Financial Summary

The Foundation’s investment portfolio had increased to approximately $587 million at the end of 2017. Spending for grants, administrative expenses and taxes totaled $23 million. Total net-of-fee return on the investments, income plus realized and unrealized capital gains, was approximately 12.5 percent, which slightly lagged a classic 60 percent equity/40 percent bond gross-of-fee portfolio. We are pleased that the Foundation was able to preserve and enhance the real value of its endowment over the past 30 years; the portfolio delivered an 8.7 percent return per annum, exceeding the average inflation (2.6 percent) plus spending rate (4.9 percent) for a total of 7.5 percent per year.

The Foundation’s investment objective continues to be securing maximum long-term total return on its investment portfolio in order to maintain a strong grants program, while assuring consistent growth of its assets at a level greater than the rate of inflation. With the assistance of Goldman Sachs, the Foundation’s investment advisor since August 2012, the Foundation has proactively redesigned and maintained a moderate risk portfolio diversified across a wide array of asset classes and strategies.

Despite elevated geopolitical uncertainty, 2017 was a remarkable year with global equities hitting record highs and volatility hovering near historic lows throughout the year. Global equities notched another strong year with double-digit returns; emerging market equities led the global stock market rally, outperforming both non-U.S. developed and domestic equities during the year. The portfolio’s long-only public equities, which accounted for 51 percent of the total portfolio, had delivered an impressive gain of 22 percent during the year. Conversely, investment-grade fixed income, tactical tilts and private real estate, all of which had a single-digit return, weighed on the 2017 performance. Despite the possibility that the world economy and financial markets may progress through the later stages of the bull-market cycle, we are confident that our disciplined, prudent investment approach will provide us with the ability to navigate a challenging market.

Throughout 2017, the Foundation continued transitioning its portfolio to its interim targets by gradually increasing its exposure to private equity and trimming its allocation in hedge funds. Compared to its strategic asset allocation, the portfolio has remained underweight in private investments, but overweight in public equities, mainly driven by the strong equity market performance during the year. At year-end 2017, the Foundation’s asset mix was 51 percent long-only equities, 17 percent fixed-income, 2 percent cash, 13 percent hedge funds, 8 percent tactical tilts and a total of 9 percent in private equity and private real estate funds. In comparison, at the end of 2016, the Foundation’s portfolio was comprised of 44 percent long-only equities, 15 percent fixed-income, 6 percent cash, 13 percent hedge funds, 9 percent tactical tilts and a total of 13 percent in private equity and real estate funds.

The Finance Committee and the Board of Trustees meet regularly with Goldman Sachs to review asset allocation, investment strategy and the performance of the underlying investments. Northern Trust Corporation is the custodian for all the Foundation’s securities. A complete listing of investments is available for review at the Foundation’s offices. Audited financial statements were not completed in time for this publishing, but will be available on the Foundation’s Web site in June.

The Foundation’s endowment ended 2017 at approximately $587 million, representing a net increase of $44 million after disbursement for grants and expenses during the year. The portfolio continued to benefit from the stock market rally and delivered a solid gain of 12.5 percent for the year, far outpacing the rate of inflation and spending of 6.7 percent.