Objective
The investment objective of the Foundation is to preserve the purchasing power of its endowed funds, while providing a continuing and stable funding source to support the current and future mission of UNH. To accomplish this objective, the Fund seeks to generate a market return that will exceed distributions, expenses, and the eroding effects of inflation. It is the intention that all returns (i.e., interest income, dividends, realized gains and unrealized gains) above and beyond the amount approved for distribution will be reinvested in the Fund. The Fund is managed consistent with the applicable standard of conduct set forth in the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as adopted in the state of New Hampshire (RSA 292 - B).
Horizon and Liquidity
The Foundation has a long-term investment horizon with relatively low and predictable liquidity needs. For this reason, the Fund is designed to tolerate short- and intermediate-term volatility, provided that long-term (10-year) returns meet or exceed the investment objective. Consequently, the Fund may include less liquid investments, such as private equity, hedge funds, and other partnership vehicles, which typically offer higher risk-adjusted return potential as compensation for reduced liquidity. To ensure adequate liquidity for distributions and to facilitate rebalancing, Foundation staff and the Investment Committee frequently review the Fund's liquidity characteristics and make adjustments accordingly.
The Investment Pool
FOUNDATION INVESTMENTS AS OF JUNE 30, 2024
The Foundation’s endowment pool has been in place and growing since the Foundation was established in 1989. It features a diversified mix of fund managers designed to yield a long-term real return, net of fees and inflation, in excess of distributions. On June 30, 2024, the pool totaled $316.8 million.
In 2015, the Foundation’s sustainable investing strategy was established in a separate ESG pool, seeking to achieve the same return goals as the Main pool while taking into account environmental, social and governance criteria in the selection of fund managers. The ESG pool increased in size ?over the next several years. In 2022, the Committee decided that it was in the best interests of both pools to combine their assets and the strategies into one unified investment strategy.? The Foundation’s investment policy statement was amended to integrate the consideration of ESG factors into the investment decision-making process for the entire pool.? As of June 30, 2024, ESG-qualified investments comprised about 63% of the total Foundation assets under management. Additional information on the Foundation’s approach to sustainable investing can be found here.
Asset Allocation
To achieve the Foundation’s investment objective, the Fund is allocated among several asset classes in order to achieve above-average long-term returns and reduced volatility through diversification.
The global equity segment is expected to provide long-term growth and offer high expected real returns and liquidity. Private equity investments are expected to achieve outsized returns in exchange for substantially reduced liquidity. Flexible capital strategies are employed to offer market-comparable returns with lower expected volatility. Real assets are used to provide the Fund with a diversified hedge against inflation, plus a stronger yield component. Fixed income investments are intended to provide stability and protection in deflationary environments. Cash provides short-term liquidity to support distributions and to fund rebalancing transactions. The Fund is diversified within asset classes as well. The purpose of diversification is to provide reasonable assurance that no single security, or class of securities, will have a disproportionate impact on the performance of the Fund. As a result, the risk level associated with the portfolio investment is appropriately reduced.
The Fund’s current long-term, strategic asset allocation targets are presented in the following table, as well as the permissible ranges of actual investment exposure. Variations from targets are based on the Committee’s assessment of market conditions and opportunities, as well as the impact of period-to-period market fluctuations.
| Asset Class | Policy Target (%) | Target Range (%) |
|---|---|---|
| Global Public Equity | 50 | 40-70 |
| Private Equity | 20 | 0-25 |
| Flexible Capital | 15 | 5-20 |
| Real Assets | 10 | 5-15 |
| Fixed Income/Cash | 5 | 0-15 |
The Foundation employs a combination of active and passive managers in the Fund. Active investment managers are expected to provide an appropriate excess return, net of fees, over a normal portfolio or a relevant index, e.g., the S&P 500, ideally placing them well into the second quartile of managers with similar objectives over a market cycle. Passive managers are expected to track the performance of the appropriate normal portfolio or index within reasonable tolerances. Selected managers have discretion with regard to portfolio composition and individual asset selection, within guidelines and constraints established by the committee. The Committee oversees the activities and results of the managers through regular meetings and communications.
Distributions
In accordance with the Foundation’s investment policy statement and UPMIFA, payouts from endowed funds are approved annually by the Board. These distributions consist of payouts to the many donor-specified purposes within the Fund and a payout for administrative costs associated with the Fund. Payouts are based on the trailing 12-quarter average of the Fund’s unit value, with 4.25 percent currently going to purpose and 1.0 percent to support Fund administrative expenses. Remaining gains (losses) in value are allocated to each endowed fund on a pro rata basis.
Oversight and Advice
The Investment Committee is comprised of voting members of the UNHF Board, providing considerable expertise in the field of investments. In addition, the Committee engages with consultants to advise on the management of the Fund. Hired in June 2008, Prime Buchholz LLC (Portsmouth, New Hampshire) is the Foundation's investment consultant. In May 2017, the Committee on Investor Responsibility (CIR) was established by the Committee to provide advice on sustainable investing matters.
