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TIFF25 The Investment Fund for Foundations

1991

2016

years after our founding, TIFF’s singular focusis unchanged. We pursue investment excellence so that endowed non-profits can

for build a sound future

25 A tested and timeless missionto seek to enhance the investment returns of non-profit organizations

to reduce the investment and administrative expenses of non-profit organizations

to broaden the universe of investment choices available to non-profit organizations

to assist non-profit organizations in deploying their assets in a manner that will support charitable expenditures while preserving the purchasing power of their assets

to help non-profit organizations monitor and evaluate their investment performance

to promote within the non-profit community an understanding of investment management

learn more at www.tiff.org

23

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TIFF’s path forwardIn the early spring of 1991, the world was a tumultuous place. The Soviet Union was crumbling, the apartheid era in South Africa was coming to an end, the Gulf War and Operation Desert Storm dominated world news, and four Los Angeles police officers were charged with beating Rodney King. World economies were beset by recessions, the savings and loan crisis raged in the United States, and the international banking system teetered as the BCCI scandal shook its very foundations.

Into that tumult, a group of far-sighted and dedicated non-profit executives * from places like the John D. and Catherine T. MacArthur Foundation and the Rockefeller Brothers Fund formally launched a project on which they had then been working for several years. On March 15, 1991, that group filed charter documents in the State of Delaware to create a non-profit corporation called “The Investment Fund for Foundations.” The idea behind TIFF was as simple as it was seminal — to create a cooperative-style organization where non-profit foundations lacking sufficient internal resources could pool endowment funds to access the innovative investment techniques being utilized by large foundations and universities. Within a few years, TIFF’s founders expanded the universe of eligible members to encompass 501(c)(3)’s of all stripes. That founding group also hired staff, formed a board, developed a mission statement and a credo, and developed pooled investment vehicles to implement TIFF’s mission. Then, early

Dick FlanneryChief Executive Officer

staffers with names such as Salem and Cash breathed life into an entity that would go on to serve hundreds of non-profits across the country.

In the ensuing 25 years, some three dozen prominent chief investment officers and non-profit executives served on a TIFF board and over 750 non-profits in 43 states pooled their resources at TIFF. Today, about 70 staffers in Boston and outside Philadelphia (Radnor) manage about $10 billion in non-profit assets (including committed capital) through core and specialized investment strategies. And, the current TIFF boards, like their predecessors, comprise highly talented volunteers who donate their time and talent to the pursuit of investment excellence on behalf of endowed non-profits.

TIFF has never been an institution that trumpeted achievements or permitted fanfare over milestones. So, we candidly struggled over what, if anything, we should do as the 25th anniversary approached. “Nothing” was an option we seriously considered. We finally decided the event should be acknowledged, but in a modest and hopefully graceful manner – hence the scale and style of the piece you are now holding.

Those of us who have the great privilege and serious responsibility to carry on TIFF’s work today thank the members, directors, staffers, founders, and money management partners who came before us; and, we pledge our utmost efforts to ensuring that the path forward for TIFF’s second 25 years is built on a foundation just as solid as the one we inherited.

* You will find some of their names and even a few of their faces later in this booklet.

54

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Investing for the long haulOne of the reasons I decided to join TIFF last year as Chief Investment Officer is the inherent advantage of having an investor base with a built-in understanding of the long view. Beyond relying on a sober spending rate, perpetual-life charities need an investment program geared for the long haul if they want to achieve 5% real (inflation-adjusted) returns. As a concept, focusing on long time horizons sounds easy. In practice, it’s not. Over my career, I’ve learned how difficult it can be to remain disciplined and to stay the course in the roughest of market environments.

We’ve all heard how important it is to be in the market when powerful surges occur – and history shows they do occur. A few numbers help illustrate just how important these surges are. Research by J.P. Morgan1, for example, found that an imaginary buy-and-hold investor in the S&P 500 Index from the start of 1995 through the end of 2014 (20 years) would have seen a 9.85% annualized return. Missing the 10 best days drops the return to 6.10%. Missing the 20 best days lowers the return to 3.62%. Interestingly, six of the 10 best days fell within two weeks of the 10 worst days. Similarly, work at Vanguard2 in 2011 found that seven of the 10 highest-returning months for US stocks since 1926 occurred during recessions.

TIFF’s own research of long-term market data confirms a central lesson here. To achieve the 5% real goal on behalf of our investing organizations, our core endowment strategies must hold sufficient equity risk to propel returns. We temper that risk with a range of other strategies. Nonetheless, with equity risk comes a degree of volatility. These painful (or exhilarating) short-term periods test our collective discipline. We want to avoid pulling short-term levers for emotional reasons. Instead, our watchword must be constancy. If we believe that a reasonably regulated free-market system will continue to produce long-term economic growth and productivity — and we do — then the most rewarding approach is clear: investing for the long haul beats chasing returns.

It’s my job to make sure our portfolios take sufficient risk to meet your long-term endowment needs while dampening shorter-term volatility. We believe this is difficult but achievable. As we set this course, we are keenly aware that your amazing work as non-profits depends in part on our success. Our team will do its utmost in the years ahead to reward your trust.

Jay WilloughbyChief Investment Officer

6 7

1 https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-retirement 2 https://personal.vanguard.com/pdf/icrrbp.pdf

BOARD M

EMBERS

Board membersSeth AlexanderPresident MIT Investment Management Co.(TAS board, former Chair)

Craig CarnaroliExecutive Vice President University of Pennsylvania(mutual fund board)

Collette ChiltonChief Investment OfficerWilliams College(TAS board, Chair)

Richard FlanneryChief Executive Officer TIFF Advisory Services(TAS board)

Erik LundbergChief Investment Officer University of Michigan(TAS board)

Scott MalpassVP and Chief Investment Officer University of Notre Dame(TAS board)

Ana MarshallVP and Chief Investment Officer The William and Flora Hewlett Foundation(TAS board)

William McCalpinformer Chief Executive Officer Imprint Capital Advisors, LLC(mutual fund board, Chair)

N.P. NarvekarPresident and CEOThe Columbia Investment Management Co.(mutual fund board)

Sandra RobertsonChief Investment Officer and Chief Executive Officer Oxford University Endowment Mgmt. Ltd.(TAS board)

Amy RobinsonVice President and Chief Financial OfficerThe Kresge Foundation(mutual fund board)

Dennis SuginoSenior Adviser Aristotle Capital Management, LLC(TAS board)

8 9

If TIFF did not exist, it would need to be invented, because our mission is as relevant today as it was 25 years ago. My board colleagues and I salute TIFF’s founders, alumni, former board members, external managers, and current team as well as the many others who have supported TIFF's work on behalf of non-profits over the years. -- Collette Chilton, Chair, TIFF Advisory Services Board

• "TAS board" indicates a member of the TIFF Advisory Services board• "mutual fund board" indicates a member of the TIFF Investment Program board

LEADERSHIPSenior investment team

Dave FallaceManaging DirectorDiversifying strategies, including absolute return

Trevor GrahamManaging DirectorMarketable equity-oriented assets

Stephen VicinelliManaging Director, Deputy CIOPrivate investments

Jay WilloughbyChief Investment Officer

Portfolio ManagementChris Anderson, Jessica Bolster, Daniel Greenberg, Chris Matteini, Joe Miller, Brendon Parry, Jessica Taranto

ResearchLeah Anderson, Martin Breu, Bradley Calder, Elizabeth Clegg, Rachel Gladstone, Danny Guo, Tim McDonnell, Stephen Williams, Emily Xia

Investment Committee• Jay Willoughby, Chair• Herbie Bohnet • Dave Fallace• Dick Flannery• Trevor Graham• John Merrill• Stephen Vicinelli

Organizational leadership

Dawn LezonVice President,finance and financial reporting

Kelly LundstromVice President,fund and member operations

Richelle MaestroGeneral Counsel

John MerrillManaging Directoroutreach, TIFF Keystone Program

Christian SzautnerChief Compliance Officer

Jim ShieldsChief Information Officer

Dick FlanneryChief ExecutiveOfficer

10 11

Herbie Bohnet Managing Directorand Counsel

MILESTO

NES

Growth at areasonable pace

March 15, 19911995 1997 1999

2001 2004

TIFF is Incorporated as a Not-for-ProfitA foundation collaborative headed by the MacArthur and Rockefeller foundations creates TIFF

Private investment strategieslaunched

Absolute return strategieslaunched

At 10th anniversary, about 300 member organizations and $2B in assets

First core endowment fund launched (diversified global asset mix including hedge funds)

Comprehensive OCIO service launched - TIFF Keystone Program (TKP) (offering non-profits the ability to delegate fiduciary responsibility and oversight to TIFF)

Today

Second core endowment fund launched (diversified global asset mix including hedge funds and private investments)

About 750 member organizations and about $10B assets under management (including committed capital) as of 12/31/2015

▲▲

▲ ▲▲ ▲

▲▲

2007

2012First annual TIFF Investment Forum is held, adapted from six previous Endowment Management Seminars

▲2012 ▪ FO R U M ▪ 2

012

IN

VESTMENT

1994Inception of a family of five mutual funds under the TIFF umbrella (US, international, emerging markets, bonds, short-term)

▲

▲2011

At 20th anniversary, about 45 TIFF staffers serving non-profits in 43 states

1992David Salem is named TIFF’s first President and CEO

▲

© 2016 TIFF Advisory Services, Inc. All rights reserved. May not be reproduced or distributed without permission.

State # of Members

2015 Change

NY 104 ‐4

MA 75 +2

PA 60 0

VA 59 ‐1

CA 52 ‐2

Top 5 States by Member Count

Geographic concentration of member organizations (by member count)

4

50 or more

25‐49 

10‐24

5‐9 

None

1‐4

Members organizations

As of 12/31/2015

MT

WY

ID

WA

OR

NV

UT

CA

AZ

ND

SD

NE

CO

NM

TX

OK

KS

AR

LA

MO

IA

MN

WI

IL IN

KY

TN

MS AL GA

FL

SC

NC

VAWV

OH

MI

NY

PA

MDDE

NJCT

RI

MA

ME

VTNH

AK

HI

DC

© 2016 TIFF Advisory Services, Inc. All rights reserved. May not be reproduced or distributed without permission.

State # of Members

NY 109

MA 77

PA 63

VA 61

CA 57

Top 5 States by Member Count

Member organizations as of June 30, 2015

50 or more

25‐49 

10‐24

5‐9 

None

1‐4

Members organizations

Member count by state 

MT

WY

ID

WA

OR

NV

UT

CA

AZ

ND

SD

NE

CO

NM

TX

OK

KS

AR

LA

MO

IA

MN

WI

IL IN

KY

TN

MS AL GA

FL

SC

NC

VAWV

OH

MI

NY

PA

MDDE

NJCT

RI

MA

ME

VTNH

AK

HI

DC

5

12 13

12/31/2015Member organizations

BUILDIN

G INVESTM

ENT EXCELLEN

CE

Building investment excellence for the next 25 years

PeopleTIFF seeks highly skilled, resourceful, and intelligent individuals for whom our mission strikes a chord. We believe our non-profit focus is appealing, especially to the rising generation of younger investment professionals, and we view our model as an attraction for top-flight talent.

Information technologyWe are implementing a “backup to cloud storage” initiative to improve disaster recovery; upgrading and reassessing security, with an emphasis on end-user enhancements and security awareness; upgrading failover infrastructure and off-hours monitoring to further minimize disruption and down-time; and upgrading Web and other Member-related applications to improve the efficiency and effectiveness of Member support.

Research processTo ensure that we pursue only the most promising investment ideas, TIFF’s Investment Committee, comprised of our most experienced staffers, is identifying more targeted categories of opportunity and providing more focused direction to the full investment team.

Portfolio construction and risk managementWe are building a faster, more dynamic platform for running in-depth, what-if scenarios for different portfolio mixes. It will allow us to simulate the impact of various possible portfolio shifts under different market scenarios to intimately understand potential risks and rewards. The platform uses both externally developed applications and customized, internally developed software.

ReputationOur approach and member base have given TIFF a strong reputation for being a good partner with top-tier money managers around the world. This calling card is important, and we intend to protect and burnish it.

Research managementTIFF is enlarging and enhancing its research management system, which is used across the organization to capture all information related to managers. Currently, the system holds extensive data and commentary on over 3,500 investments.

Environmental, social, governance factorsWe are conducting research on, and discussing with board members, the inclusion of environmental, social, and governance factors in investment decision-making. No firm decisions have yet been made.

Board continuitySince inception, the TIFF boards have been comprised primarily of leading non-profit chief investment officers and leading non-profit business and financial executives. That formula has stood the test of time and it remains firmly in place today. The TIFF boards have contributed countless hours to the investment needs of endowed non-profit organizations.

Enhanced strategiesWe are researching ways to further enhance the investment strategies offered to non-profits. Our goal is to deliver more flexible investment approaches while maintaining reasonable liquidity terms.

14 15

TIFF has made the pursuit of investment excellence and continuous improvement its central guiding principle. These are among the projects and process improvements we are currently undertaking.

Operational risk managementWe are investing in new tools and processes to enhance our ability to manage the demands of a rapidly changing and increasingly complex regulatory environment. Robust data management capabilities and a flexible platform are vital priorities.

OU

R THANKS

To all our member organizati ons, board members, managersof capital, and staff , past and present,

David Salem, TIFF’s first CEO and CIO, left, embraces Lawrence Landry, “The Father of TIFF.” Landry was originally with the MacArthur Foundation (2010 photo)

Our board alumni * and their affiliations while serving

thank you for creati ng and sustaining TIFF so that we may conti nue to serve the non-profi t community

CEO Dick Flannery with Esther Cash, who built TIFF’s operations, finance, and member services capabilities from scratch. (2010 photo)

Board Member Bill McCalpin, originally with the Rockefeller Brothers Fund, at a 1994 TIFF board meeting. He rejoined in 2008 and remains a board member today.

Michael BillsUniversity of VirginiaSuzanne BrennerMetropolitan Museum of ArtChristopher BrightmanUniversity of VirginiaAshvin ChhabraInstitute for Advanced Study

John CraigCommonwealth FundGregory CurtisLaurel FoundationAlice HandyUniversity of VirginiaHarry HoffmanMayo FoundationSheryl JohnsHouston EndowmentRobert KasdinMetropolitan Museum of ArtMark KritzmanWindham Capital ManagementLawrence LandryMacArthur FoundationBarbara LawsonMarin Community Foundation

Laurence Lebowitz TIFF Richard LindseyCalcott GroupMichael McCafferyStanford UniversityWilliam McLeanMacArthur FoundationJohn MebaneThe Duke EndowmentJane MendilloWellesley College / Harvard UniversityJack MeyerHarvard UniversityThruston MortonDuke UniversityWilliam NicholsThe William and Flora Hewlett FoundationAlicia PhilippMetropolitan Atlanta Community Foundation

John PowersStanford UniversityFred RenwickNew York UniversityDavid Salem TIFF

Carl SchaferThe Atlantic FoundationNina ScheragoHoward Hughes Medical Institute

Ellen ShumanCarnegie Corporation of New YorkAnn Brownell SloaneSloane & HinshawDavid SwensenYale UniversityLinda TafoyaAdolph Coors FoundationJeffrey TarrantArista GroupPhilip TobinThe Cleveland FoundationDavid WhiteThe Rockefeller FoundationArthur WilliamsPine Grove AssociatesRobert WiseMeadows Foundation

designates an original 1991 Trustee of TIFF

Other groups making early commitments or grants to TIFFClaude Worthington Benedum Foundation, The Boston Foundation, California Community Foundation, Communities Foundation of Texas Inc., The John A. Hartford Foundation Inc., The Joyce Foundation, W. K. Kellogg Foundation, Joyce Mertz-Gilmore Foundation, The Minneapolis Foundation, The New York Community Trust, The Rhode Island Foundation, The San Francisco Foundation, Anonymous

groups that made early commitments or grants to TIFF

16 17* Includes board alumni of TIFF’s investment adviser entity and TIFF’s family of mutual funds.

• TIFF requires complete honesty of its staff, board, and vendors.

• No member of TIFF’s staff or board shall encourage an organization to purchase a product or service that it does not need.

• TIFF shall be accountable for the actions of its board and staff in the performance of their authorized duties.

• Each member of TIFF’s staff shall be accountable for his or her actions.

• TIFF values candor and encourages staff, board, and vendors to disclose complaints, biases, and real or potential conflicts of interest at the earliest possible time.

• Employment, promotion, and compensation decisions shall be based on merit alone.

• The value of members of TIFF’s staff shall be measured by the enthusiasm and care with which they perform their assigned duties, not by the character of such duties.

• No member of TIFF’s staff is too exalted to perform, when necessary, the duties of the least-senior or lowest-paid employee.

• TIFF seeks to maintain a congenial work environment where patience and humor are the norms.

TIFF’s Credo

Members Assets ($M) *

Community Foundations 53 $778

Cultural/Historical Organizations 64 $598

Education-Related Institutions 192 $2,615

Health Care-Related Institutions 67 $1,436

Private Foundations 202 $2,513

Specific Public Benefit Institutions 179 $2,075

Total 757 $10,015

Membership summary as of December 31, 2015

* Includes assets in private investment strategies on which TIFF receives a management fee, which may be based on committed capital or net invested capital.

1819Pictured on page 18: Daniel Greenberg, Elizabeth Clegg. Pictured on page 19: Danny Guo (top), Brian Marrer, Michele McCaughern.

The Investment Fund for Foundations170 North Radnor Chester Road, Suite 300Radnor, Pennsylvania 19087610-684-8200info@tiff.orgwww.tiff.orgOffices in Boston and thePhiladelphia metro area

© 2016 TIFF Advisory Services, Inc. All rights reserved. May not be reproduced or distributed without permission. Published March 2016.