Investment governance
Trustees delegate most investment decision to an Investment Committee comprising five members, of which three are trustees and two independent members. The trustees tend to have sound lay investment knowledge and this is supplemented by two independent experts, one of whom will have experience of fund management and the other as an equity manager.
The Committee is served by a part time Investment Director and advised by an Investment Consultant (currently Cambridge Associates). The Committee does not see managers but receives reports from the Investment Director and the two independent experts at its regular meetings. Commitments to illiquid funds are taken after consulting with the Investment Consultants.
The Chairman of the Foundation chairs the Investment Committee which also reflects the centrality of the portfolio to the Foundation’s financial wherewithal. Every 18 months or so the Investment Committee is required to account to the full body of Trustees, and in particular to set out the investment risks to which the organisation is exposed. The purpose of this is to ensure that all trustees are prepared for adverse markets and can remain confident in the rational of the strategy in difficult circumstances. The strategy is underpinned by our Investment Beliefs.
Investment strategy
Our income comes from the interest on our investments. We do not fundraise or receive funding from the Government, making us financially and politically independent.
Our long term approach to investing is based on keeping a liquidity buffer in short dated gilts, which when combined with portfolio income, will provide sufficient liquidity to meet our obligations. This is invested for security first, then liquidity and last of all, return. With that sum assured we invest the balance for a maximum return (notwithstanding the associated volatility) in global equities and private equity/venture capital. Spending is calculated using a Constant Growth method linked to the historic value of the endowment, adjusted for inflation. In 2020 spending was 5.2% of the net asset value. We invest in public equities using five global managers, each with the same mandate but who are selected to be uncorrelated to each other, and we regularly rebalance between them, taking from the best performers and giving to the others in order to maintain an equally balanced portfolio. The private equity/venture capital portfolio is deliberately concentrated on funds of usually less than $500m. The short-dated gilts portfolio is managed internally. In 2015, Trustees decided to reduce the risk profile after many years of above average returns. This decision has given the organisation increased stability while it introduced a step increase in its spending plans and accounts for the current overweight to Gilts. Since 2003 (when this strategy began) the total return (net of fees) has been 10.4% per annum.