Publication: Asia Asset Management, p 14-15 Date: April 2007 Headline: SMU's endowment fund shows the way SMU's endowment fund shows the way Fund now looking to private equity to broaden investment scope E ndowment funds i n the United States combination of both active and passive have shown the way i n asset allocation mandates and these are invested and investments, providing a template through segregated and pooled funds. for similar fmds t o emulate overseas. In T h e fund uses up t o 30 external fund Asia, endowment funds have traditional- managers, virtually all of them appoint- ly been more conservative and have ed since 2005, with a tilt towards invested i n a far narrower range of assets. actively managed portfolios. In the case of Hong Kong, many of the According t o Mr Teo, the invest- endowment funds are still firmly glued ment objective of the endowment fund to the balanced mode, showing n o moti- is not just to preserve the purchasing vation to do otherwise. power of the fund but also to achieve a But in Singapore, one endowment sustainable rate of return i n excess of fund is breaking new ground with its ini- the spending rate over the long-term. tiatives. "I thinkin the last two years, we "We are looking t o achieve a return of have done quite a lot of interesting five per cent over the rate of inflation things," proclaims Teo Jwee Liang, the annually," he points out. chief investment officer at the Singapore In terms of the asset mix, the fund Management University (SMU). Since has about 40% invested i n equities, split coming o n board as the fund's CIO into global, US, European and Asian about two years ago, Mr Teo has over- equities. T h e funds are managed by a seen an overhaul of the fund's long-term Tea Jwee Liang number of large global firms as well as asset allocation and the way that its boutique operators, notes M r Teo. "So assets are being managed. 'We are tak- ant, Cambridge Associates, for invest- i t is not just the global firms that we are ing the lead i n many respects i n the way ment planning and asset allocation loolung at but also the smaller firms an endowment fund should be man- modelling; the consulting firm built its with local coverage," he says. aged," M r Teo told Asia Asset reputation i n the US for its work o n A further 20% is invested i n global Management i n a n interview in behalf of leading endowments there. bonds, including corporate bonds while Singapore last month. More recently, Cambridge has made a further 20% is allocated to marketable When it was launched, the fund's inroads i n Hong Kong, winning a cou- alternatives (hedge funds). In addition, assets were placed with two local fund ple of mandates i n the local market. some five t o 10 % is allocated to i d a - managers for balanced mandates; the Now, the fund's structure has a tion-linked assets such as commodities fund started with a grant of and real estate. The fund is S$SO million and since then also looking t o allocate the fund has expanded i n size between five and 10% of its to S$600 million, comprising portfolio to private equity. the accumulated surplus, com- Mr Robert Tomlin (Chairman) "We are looking at some of mitted pledges &om donors Vice-chairman, Asia the emerging opportunities UBS AG and matching grants fkom the for this asset class globally," government. Mr Timothy Chia Mr Anil Thadani says Nlr Teo. For the new alignment Chairman &Group CEO Chairman Interestingly, in allocating that the SMU has undertak- Hup Soon Global Pte Ltd Symphony Capital Parlers Asia to hedge funds, the endow- en, the balanced strategy has Mr Michael DeNoma Ms Saw Phaik Hwa ment fund has chosen not to since been abandoned i n Group Execulve Director President& CEO go with funds of funds vehi- favour of specialist managers Standard Chartered Bank SMRT Corporation cles and has instead invested based o n a core-satellite directly i n single strategy Mr Dilhan Pillay Mr Tan Kee Yong approach, one that was estab- Partner Deputy Secretary (Semces) funds, including absolute lished following an in-depth Wong Partnership Ministry of Education returns, event driven and review of best practices and longhhort strategies. As M r with the input of its consult- Teo describes it, it is a cus- Source: This article appeared in the Apr 07 issue of Asian Asset management and is reproduced here with the permission of the publisher. Publication: Asia Asset Management, p 14-15 Date: April 2007 Headline: SMU's endowment fund shows the way tomized multi-strategy approach, included in this category. "There are investing i n up to 20 individual funds. Personal CV other sectors to address of course such as "There's more transparency when it timbedforestry and oil and gas but we are Careec Brings more than 15 years ofinvest- comes to investing in single strategy ment management experience to SMU. not addressing these areas for the time hedge funds and one also pays lower fees m Pr~or joining SMU, Mr Teo was head of being," he adds. in the process compared with fund-of- the lnvenment department of a public non- Going forward, private equity will be profit organization. Also held senior posi- fund structures," explains Mr Tea. added to its list of investments. It is a rel- tions with major mstitutions, including Even so, the issue of investing i n Dresdner RCM Global Investors, Dresdner atively new area for institutional single strategy hedge funds poses a dif- Bank, and United Overseas Bank Hs also a investors in Asia; the fund is looking to ferent set of risks. Manager reporting worked at Exxon Singapore and the Minisay allocate up t o 10% of its assets i n the of National Development. and monitoring not to mention the sector. The fund also plans to embrace a operational risks are among some of Education: B. Eng First Class Honours) currency overlay strategy shortly. "We the challenges faced when undertaking from Monash University and MBA from are looking t o appoint one manager to this approach. I t is a process that can National University of Singapore. help reduce the volatility of our portfo- be time consuming and laborious too lios," says M r Teo. Other interests: Chamnan of Senja- and certainly for investors that are not Cashew Community Centre Management How did the fund perform i n 2006? large, the lack of sufficient resources Committee, Vice-Chairman of Tanglin View "If we look at our peer group of endow- preclude them &om undertaking this Management coundl and member of School ment funds in the US, comparing funds Advisory Board, Westmew Primary School. task in-house. of a similar size and scale, we have In the case of SMU, it outsources t i hs exceeded the average returns," he says. function to Cambridge Associates. "Maybe For its investments in intlation linked Last year, the fund reported a return in over time, when we have sufEdent scale assets, Mr Teo says the fund focuses the mid-teens i n US dollar terms. M r and resources, we may be able to assume mainly on the real estate and commodity Teo expects the fund's assets to top S$l this function in-house," notes MI-Tea. sectors. Inflation linked bonds are also billion i n the next few years. Source: This article appeared in the Apr 07 issue of Asian Asset management and is reproduced here with the permission of the publisher.