UW SYSTEM TRUST FUNDS by lifemate

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									UNIVERSITY OF WISCONSIN SYSTEM
                   TRUST FUNDS


      Annual Endowment Peer Benchmarking Report
                        Year Ended June 30, 2007
                                              UW SYSTEM TRUST FUNDS
                                     Annual Endowment Peer Benchmarking Report
                                            Fiscal Year Ended June 30, 2007



                                                    INTRODUCTION

●   The Annual Endowment Peer Benchmarking Report utilizes three informational sources: 1) the 2007 National Association
    of College and University Business Officers (NACUBO) Survey; 2) the 2007 Commonfund Benchmarks Study; and 3) the
    informal Big Ten survey conducted by Penn State University.

●   The peer benchmarking data presented in this report fall into the following categories:

          1. Asset Allocation
          2. Investment Performance
          3. Cost of Managing Investment Programs
          4. Investment Management Practices
          5. Endowment Growth from New Gifts
          6. Spending Policies
          7. Investment Return Assumptions
          8. Underwater Funds
          9. Staffing, Resources, and Governance
         10. Socially Responsible Investing Practices

●   The NACUBO and Commonfund surveys represent essentially the same population of institutions. Therefore, when
    similar data is provided in both surveys, results from only one of the surveys is presented here. In some cases, only one
    of these two surveys provides certain types of data. Big Ten data is presented wherever possible, as this information
    represents a distinct subset of the larger population.

●   Except where otherwise noted, data presented are equal-weighted averages.



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                                                   UW SYSTEM TRUST FUNDS
                                          Annual Endowment Peer Benchmarking Report
                                                 Fiscal Year Ended June 30, 2007




                                                       SUMMARY DATA


                                                      NACUBO                  Big Ten               Commonfund
                                                        Study                  Survey                    Study
    Number of Institutions Reporting: Total              785                     17                       767
    Number of Institutions Reporting: Public             269                     16                       188
    Number of Institutions Reporting: Private            516                      1                       579
    Largest Endowment – Public:                     $15.6 billion1           $7.3 billion3           $15.6 billion1
    Largest Endowment – Private:                    $34.6 billion2           $6.4 billion4           $34.6 billion2
    Average Endowment Size:                         $523.8 million           $1.7 billion                 N/A
    Median Endowment Size:                           $91.1 million           $1.3 billion                 N/A
    Participating UW Institutions:              UW System Trust Funds   UW System Trust Funds    UW System Trust Funds
                                                UW-Madison Foundation   UW-Madison Foundation    UW-Madison Foundation
                                                                                                 UW-Superior Foundation
                                                                                                UW-River Falls Foundation
    UW System Trust Funds Endowment:                                         $352 million
1
  University of Texas System
2
  Harvard University
3
  University of Michigan
4
  Northwestern University




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                                                     UW SYSTEM TRUST FUNDS
                                            Annual Endowment Peer Benchmarking Report
                                                   Fiscal Year Ended June 30, 2007




                                                        ASSET ALLOCATION


                                        UW                   NACUBO                 NACUBO                   NACUBO                  Big Ten
ASSET CLASS                         Trust Funds              All Pools            $100-$500MM                  >$1B                  Average
Equities                               62.1%                  57.6%                   56.6%                    47.0%                  52.5%
Fixed Income                           18.4%                  18.6%                   15.1%                    11.2%                  16.4%
Alternatives                           14.1%                  18.9%                   23.4%                    39.5%                  29.1%
      Private Capital 1                6.5%                    3.2%                    3.9%                    10.4%                   8.7%
      Hedge Funds 2                    7.6%                   10.6%                   13.8%                    20.5%                  12.2%
      Real Estate 3                    0.0%                    3.5%                    3.6%                     5.0%                   5.5%
      Natural Resources 4              0.0%                    1.6%                    2.1%                     3.6%                   2.7%
Cash                                   4.5%                    3.5%                    2.8%                     1.6%                   1.3%
Other                                  0.9%                    1.4%                    2.1%                     0.7%                   0.7%
           TOTAL                      100.0%                  100.0%                 100.0%                   100.0%                 100.0%
1
  Category consists primarily of venture capital and other private equity.
2
  Category consists primarily of unregulated private investment partnerships investing in mostly marketable securities, but employing strategies
  (long/short, convertible arbitrage, leverage, etc.) designed to provide for more absolute returns with low correlation to the markets.
3
  Category includes both public and private real estate.
4
  Category includes timber, oil and gas partnerships, and commodities.




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         UW SYSTEM TRUST FUNDS
Annual Endowment Peer Benchmarking Report
       Fiscal Year Ended June 30, 2007




   INVESTMENT PERFORMANCE




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                                 UW SYSTEM TRUST FUNDS
                        Annual Endowment Peer Benchmarking Report
                               Fiscal Year Ended June 30, 2007




                           INVESTMENT PERFORMANCE

                          Range of Returns: NACUBO All Pools

                                1 Year           3 Year           5 Year      10 Year
      th
    75 Percentile                19.0%            14.0%            12.4%        9.5%
       Median                    17.2%            12.3%            11.3%        8.4%
    25th Percentile              15.6%            10.7%             9.8%        7.3%
UW Trust Funds Return            21.0%            15.9%            13.0%        9.3%
                              st               st               st           nd
 UW Trust Funds Rank         1 Quartile       1 Quartile       1 Quartile   2 Quartile




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                                         UW SYSTEM TRUST FUNDS
                                Annual Endowment Peer Benchmarking Report
                                       Fiscal Year Ended June 30, 2007




                         COST OF MANAGING INVESTMENT PROGRAMS


●   In the past, the Commonfund Study attempted to report investment costs on a percent-of-assets basis, to improve
    comparability across different sizes and types of institutions.

●   The Commonfund Study now reports direct investment costs simply in total dollar terms and asks what types of
    fees are included and excluded by respondents.

●   The NACUBO study requests “dollars withdrawn” to fund direct investment management and custody fees
    and translates this into an average percent of assets, but cautions against interpreting the results as average total
    fees in basis points.

●   The increasing use of different fee structures and investment vehicle types has rendered calculations and
    comparisons more difficult and suspect, especially when attempting to express costs as a percent of total assets.




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                                                        UW SYSTEM TRUST FUNDS
                                               Annual Endowment Peer Benchmarking Report
                                                      Fiscal Year Ended June 30, 2007




                                            INVESTMENT MANAGEMENT PRACTICES


                                                   Percent Internally               Percent Passively                 Percent Actively
                                                      Managed1                         Managed2                          Managed
        NACUBO All Pools                                7.8%                             15.9%                            84.1%
        NACUBO $100-$500 million                        3.8%                             16.3%                            83.7%
        NACUBO >$1 billion                              9.6%                             8.7%                             91.3%
        UW Trust Funds *                                9.4%                             14.4%                            85.6%
    1
      UW Trust Funds’ “internally-managed” endowment assets are comprised of the U.S. Treasurys and U.S. TIPS portfolios managed by
      UW-Madison’s Applied Security Analysis Program.
    2
      Passively managed assets are comprised of the U.S. Treasurys and U.S. TIPS portfolios being managed “internally,” as well as a portion
      of the total allocation to U.S. Small/Mid Cap Equities.
.




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                           UW SYSTEM TRUST FUNDS
                  Annual Endowment Peer Benchmarking Report
                         Fiscal Year Ended June 30, 2007




             ENDOWMENT GROWTH FROM NEW GIFTS

         New Gifts as a Percent of Average Endowment Value*

 NACUBO All Pools                                                 3.2%
 NACUBO $100-$500 million                                         3.7%
 NACUBO >$1 billion                                               2.7%
 UW Trust Funds                                                   3.0%
* Rates are computed by dividing new gift dollars received by the average of the fiscal
  year beginning and ending market values.




                           New Gifts in Dollars ($ Millions)

  Commonfund All Pools                                            $8.0
  Commonfund $100-$500 million                                    $7.6
  Commonfund >$1 billion                                          $66.5
  UW Trust Funds                                                  $9.8




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                                              UW SYSTEM TRUST FUNDS
                                     Annual Endowment Peer Benchmarking Report
                                            Fiscal Year Ended June 30, 2007



                                             SPENDING POLICIES

                                             Spending Methodology*

                                                    Commonfund           Commonfund         Commonfund
                                                      All Pools        $100-$500 million     >$1 billion
 Percent of a moving average                           75.0%                77.0%             71.0%
        Average percentage used                         4.8%                 4.8%              5.0%
 Decide on an appropriate rate each year                9.0%                 9.0%              4.0%
 Spend a pre-specified percentage of                    5.0%                 5.0%              0.0%
 beginning market rate
 Weighted average or hybrid method                     5.0%                  5.0%               14.0%
 Last year’s spending plus inflation                   3.0%                  5.0%                7.0%
 Spend all current income                              2.0%                  1.0%                0.0%
 Grow distribution at a predetermined                  1.0%                  1.0%                2.0%
 inflation rate
 Other                                                 8.0%                  5.0%               7.0%
 UW Trust Funds                                               4% of moving 12-quarter average
* Multiple responses were allowed.




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                          UW SYSTEM TRUST FUNDS
                 Annual Endowment Peer Benchmarking Report
                        Fiscal Year Ended June 30, 2007




                            SPENDING POLICIES


                           Average Spending Rates*

 Commonfund All Pools                                            4.4%
 Commonfund $100-$500 million                                    4.6%
 Commonfund >$1 billion                                          4.4%
 Big Ten                                                         4.8%
 UW Trust Funds                                                  3.6%
*Average spending rates are computed as a percentage of market value.




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                      UW SYSTEM TRUST FUNDS
             Annual Endowment Peer Benchmarking Report
                    Fiscal Year Ended June 30, 2007




            INVESTMENT RETURN ASSUMPTIONS


             Long-Term Investment Return Assumptions

Commonfund All Pools                              8.3%
Commonfund $100-$500 million                      8.6%
Commonfund $500-$1 billion                        8.7%
Commonfund > $1 billion                           8.4%
UW Trust Funds                                 8.0%-9.0%




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                                                    UW SYSTEM TRUST FUNDS
                                           Annual Endowment Peer Benchmarking Report
                                                  Fiscal Year Ended June 30, 2007




                                                     UNDERWATER FUNDS*


                                                            Percent of Institutions Reporting           Percent of Endowment Underwater
                                                                  Underwater Funds
 Commonfund All Pools                                                     16%                                              1.7%
 Commonfund $100-$500 million                                             23%                                              0.9%
 Commonfund > $1 billion                                                  21%                                              0.5%
 UW Trust Funds                                                          None                                              0.0%
* “Underwater funds” represent individual endowment accounts whose market values are below their “historic dollar value”
  (i.e., the original value of the gift).




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                                                  UW SYSTEM TRUST FUNDS
                                         Annual Endowment Peer Benchmarking Report
                                                Fiscal Year Ended June 30, 2007




                                   STAFFING, RESOURCES, AND GOVERNANCE

                                             Committee Size and Investment Staffing

                                       Average Number of           Average            Investment Staff   Percent Using
                                       Committee Members      Investment Staffing         Range *        Consultants *
 Commonfund All Pools                         7.6                     1.4                   0-28            74.5%
 Commonfund $100-$500 million                 8.7                     0.9                    0-4            87.2%
 Commonfund > $1 billion                      8.9                    11.5                   0-28            52.2%
 UW Trust Funds                               5.0                     2.0                   N/A               No
* These numbers are from the NACUBO Study.




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                                            UW SYSTEM TRUST FUNDS
                                   Annual Endowment Peer Benchmarking Report
                                          Fiscal Year Ended June 30, 2007




                              STAFFING, RESOURCES, AND GOVERNANCE

                               Average Number of Separate Investment Firms Used

                        Commonfund All Pools                               15.4
                        Commonfund $100-$500 million                       18.4
                        Commonfund > $1 billion                            75.6
                        UW Trust Funds                                      8



                       Average Number of Separate Investment Firms Used by Asset Class

                                         Commonfund All      Commonfund       Commonfund
                                            Pools           $100-$500 mm       > $1 billion   UW Trust Funds
Domestic Equities: U.S.                       3.8                4.8               7.6              3
Fixed Income                                  1.9                2.0               3.1              2
International Equities: Non-U.S.              2.8                2.8               7.5              2
Alternative Strategies – Direct              15.8                9.6              59.6              1
Alternative Strategies – Fund of Funds        3.2                4.2               3.6              3




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                                    UW SYSTEM TRUST FUNDS
                          Annual Endowment Peer Benchmarking Report
                                 Fiscal Year Ended June 30, 2007




               SOCIALLY RESPONSIBLE INVESTING PRACTICES

                   Percent That Consider Social Responsibility Criteria

NACUBO All Pools                                                         24.0%
NACUBO $100-$500 million                                                 22.0%
NACUBO > $1 billion                                                      28.2%
UW Trust Funds                                                            Yes*
* UW Trust Funds actively votes proxies, solicits student and public comment on social issues, and
  may take ad hoc actions on social responsibility issues.




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