portfolio review 3rd quarter 2015 · • emerging market valuations are now even more compelling....

PORTFOLIO REVIEW3rd Quarter 2015

Prepared by: Caitlin Markel

Richard M. ToddScott Middleton, CFA, CIMA®

Steve Karsh

INNOVEST AT A GLANCE

—

———

——

——

——

—

—

——

—

——

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

————

*As of August 2015

Privileged and Confidential

2

June 30, 2012

Innovest’s History With South Dakota School of Mines and Technology Foundation

2010-20112008-2009

Entered into contract between Innovest Portfolio Solutions and South Dakota School of Mines and Technology Foundation .

Prepared first quarterly performance report and continue to date.

Recommended consolidation of custody of the portfolio’s long term assets.

Completed spending simulations to help determine the appropriate asset allocation, resulting in a transition of the portfolio to revised asset allocation levels and new asset classes.

Purchased Private Advisors Stable Value and Common Sense Offshore as part of new allocation.

Completed manager searches for mid and small cap equities, international equity, hedge fund of funds, leveraged hedge fund of funds, private equity and real estate strategies, resulting in the hiring of several managers in 2010 (see note below).

Replaced Blackrock High Yield with JP Morgan High Yield due to management changes.

Delivered Emerging Markets presentation and related manager search.

Completed Liquid Low Correlated Hedge Fund manager search.

To improve portfolio diversification, added Cornerstone Patriot Fund, UBS Trumbull Private Real Estate Fund, Wells Fargo Emerging Markets, Highbridge Dynamic Commodities, Common Sense Long Biased, and Common Fund Capital PE VIII. Also replaced Fidelity Floating Rate with Eaton Vance Floating and replaced Janus Perkins Mid Cap Value with iShares Russell Mid Cap Value and John Hancock Disciplined Value.

Implemented a new allocation after review of the annual Asset Allocation Study

3

June 30, 2012

Innovest’s History With South Dakota School of Mines and Technology Foundation

2014-2015

Provided Asset Allocation Study along with quarterly performance reports; Delivered Fiduciary Education

Removed Highbridge Commodity from plan due to poor performance and directed complete Commodity allocation into PIMCO Commodity. Added an additional commitment to Lighthouse Global Long/Short with the proceeds from the Common Sense Redemption.

Conducted International Core Equity search including current manager (Thornburg), and index fund, and two active managers. Added iShares MSCI EAFE to portfolio to diversify International Equity allocation, which was later replaced by Vanguard Total Intl Stock.

Presented searches on Core Fixed Income, Emerging Markets Equity, LCH Basket, and PIMCO Commodity replacement.

Added Vanguard 500 Index to replace SFM due to poor performance and to lower overall costs. Added Vanguard Sm Cap Growth to lower costs and increase diversification in the SMID cap space.

Chose new allocation adding Fixed Income as an asset class

2012-2013

Delivered Active vs. Passive Investing presentation

Delivered illiquid credit presentation and related manager search, resulting in the addition of Portfolio Advisors Private Equity VII investment.

Completed analysis of the portfolio’s expense ratios of each of the investment managers.

Received a full redemption of Common Sense Offshore and partial redemptions of Private Advisors Stable Value and Common Sense Long Biased.

Added Fidelity Contra Fund to replace Weber due to inconsistent performance. Replaced Fidelity Floating Rate with Eaton Vance Floating Rate and replaced Janus Perkins Mid Cap Value with John Hancock Disciplined Mid Cap Value.

4

THIS PAGE LEFT INTENTIONALLY BLANK

5

Performance Over Time

Risk and Return (Since Inception) Asset Allocation

Cumulative Performance over Time

Change in Account Value

LastQuarter

Year ToDate

1Year

3Years

5Years

7Years

SinceInception

InceptionDate

SDSM Total Fund -6.34 -3.14 -3.05 5.19 5.98 4.02 8.71 04/01/2009SDSM Custom Benchmark -6.41 -3.67 -2.93 6.17 6.68 7.25 10.57Difference 0.07 0.53 -0.12 -0.98 -0.70 -3.23 -1.86

Market ValueAs of

07/01/2015

Market ValueAs of

09/30/2015

Change$

SDSM Total Fund 50,980,920 47,924,348 -3,056,572

$0 $1,202,971 $2,405,942 $3,608,913 $4,811,884 $6,014,855

Schwab Money Market FundCommon Fund Capital Int'l VII

TIFF PE Partners 2011CommonFund Capital PE VIIIJPMorgan High Yield Select

iShares Russell Midcap ValueVanguard Small Cap Growth Index

Vanguard Total Bond Market IdxPort Advisors PEFVI

John Hancock Disciplined Mid Cap ValuePortfolio Advisors Private Equity VII

Oak Ridge Small to Mid Cap Growth - SDSMTIFF Absolute Return Pool

UBS Trumbull Property FundCornerstone Patriot Real Estate Fund

PIMCO Commodity Real ReturnLighthouse Global Long/Short Equity

Vanguard Total Intl Stock IndexThornburg Intl ADR - SDSMEaton Vance Floating Rate; I

Wells Fargo Adv Emerging Markets EquityVanguard 500 Index Fidelity Contrafund

BRC Large Cap Equity - SDSMPrivate Advisors Stable Value Fund, Ltd.

$145,442$170,624

$285,204$365,999

$932,294$1,032,247$1,038,102$1,056,855$1,097,864$1,132,294$1,230,578$1,254,341

$1,457,634$1,776,651$1,826,988$1,922,861

$2,477,174$2,758,062$2,803,711

$2,958,146$3,388,014

$3,794,016$3,875,051

$4,238,048$4,906,148

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Re

turn

(%)

8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0Risk (Standard Deviation %)

S&P 500 Index

SDSM Total Fund

SDSM Total Fund SDSM Custom Benchmark

-50 %

0%

50%

100%

150%

6/09 12/09 6/10 12/10 6/11 12/11 6/12 12/12 6/13 12/13 6/14 12/14 6/15 9/15

Executive SummarySeptember 30, 2015

6

THE MARKETS

Investment ReturnsThird Quarter 2015

July August September

‐6.44%

‐11.92%

‐10.23%

‐17.90%

1.23%

‐25.00%

‐20.00%

‐15.00%

‐10.00%

‐5.00%

0.00%

5.00%

S&P 500

Russell 2000

MSCI EAFE

MSCI EM

Barclays US Agg Bond

7

U.S. ECONOMY: STILL MODESTLY POSITIVE• The U.S. economy continues to move ahead in “plow horse”

like fashion, even as Q2 GDP growth surprised at 3.9%.• Improvements in the U.S. labor market are significant, though

the September jobs report was below expectations.• Auto sales are the strongest since 2001, as consumer spending

remains on a positive trajectory.• The service sector economy has grown robustly in 2015, with

the ISM Non-Manufacturing Index hitting a record in July.

CHINA: A SOFT LANDING OR A FINANCIAL MELTDOWN?• Chinese economic data continued to disappoint to the

downside.• The Chinese domestic stock market crashed after peaking in

mid-June, sparking volatility across global markets in Q3.• A surprise devaluation of the Chinese Yuan weighed on U.S.

markets in August. • While China’s influence on global growth is quite significant,

U.S. exports to China account for just 0.5% of U.S. GDP.

Third Quarter: GLOBAL ECONOMICS

China’s Growth Has Fallen Below Its 7% Target

Source: Vanguard, 9/2015.

U.S. Leading Economic Indicators Are Encouraging

Source: Fritz Meyer POV, 9/2015.

8

GLOBAL ECONOMICS, continued

INFLATION: LOWER FOR LONGER • Energy oversupply and a strong U.S. Dollar have reduced

headline inflation in recent quarters.• Wage growth in the U.S. labor market has remained

subdued, further dampening inflationary pressures.• The U.S. Federal Reserve has delayed raising interest rates,

at least in part due to low inflation.• Bond yields have remained near record lows due to low

inflation and modest economic growth.

GLOBAL MONETARY POLICY: STILL IN THE HEADLINES• Janet Yellen and the Fed have chosen to delay raising short-

term interest rates due to global economic concerns.• Mario Draghi and the European Central Bank have launched

a QE program and may expand it due to unexpectedly low inflation in Europe.

• The Bank of Japan continues to aggressively stimulate its economy through monetary policy.

• The U.S. Dollar may continue to strengthen if monetarypolicy in the U.S. is less stimulative than abroad.

U.S. CPI and Core CPI Remain Low

Central Bank Decisions are Driving Short-Term Volatility

Source: Reuters 9/2015.

Source: JP Morgan Asset Management, as of 9/30/2015.

9

STOCKS: VOLATILITY RETURNED IN Q3• U.S. large cap stocks experienced their first 10+% correction

in four years.• Earnings growth in U.S. equities remained subdued, mostly

due to the energy sector. • U.S. equity valuations are now slightly below long-term

averages.• Emerging market valuations are now even more compelling.

BONDS: HIGH-QUALITY YIELDS PUSHED LOWER• High-grade bonds gained in Q3, reflecting their safe-haven

status when stocks tumble.• The yield on the 10-Year U.S. Treasury approached 2%,

down 29 basis points for the quarter.• Lower credit quality bonds struggled in Q3, as spreads

widened and investor confidence waned.• High yield bonds and floating rate corporate loans are trading

at attractive spreads given the recent selloff.

Third Quarter: ASSET CLASS FUNDAMENTALS

Source: Barclays Research 9/2015.

Sources: Standard & Poor’s and JP Morgan Asset Management, as of 9/30/2015.

Survey of 10-Year Treasury Expectations for Year-End 2015

U.S. Large Cap Pullbacks in the Last Six Years

10

ASSET CLASS FUNDAMENTALS, continued

ALTERNATIVES DELIVERED MIXED RESULTS • Hedge funds helped to provide stability to portfolios in the

market selloff during August and September.• Commodities remained in a downward trend and remain

particularly sensitive to bad news from China.• Midstream Master Limited Partnerships experienced a sharp

drawdown in Q3, despite having little direct exposure to commodity prices. Valuations in MLPs are now extremely attractive.

AN OPPORTUNITY TO REBALANCE• Short-term volatility reminds us of our long-term and

disciplined approach to successful investing.• Fixed-income investments have generally become

overweighted during recent market volatility. • Portfolio rebalancing takes partial profits from asset classes

that have run up the most, and adds capital to areas that are depressed in price and valuations.

• Equity bull markets are typically ended by recessions. U.S. economic fundamentals point to a low likelihood of recession in the next six to nine months.

Volatility of Stocks, Bonds, and Hedge Funds

Volatility is measured by rolling three-year standard deviations of total returns.

Source: Fundmanagertalk.com.

Why Rebalancing is Important

11

ASSET CLASS FUNDAMENTALS, continued

*Returns shown are calendar year returns from 1980 to 2014 excluding 2015, which is year‐to‐date through 9/30/2015. Intra‐year drops refer to the largest market drops from a peak to a trough during the year. Returns are based on price index only and do not include dividends. Sources: FactSet, Standard & Poor’s, and J.P. Morgan Asset Management.

12

US Market Indices Performance US Market Sector Performance

Source: Investment Metrics, LLC

Source: Investment Metrics, LLCSource: Investment Metrics, LLC

1 Quarter

0.0

10.0

-10.0

-20.0

-30.0

Re

turn

(%)

S&

P 5 0

0

I nd

e x

Ru s

s ell

2

0 00

I n

de x

MS

CI

E

AF

E

I nd

e x

MS

CI

E

AF

E LC

I nd

e xM

SC

I

Em

ergi

ng

Ma rk

ets

I n

de x

Bar

c lay s

Ca

pita

l

Ag g

r eg

a te

BC

Mu

nic

ipa l

B

on

dB

a rcla

ys U

.S.

C

or p

:

Hig

h

Yi e

ldB

C G

lob a

l

Ag

g r eg

ate

Ex U

SD

Em

ergi

ng

Ma rk

et D

ebt

S&

P/L

STA

Leve

rag e

d

Lo a

n

I nd

e x

MS

CI

U

.S.

R

EIT

I n

de x

Al e

r ian

M

L P In

f ra st

ruc

ture

DJ -U

BS

Co

mm

od it

y

I nd

e xH

FRI

F

o F C

om

posi

t e I n

de x

-6.4

-11.9-10.2

-8.9

-17.8

1.2 1.7

-4.9

0.6

-0.9 -1.4

2.1

-22.0

-14.5

-3.3

S&P 500 S&P 500 Growth S&P 500 Value

Russell Midcap Index Russell Midcap Growth Index Russell Midcap Value Index

Russell 2000 Index Russell 2000 Growth Index Russell 2000 Value Index

0.0

8.0

16.0

-8.0

-16.0

-24.0

Re

turn

(%)

1

Quarter

1

Year

-10.7

-1.6

-13.1

4.0

-11.9

1.2

-8.0

-2.1

-8.0

1.4

-8.0

-0.2

-8.3

-4.3-4.8

2.8

-6.4

-0.6

S&P 500 Consumer Discretionary S&P 500 Consumer Staples S&P 500 Energy

S&P 500 Financials S&P 500 Health Care S&P 500 Industrials

S&P 500 Information Technology S&P 500 Materials S&P 500 Telecom Services

S&P 500 Utilities

0.0

20.0

40.0

-20.0

-40.0

-60.0

Re

turn

(%)

1

Quarter

1

Year

5.4 6.6

-6.8 -7.9

-16.9 -18.0

-3.7

2.1

-6.9-3.6

-10.7

5.2

-6.7-0.3

-17.4

-29.7

-0.2

7.1

-2.6

13.2

Quarterly Market Summary September 30, 2015

Copyright © 2015 Investment Metrics, LLC. All rights reserved.

13

Intl Equity Region PerformanceIntl Equity Indices Performance

Fixed Income Market Sector Performance

Source: Investment Metrics, LLC

Source: Investment Metrics, LLCSource: Investment Metrics, LLC

Barclays U.S. Aggregate Barclays U.S. Treasury Barclays U.S. Agency Barclays U.S. Credit Index Barclays U.S. MBS

Barclays U.S. ABS Barclays U.S. Corp: High Yield Barclays Global Aggregate JPM EMBI Global (USD)

0.0

3.0

6.0

-3.0

-6.0

-9.0

Re

turn

(%)

1

Quarter

1

Year

-2.0 -2.0

0.9

-3.3

-4.9

-3.4

0.7

2.4

1.3

3.4

0.5

1.51.1

2.8

1.8

3.8

1.2

2.9

MSCI EAFE Index MSCI EAFE Small Cap Index MSCI EAFE Growth Index

MSCI EAFE Value MSCI Emerging Markets

0.0

8.0

-8.0

-16.0

-24.0

-32.0

Re

turn

(%)

1

Quarter

1

Year

-17.8-19.0

-11.7 -12.2

-8.7

-4.3

-6.8

0.6

-10.2-8.3

MSCI Japan MSCI Pacific ex Japan MSCI United Kingdom MSCI Europe ex U.K.

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

Re

turn

(%)

1

Quarter

1

Year

-8.0-7.3

-10.0

-12.1

-15.9-16.7

-11.7

-1.9

Quarterly Market Summary September 30, 2015

Copyright © 2015 Investment Metrics, LLC. All rights reserved.

14

Alternative Asset Class Returns September 30, 2015

Source: Christenson Investment Parnters Source: Christenson Investment Parnters

Source: Christenson Investment Parnters Source: Standard & Poors

‐26.8

‐19.8 ‐20.5

‐15.0

‐19.7 ‐18.4

‐14.0‐10.7

‐16.0‐13.5

‐10.7‐8.3

‐14.5‐11.0 ‐10.5

‐4.4‐7.1

‐5.0

‐14.6

13.4

‐30.0

‐25.0

‐20.0

‐15.0

‐10.0

‐5.0

0.0

5.0

10.0

15.0

20.0

Crud

e Oil

Gasoline

Heatin

g Oil

Natural Gas

Soybean Oil

Whe

at

Soybeans

Corn

Zinc

Nickel

Copp

er

Alum

inum

Bloo

mbe

rg Com

m Inde

x

Cotton

Coffe

e

Sugar

Silver

Gold

Cattle

Hogs

Commodity Sector Returns

‐22.3

‐14.5 ‐13.7

‐11.1

‐7.5‐5.5 ‐5.4

‐25.0

‐20.0

‐15.0

‐10.0

‐5.0

0.0

Energy BloombergComm Index

Grains IndustrialMetals

Softs PreciousMetals

Livestock

Commodity Broad Sector Returns

‐6.0‐3.7 ‐3.5 ‐2.9 ‐1.5 ‐1.5 ‐0.2

0.12.1

4.4

17.4

‐10.0

‐5.0

0.0

5.0

10.0

15.0

20.0

Even

t Driv

en

HFRI FoF

Com

posite

Distressed

Globa

l Macro

Long/Sho

rt Equ

ity

Convertib

le Arbitrage

Fixed Income Arbitrage

Multi‐Strategy

Equity M

arket N

eutral

Managed

Futures

Dedicated Short B

ias

Hedge Fund Strategy Returns

‐14.5

‐9.1‐8.0 ‐7.6

‐5.9‐4.0

0.0

2.0 2.1 2.4

‐16.0‐14.0‐12.0‐10.0‐8.0‐6.0‐4.0‐2.00.02.04.0

Singap

ore

Canada

Emerging

Markets

Australia

Hon

g Ko

ng

Japa

n

S&P De

velope

d RE

IT

United Kingdo

m

U.S.

Europe

Global REIT Country and Regional Returns

15

June 30, 2015

Allocation Differences

0.0% 3.0% 6.0%-3.0 %-6.0 %-9.0 %

Cash & Equivalents

Private Equity

Absolute Return Funds

Real Estate

Commodities

Floating Rate Corporate Loans

High Yield

Emerging Markets Equity

International Equity

Smid Cap Equity

Large Cap Equity

0.1%

-4.0 %

-0.2 %

0.8%

-0.5 %

-0.1 %

-0.1 %

0.0%

0.2%

0.7%

3.1%

September 30, 2015

Allocation Differences

0.0% 10.0% 20.0%-10.0 %-20.0 %

Cash & Equivalents

Private Equity


Real Estate

Commodities


High Yield

Fixed Income



Smid Cap Equity

Large Cap Equity

0.3%

-3.4 %

8.4%

1.5%

-1.0 %

-0.8 %

-0.1 %

-7.8 %

0.1%

1.6%

-0.7 %

1.8%

June 30, 2015

Market Value($)

Allocation(%)

Target(%)

Large Cap Equity 12,776,285 25.06 22.00Smid Cap Equity 4,957,628 9.72 9.00International Equity 6,198,382 12.16 12.00Emerging Markets Equity 4,090,383 8.02 8.00High Yield 979,321 1.92 2.00Floating Rate Corporate Loans 3,004,988 5.89 6.00Commodities 2,296,839 4.51 5.00Real Estate 3,483,121 6.83 6.00Absolute Return Funds 10,094,204 19.80 20.00Private Equity 3,055,325 5.99 10.00Cash & Equivalents 44,443 0.09 0.00Total Fund 50,980,920 100.00 100.00

September 30, 2015

Market Value($)

Allocation(%)

Target(%)

Large Cap Equity 11,907,115 24.85 23.00Smid Cap Equity 4,456,985 9.30 10.00International Equity 5,561,773 11.61 10.00Emerging Markets Equity 3,388,014 7.07 7.00Fixed Income 1,056,855 2.21 10.00High Yield 932,294 1.95 2.00Floating Rate Corporate Loans 2,958,146 6.17 7.00Commodities 1,922,861 4.01 5.00Real Estate 3,603,639 7.52 6.00Absolute Return Funds 8,840,956 18.45 10.00Private Equity 3,150,269 6.57 10.00Cash & Equivalents 145,442 0.30 0.00Total Fund 47,924,348 100.00 100.00

Asset Allocation vs. Target Allocation

16

Allocation

MarketValue

($)%

Performance(%)

LastQuarter

Jul-2015To

Sep-2015

YearTo Date

1Year

3Years

5Years

Apr-2009To

Sep-2015Since Innovest

SinceInception

InceptionDate

Large Cap Equity

BRC Large Cap Equity (Net) 4,238,048 8.84 -8.95 -8.95 -2.06 1.44 14.28 14.63 17.02 17.02 04/01/2009S&P 500 Index -6.44 -6.44 -5.29 -0.61 12.40 13.34 16.91 16.91

Vanguard 500 Index 3,794,016 7.92 -6.45 -6.45 -5.30 -0.64 12.36 13.30 16.90 -6.19 04/01/2015S&P 500 Index -6.44 -6.44 -5.29 -0.61 12.40 13.34 16.91 -6.18

Fidelity Contrafund 3,875,051 8.09 -4.71 -4.71 0.15 3.27 13.15 13.34 16.90 15.09 01/01/2013S&P 500 Index -6.44 -6.44 -5.29 -0.61 12.40 13.34 16.91 13.76

Large Cap Equity Composite 11,907,115 24.85 -6.81 -6.81 -2.43 1.16 13.00 12.31 16.26 16.26 04/01/2009

S&P 500 Index -6.44 -6.44 -5.29 -0.61 12.40 13.34 16.91 16.91

Small/Mid Equity

iShares Russell Midcap Value 1,032,247 2.15 -8.08 -8.08 -7.79 -2.25 13.44 12.91 19.58 8.91 07/01/2013Russell Midcap Value Index -8.04 -8.04 -7.66 -2.07 13.69 13.15 19.84 9.16

John Hancock Disciplined Mid Cap Value 1,132,294 2.36 -5.45 -5.45 -2.75 5.19 17.07 16.01 20.92 13.05 07/01/2013Russell Midcap Value Index -8.04 -8.04 -7.66 -2.07 13.69 13.15 19.84 9.16

Vanguard Small Cap Growth Index 1,038,102 2.17 -11.69 -11.69 -5.84 -0.49 11.32 N/A N/A -11.42 04/01/2015CRSP U.S. Small Cap Growth TR Index -11.70 -11.70 -5.90 -0.58 11.06 11.86 18.40 -11.45

Oak Ridge Small to Mid Cap Growth (Net) 1,254,341 2.62 -13.48 -13.48 -5.65 0.72 12.02 13.02 17.64 17.64 04/01/2009Russell 2000 Growth Index -13.06 -13.06 -5.47 4.04 12.85 13.26 18.78 18.78

Smid Cap Equity Composite 4,456,985 9.30 -9.88 -9.88 -5.38 1.17 12.32 12.04 16.46 16.46 04/01/2009

SMid Cap Composite Benchmark -10.94 -10.94 -6.81 0.69 13.24 13.21 19.33 19.33


Thornburg Intl ADR (Net) 2,803,711 5.85 -8.93 -8.93 -4.21 -6.20 3.86 2.33 9.38 9.38 04/01/2009MSCI EAFE (net) Index -10.23 -10.23 -5.28 -8.66 5.63 3.98 10.21 10.21

Vanguard Total Intl Stock Index 2,758,062 5.76 -11.61 -11.61 -6.81 -10.72 3.13 2.15 N/A -10.72 10/01/2014FTSE Global ex USA All Cap Index (Net) -11.88 -11.88 -7.62 -11.10 3.00 2.29 10.30 -11.10

International Equity Composite 5,561,773 11.61 -10.28 -10.28 -5.52 -8.40 2.86 1.20 8.37 8.37 04/01/2009

International Equity Composite Benchmark -11.06 -11.06 -6.45 -9.79 5.19 3.72 9.99 9.99


Wells Fargo Adv Emerging Markets Equity 3,388,014 7.07 -17.17 -17.17 -15.49 -20.29 -6.22 -3.52 N/A -2.03 10/01/2011MSCI Emerging Markets (Net) -17.90 -17.90 -15.48 -19.28 -5.27 -3.57 7.83 -0.15

Asset Allocation & Performance

All Products are Net of Managers' Fees.Total Fund Return is Net of all Innovest, Mutual Fund, Hedge Fund and Separate Account Fees.*Returns are provided on the fund pages **30% S&P 500, 12% Russell 2500, 17% MSCI EAFE, 11% MSCI Emerging Markets, 30% Barclays Agg

17

Asset Allocation & PerformanceAllocation

MarketValue

($)%

Performance(%)

LastQuarter

Jul-2015To

Sep-2015

YearTo Date

1Year

3Years

5Years

Apr-2009To


SinceInception

InceptionDate

Fixed Income

Vanguard Total Bond Market Idx 1,056,855 2.21 1.18 1.18 1.01 2.75 1.58 2.98 4.38 N/A 10/01/2015Barclays Aggregate Index 1.23 1.23 1.13 2.94 1.71 3.10 4.49 N/A

High Yield

JPMorgan High Yield Select 932,294 1.95 -4.80 -4.80 -2.56 -3.10 3.34 5.53 11.45 9.06 07/01/2009Barclays US Corp: High Yield -4.86 -4.86 -2.45 -3.43 3.51 6.15 13.24 10.08


Eaton Vance Floating Rate; I 2,958,146 6.17 -1.56 -1.56 0.64 0.40 2.49 3.98 8.78 1.79 07/01/2013CSFB Leveraged Loan -1.23 -1.23 1.61 1.25 3.77 4.84 9.68 3.09

Commodities

PIMCO Commodity Real Return 1,922,861 4.01 -16.28 -16.28 -16.80 -28.60 -18.20 -8.18 -0.15 -0.15 04/01/2009Bloomberg Commodity Index Total Return -14.47 -14.47 -15.80 -25.99 -16.02 -8.89 -3.30 -3.30

Real Estate

UBS Trumbull Property Fund 1,776,651 3.71 3.43 3.43 9.63 12.94 11.30 11.78 8.59 12.74 04/01/2010NCREIF ODCE 3.68 3.68 11.30 14.93 13.45 14.02 8.88 14.64

Cornerstone Patriot Real Estate Fund 1,826,988 3.81 4.10 4.10 10.55 12.65 11.08 12.66 8.19 12.84 04/01/2010NCREIF ODCE 3.68 3.68 11.30 14.93 13.45 14.02 8.88 14.64

Real Estate Composite 3,603,639 7.52 3.77 3.77 10.08 12.80 11.14 12.19 N/A 12.78 04/01/2010

NCREIF ODCE 3.68 3.68 11.30 14.93 13.45 14.02 8.88 14.64

Conservative Absolute Return Funds

Private Advisors Stable Value Fund, Ltd. 4,906,148 10.24 -3.02 -3.02 -2.72 -4.38 2.53 3.05 4.62 4.62 04/01/2009HFRI FOF: Conservative Index -1.84 -1.84 0.32 0.58 4.24 2.82 3.89 3.89


TIFF Absolute Return Pool 1,457,634 3.04 -0.91 -0.91 1.32 2.49 7.05 6.37 9.06 1.71 01/01/2014HFRI Fund of Funds Composite Index -3.66 -3.66 -1.06 -0.12 4.13 2.67 4.03 1.29

Lighthouse Global Long/Short Equity 2,477,174 5.17 -1.39 -1.39 3.10 5.29 9.73 7.33 7.19 4.78 01/01/2014HFRI Fund of Funds Composite Index -3.66 -3.66 -1.06 -0.12 4.13 2.67 4.03 1.29

Absolute Return Funds Composite 8,840,956 18.45 -2.16 -2.16 -0.49 -0.63 3.24 3.30 2.55 2.55 04/01/2009

Absolute Return Funds Benchmark -2.75 -2.75 -0.37 0.23 4.18 2.77 3.85 3.85


18

Asset Allocation & PerformanceAllocation

MarketValue

($)%

Performance(%)

LastQuarter

Jul-2015To

Sep-2015

YearTo Date

1Year

3Years

5Years

Apr-2009To


SinceInception

InceptionDate

Private Equity*

CommonFund Capital PE VIII 365,999 0.76 N/A N/A N/A N/A N/A N/A N/A N/A 12/01/2011

Common Fund Capital Int'l 170,624 0.36 N/A N/A N/A N/A N/A N/A N/A N/A 04/01/2011

Port Advisors PAPEF VI 1,097,864 2.29 N/A N/A N/A N/A N/A N/A N/A N/A 04/01/2009

TIFF PE Partners 2011 285,204 0.60 N/A N/A N/A N/A N/A N/A N/A N/A 06/01/2011

Illiquid Credit*

Port Advisors PAPEF VII 1,230,578 2.57 N/A N/A N/A N/A N/A N/A N/A N/A 10/01/2012

Total Fund

SDSM Foundation Total Fund - Net 47,924,348 100.00 -6.34 -6.34 -3.14 -3.05 5.19 5.98 8.71 4.18 10/01/2003SDSM Foundation Total Fund - Gross -6.28 -6.28 -2.92 -2.74 5.59 6.41 9.15 4.41SDSM Custom Benchmark -6.41 -6.41 -3.67 -2.93 6.17 6.68 10.57 6.21Return Benchmark (CPI + SDSM&T) 0.97 0.97 5.40 5.38 6.75 7.58 7.65 N/ASpending Benchmark (HEPI + 5.5%) 1.82 1.82 5.57 7.79 7.76 7.66 7.55 8.5870% MSCI ACWI / 30% Barclays Global Agg -6.28 -6.28 -5.21 -5.16 4.82 5.61 10.47 6.6770% Global Eq/30% Barclays Agg** -6.50 -6.50 -4.41 -2.75 6.26 7.07 11.73 7.45


19

As of 6/30/2015

Commitment $1,500,000

Contributed $956,154

Outstanding Commitment $543,846

Percent of Capital Contributed 63.74%

Distributed $244,626

Reported Value $1,143,394

Residual Value $1,388,020

Annualized Inception To Date Net IRR* 11.90 %

Weighted S&P 500 Return 17.28 %

Date of First Capital Call 2/23/2009*Based on Reported Value as of 06/30/2015

Commitment $700,000




Distributed $12,661

Residual Value $342,968

Return Multiple 1.22x

Annualized Inception To Date Net IRR* 15.17%

Weighted S&P 500 Return** 13.77%


Private Equity Performance

PAPEF VI

Commonfund Private Equity Partners VIII

**Weighted index returns are a since inception IRR assuming all cashflows related to the private equity fund were invested in the indicated index.

20

Commitment $300,000




Distributed $7,938




Weighted MSCI ACWI ex U.S. (net) Return** 5.96%


Commitment $500,000




Distributed $52,382




Weighted S&P 500 Return** 15.98%


Commonfund International Equity Partners (CIP VII)

TIFF Private Equity Partners 2011

Private Equity Performance

21

As of 6/30/2015

Commitment $2,000,000

Contributed $1,037,158



Distributed $0

Residual Value $1,230,578


Weighted CS HY Index Return** 4.70%


PAPEF VII

Illiquid Credit Performance

**The Weighted CS HY Index Return is a since inception IRR assuming all cashflows related to PAPEF VII were invested in the CS HY Index.

22

SDSM&T Foundation

Private Investments Commitment SummaryAs of June 30, 2015

INVESTMENTS TYPE

VINTAGE

YEAR

CAPITAL

COMMITMENT

CAPITAL

CALLED

UNFUNDED

COMMITMENT

($)

UNFUNDED

COMMITMENT

(%)

Portfolio Advisors Private Equity Fund VI Diversified Private Equity 2009 $1,500,000 $956,154 $543,846 36.26%

CommonFund Capital PE VIII Diversified Private Equity 2011 $700,000 $290,500 $409,500 58.50%

Common Fund Capital Int'l VII Diversified Private Equity 2011 $300,000 $145,800 $154,200 51.40%

TIFF PEP 2011 Diversified Private Equity 2011 $500,000 $285,000 $215,000 43.00%

Portfolio Advisors Private Equity Fund VII Illiquid Credit 2012 $2,000,000 $1,037,158 $962,842 48.14%

TOTAL $5,000,000 $2,714,612 $2,285,388 45.71%

23

October 26, 2015

Innovest Portfolio Solutions LLC4643 South Ulster Street, Suite 1040

Denver, Colorado 80237303-694-1900

FAX 303-694-4707

Cash Flow Summary

South Dakota School of Mines & Technology Foundation REBALANCING-SPREADSHEET

Year To Date One Last 3 Last 5 SinceDescription 3Q15 9/30/2015 Year Years Years Inception*

Beginning Value 51,069,693. 22 49,490,272. 88 49,280,289. 00 38,419,755. 93 32,983,693. 49 25,457,196. 38Net Contributions 84,953. 63 -66,500. 13 83,258. 42 2,816,613. 29 3,192,831. 10 3,312,570. 32Ending Value 47,924,347. 78 47,924,347. 78 47,924,347. 78 47,924,347. 78 47,924,347. 78 47,924,347. 78Investment Gain/(Loss) -3,230,299. 07 -1,499,424. 97 -1,439,199. 64 6,687,978. 56 11,747,823. 19 19,154,581. 08

We have attempted to exercise due care as well as due diligence in preparing this report with regard to the accuracy and the authenticity of the data used. We can, however, makeno representation or warranty with regard to absolute correctness since we are dependent upon third party sources for the data we use.

24

Total Fund Performance

0.0% 4.0% 8.0% 12.0% 16.0%-4.0 %

Total Fund

Total Fund Benchmark

Total Value Added

8.7%

9.8%

-1.1 %

Total Value Added:-1.1 %

0.0% 0.6% 1.2%-0.6 %-1.2 %-1.8 %

Other

Manager Value Added

Asset Allocation

-0.1 %

-1.3 %

0.3%

Total Asset Allocation:0.3%

Average Active Weight

0.0% 3.0% 6.0%-3.0 %-6.0 %-9.0 %

Cash & Equivalents

Private Equity


Real Estate

Commodities


High Yield

Fixed Income



Smid Cap Equity

Large Cap Equity

1.3%

-5.3 %

0.0%

0.4%

0.2%

0.3%

0.1%

-0.1 %

0.0%

0.6%

0.8%

1.5%

Asset Allocation Value Added

0.0% 0.5% 1.0%-0.5 %-1.0 %

-0.4 %

0.6%

0.1%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.1%

0.1%

0.1%

Total Manager Value Added:-1.3 %

Manager Value Added

0.0% 0.2% 0.4%-0.2 %-0.4 %-0.6 %

0.0%

0.0%

-0.3 %

-0.1 %

0.1%

-0.2 %

-0.1 %

0.0%

0.0%

-0.2 %

-0.3 %

-0.1 %

Total Fund AttributionApril 1, 2009 To September 30, 2015

Note: Total Fund Benchmark is based on Policy Benchmark which is continuously rebalanced while the Custom Benchmark in the rest of the report is rebalanced quarterly. 90-Day T-Bill used as proxy benchmarkfor Private Equity as allocations to PE are not fully invested.

25

Cumulative Returns

Risk and Return

SDSM Foundation Total Fund SDSM Custom Benchmark Spending Benchmark (HEPI + 5.5%)

-50 %

0%

50%

100%

150%

6/09 12/09 6/10 12/10 6/11 12/11 6/12 12/12 6/13 12/13 6/14 12/14 6/15 9/15

6

9

12

15

18

21

Re

turn

(%)

5 6 7 8 9 10 11 12 13 14 15 16Risk (Standard Deviation %)

SDSM Foundation Total Fund

S&P 500 Index

Total Portfolio Performance AnalysisAs of September 30,2015

Since 4/1/2009

26

TF Asset Allocation

Peer Group Analysis

-25.0

0.0

25.0

50.0

75.0

100.0

All

oc

ati

on

(%)

US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv. Real Estate Cash

SDSM Foundation Total Fund 31.99 (54) 20.83 (34) 10.32 (95) 0.00 29.03 (13) 7.52 (19) 0.30 (72)¢£

5th Percentile 52.17 32.18 70.05 18.10 32.67 13.30 65.541st Quartile 42.75 23.15 39.49 8.98 20.42 5.92 3.96

Median 32.73 19.06 29.00 6.36 15.35 5.36 0.963rd Quartile 26.32 11.20 18.63 4.80 6.60 3.08 0.2195th Percentile 16.34 5.60 9.81 1.69 2.91 1.97 0.03

-20.0-12.0

-4.04.0

12.020.0

Re

turn

-8.0-6.5 -8.0-6.5 -6.6-4.7 -7.1-3.8

0.84.6 3.9

9.0

LastQuarter

Jul-2015To

Sep-2015

YearTo Date

1Year

3Years

Apr-2009To


SDSM Foundation Total Fund (Gross) -6.28 (73) -6.28 (73) -2.92 (41) -2.74 (65) 5.59 (55) 9.15 (74)¢£

SDSM Custom Benchmark -6.41 (74) -6.41 (74) -3.67 (60) -2.93 (68) 6.17 (50) 10.57 (45)pr

5th Percentile -0.03 -0.03 0.75 2.20 8.29 12.411st Quartile -3.86 -3.86 -1.95 0.26 6.86 11.22Median -5.27 -5.27 -3.29 -1.50 6.16 10.373rd Quartile -6.46 -6.46 -4.73 -3.80 4.61 9.0395th Percentile -7.97 -7.97 -6.65 -7.15 0.83 3.94

Peer Group AnalysisSmall Endowment/Foundations (AUM <$100mm and Equity Allocation <60%)

As of September 30,2015

Gross of Fees Performance calculated from April 2009. Gross of Fees performance prior to April 2009 unavailable. Performance for universe constituents are Gross of FeesUniverse performance is preliminary and subject to change as more institutions report.

27

Disclaimer The preceding statistical analysis was prepared by Innovest Portfolio Solutions LLC with data provided by Investment Metrics (IM), Lipper and Morningstar, Inc. All Rights Reserved. The investment products discussed are not insured by the FDIC and involve investment risk including the possible loss of all principal. The information contained herein: (1) is proprieta ry to the v endors listed above and/or its content providers; (2) may not be c opied or distributed; and (3) is not w arranted to be accurate, complete or timely. None of the vendors nor its content providers are respons ible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Innovest compiles the information utilizing secondary data from statements provided by the plan trustee and/or custodian/ This report may also contain returns and valuations from outside sources as directed b y the client. Innovest assumes no respons ibility for the accuracy of these valuations or return methodologies. Reasonable care has been take n to assure the accuracy of the computer software and databases. Innovest disclaims responsibility, financial or ot herwise for t he accuracy and completeness of this report. Copyright 2015 by Innovest Portfolio Solutions LLC Inc. Note: Actual client mutual fund returns are reflected on the table of returns page. Fund pages subsequent to the table of returns reflect the representative mutual fund with the longest track record and may not be the actual share class held by the client. “Copyright 2015, Standard & Poor’s Financial Services LLC. Reproduction of S&P Index Services in any form is prohibited except with the prior written permission of S&P. S&P does not guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for an y errors or omissions, regardless of the cause or for the r esults obtained from the use of such information. S&P DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PAR TICULAR PURPOSE OR USE. In no event shall S&P be liable f or any direct, indirect, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with subscriber’s or others’ use of S&P Index Services (2015) Copyright MSCI 2015. Unpublished. All Rights R eserved. This information may only be used for your internal use, may not be reproduced or re-disseminated in any form and m ay not be used to create any financial instruments or products or an y indices. This information is provided on an “as is” basis and the user of this informa tion assumes the entire risk of any use it ma y make or permit t o be made of thi s information. Neither MSCI, an y or its affiliates o r any other person involved in or related to compiling, computing or creating this information makes any express or implied warranties or representations with respect to such information or the results to be ob tained by the use thereof, and MSCI, its affiliates and each such other person hereby expressly disclaim all warr anties (including, without limitation, all warranties of o riginality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without lim iting any of the foregoing, in no ev ent shall MSCI, any of its affiliat es or any other person involved in or related to compiling, computing or creating this information have any liability for any direct, indirect, special, incidental, punit ive, consequential or an y other damages (including, without limitation, lost profits) even if notified of, or if it might otherwise have anticipated, the possibility of such damages.

28

portfolio review 3rd quarter 2015 · • emerging market valuations are now even more compelling....

Documents