SMUs endowment fund shows the way by fdh56iuoui


									                                         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

       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.

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