Financial Summary

The Foundation’s investment portfolio ended in 2018 at approximately $536 million. Disbursement for grants, administrative expenses, and taxes totaled $28 million during the year. This represented a net-of-fee return on the investments of negative 4.2 percent, which was mainly driven by the global equity market sell-off in the fourth quarter of 2018. Although 2018 marked the portfolio’s worst annual performance since the financial crisis in 2008, we are gratified that the portfolio value has increased by $112 million after all spending since the prior bear market ended in March 2009.

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. We are pleased that the Foundation was able to preserve and enhance the real value of its endowment over the past 31 years; the portfolio delivered an 8.2 percent return per annum, while spending over $957 million in today’s dollars for grants and expenses during this period of time.

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. The Foundation made several adjustments to its long-term target allocations as well as rebalanced its portfolio throughout 2018. Specifically, a new strategic asset category (private debt) was added and exposure to hedge funds was increased, while the tactical tilts asset class was eliminated. In comparison to its strategic targets, the portfolio was slightly overweight across all liquid asset classes mainly due to the continued underweight position in private investments. At year-end 2018, the Foundation’s asset mix was 52 percent long-only equities, 21 percent fixed-income, 3 percent cash, 15 percent hedge funds, and a total of 9 percent in private funds. In comparison, at the end of 2017, the Foundation’s portfolio was comprised of 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 real estate funds.

Intense market volatility throughout the year, driven by fading global growth expectations and mounting geopolitical tensions, contributed to a tumultuous year for global equities and eroded double-digit gains made in 2017. However, the portfolio benefited from prudent diversification during the year; positive performance achieved by investment-grade fixed income, cash, and private investments helped offset the significant losses from the public equity holdings. Heading into 2019, as the global economy is now approaching the later stages of expansion, we are confident that our disciplined, prudent investment approach will provide us with the ability to navigate an unpredictable political and economic landscape while capitalizing on investment opportunities.

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 website in June.

Eva Cheng
Chief Financial Officer and Treasurer