non-classic countries,
such as Hungary, Poland and Mexico, among others.
The performance benchmark is the Citigroup World
Government Bond Fit Adjusted Composite Index.
Canyon Value realization Fund Cayman, Ltd. –
Beverly Hills, CA. (inception 04.15.15)
The fund’s objective is capital preservation and low
correlation with broader debt and equity markets, using a
broadly diversified portfolio with very low leverage. The
performance benchmark is HFRI ED:
Distressed/Restructuring Index
Real Assets
Endowment Asset Allocation
as of March 31, 2015 $181,858,280*
Wellington Strategic Real Asset – Boston, MA
The fund invests in various liquid assets, seeking strong
relative performance in a rising inflationary environment.
The index of the Fund is a blend of indices representing
the various asset classes in the Fund. Strategic Real
Assets is a vehicle which allocates to underlying
Wellington investment vehicles with inflation hedging
qualities. These underlying vehicles invest in energy
equities, metals & mining equities, commodities, and
inflation-protected core bonds. The performance
benchmark is the Wellington Strategic Real Asset
Custom Index.
Global Equities 55.7%
1. Vanguard (VINIX)
$22,136,654 (12.2%)
Domestic Equities. Large cap blend manager.
Benchmark: S&P 500 Index
2. Westfield Capital Management
$11,436,736 (6.3%)
Domestic Equities. Small cap growth manager.
Benchmark: Russell 2000 Growth Index
3. Marathon International Equities
$15,388,120 (8.5%)
International Emerging Blend Equities manager.
Benchmark: MSCI EAFE Index.
4. John W. Bristol Equity Fund I
$9,734,139 (5.4%)
Domestic Equities. All cap growth manager.
Benchmark: S&P 500 Index
5. Parametric Tax-Managed Emerging Markets Inst.
$7,893,591 (4.3%)
International Equities, Emerging Markets Net Index.
Benchmark: MSCI EM
6. Lazard Emerging Markets Portfolio
$7,632,933 (4.2%)
International emerging markets equities.
Benchmark: MSCI Emerging Markets Net Index.
7. Sanderson International Value
$17,575,845 (9.7%)
Foreign Developed Blend manager.
Benchmark: MSCI EAFE (Net)
8. AEW Global Properties Securities
$9,473,931 (5.2%)
Global Real Assets.
Benchmark: AEW Spliced Global Real Estate Index
Fixed Income 17.9%
Real Assets 2.6%
9. Loomis & Sayles
$8,709,349 (4.8%)
Fixed Income. Core Plus.
Benchmark: Barclays U.S. Govt/Credit
18. Wellington Strategic Real Asset
$4,801,712 (2.6%)
Strategic Real Assets
Benchmark: Wellington Strategic Real Asset Custom
10. Vanguard Total Bond Market Index
$10,317,522 (5.7%)
Fixed Income.
Benchmark: Spliced Total Bond Market Index
* Does not include The Rodel Charitable Foundation of Delaware
11. Vanguard Inter-term Treasury
$5,712,139 (3.1%)
Fixed Income.
Benchmark: Barclays Capital US Treasury: 5-10 Yr.
12. Colchester Global Fixed Income
$7,722,977 (4.2%)
Global Fixed Income.
Benchmark: Citigroup World Government Bond
Flexible Capital 16.8%
13. Forester Diversified
$12,573,403 (6.9%)
Hedge Fund
Benchmark: HFRI Fund of Funds Diversified Index
14. Weatherlow Offshore Fund I
$12,511,621 (6.9%)
Absolute Return Fund
Benchmark: HFRI Fund of Funds Diversified Index
15. UBP Multi-Strategy Hedge Fund
$379,444 (0.2%)
Alternative Asset Class. Hedge Funds.
Benchmark: HFRI Fund-of-Fund Composite Index
16. Anchorage Capital Partners Offshore, LTD
$3,000,000 (1.6%)
Absolute Return Fund
Benchmark: HFRI ED: Distressed/Restructuring Index
17. Canyon Value Realization Fund Cayman LTD.
$2,000,000 (1.1)
Absolute Return Fund
Benchmark: HFRI ED: Distressed/Restructuring Index
Market value estimated using preliminary manager reported performance.
Delaware Community Foundation calendar year investment returns over the past 10+ years
P.O. Box 1636 | Wilmington, DE 19899 | 302.571.8004
36 The Circle | Georgetown, DE 19947 | 302.856.4393
101 West Loockerman St. Ste. 2C Dover DE | 302.724.7552