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Pooled Endowment Fund

Overview
Governance
Asset Allocation
Unit Valuation and Income Distribution
Cost Per Unit
Dividend Payout Rate
Performance
Quarterly Performance Reports

Overview

The Pooled Endowment Fund (PEF) is an investment pool composed of funds that have been designated to University Endowment accounts. Donations received by the University are invested in the PEF and each year certain amounts are withdrawn according to the spending policy. These annual withdrawals fund scholarships, academic chairs, book funds, lectureships, as well as a diverse range of university programs.

Subject to levels of risks acceptable under a "prudent portfolio" approach to investing funds of this nature, the primary objective of the Pooled Endowment Fund is to maximize risk adjusted returns in furtherance of two competing goals; the goal of releasing substantial income to support current operations and the goal of preserving the purchasing power of assets for future generations.

Governance

The investment activities of the PEF are overseen by the Investment Committee of the Board of Trustees. This Committee sets investment policies and monitors investment performance. Click here to review the constitution and current membership of the Investment Committee.

In order to achieve its objectives, the University enlists the services of a range of external investment managers. The Investment Committee determines the selection of investment managers, the amounts entrusted to them, and also any investment parameters or restrictions. All investment activity must comply with the University's Statement of Investment Policies and Procedures (SIP&P). Click here to review the SIP&P for Queen's Pooled Endowment Fund.

The Department of Investment Services at Queen's is responsible for the day-to-day monitoring of investment manager activities and performance and in reporting such to the Investment Committee. This department reports on fund and market performance on both a monthly and quarterly basis. Scroll down to browse recent quarterly performance reports prepared for the PEF.

Asset Allocation

The holdings in the PEF are well diversified across asset classes, securities, and geographic locations. The pie-chart below shows the policy asset allocation of the Pooled Endowment Fund.

The Investment Committee is responsible for setting and approving changes to the long-term strategic asset allocation. The Department of Investment Services monitors the actual allocation and rebalances investment manager allocations as required in line with the policy targets.

Unit Valuation and Income Distribution

The PEF operates in a similar manner to a mutual fund. The value of a unit is determined by dividing the total current market value of the fund by the number of units outstanding. This value is calculated monthly by the Department of Financial Services and will increase or decrease according to investment performance.

New donations 'buy into' the fund at the prevailing market value. The general rule is that donations received at Queen's are unitized at the end of that month. For example, a $100,000 donation to a scholarship fund on August 31, 2012, would "buy" approximately 41,754 units ($100,000/2.3950 with 2.3950 being the market value at August 31, 2012).

Although donations received at Queen's are unitized at the end of the month, the corresponding income is credited for the next full month. Investment income is allocated based on the number of units held by an individual endowment and the current dividend rate, as established by the Investment Committee. Hence in our example, since August is the fourth month of the fiscal year, the income account will be credited for 8 months. Based on the current dividend rate, the income account of the donor-designated cause will be credited with $2,781 (0.0999 x 41,754 x 8/12), with $0.0999 being the annual spending rate for 2012/2013.

Pooled Endowment Fund Unit Cost

In order to determine how many Pooled Endowment Fund units one dollar will buy, see the chart below:

Date	Unit Value
February 28/13	2.6016
January 31/13	2.5545
December 31/12	2.4745
November 30/12	2.4376
October 31/12	2.4325
September 30/12	2.4317
August 31/12	2.3950
July 31/12	2.3834
June 30/12	2.3683
May 31/12	2.3208
April 30/12	2.4123
March 31/12	2.4350
February 29/12	2.4125
January 31/12	2.3677
December 31/11	2.3130
November 30/11	2.3088
October 31/11	2.3193
September 30/11	2.2300
August 31/11	2.3169
July 31/11	2.4048
June 30/11	2.4521
May 31/11	2.4817

Pooled Endowment Unit Cost Historical Data (94 KB)

Dividend Payout Rate

The Investment Committee is responsible for establishing the yearly dividend spending rate for the PEF. Over the past decade, the spending rate has ranged between 9.99 and 12.65 cents per unit, implying a dividend rate of between 4% - 6%. The spending rate for the 2012/2013 fiscal year is 9.99 cents per unit.

The annual spending rate is based on a modification of the Yale method formula.

This method was developed over 20 years ago by a group of economists at Yale University. The policy relates current-year spending to both the current endowment market values and the previous level of spending from endowment. The policy is designed to meet two competing objectives:

To release current income to the operating budget in a stable stream, and
To protect the value of endowment assets against inflation.

The spending rule attempts to achieve these two objectives by using a long-term spending rate combined with a smoothing rule that adjusts spending gradually to changes in endowment market value. The amount released under the spending rule is based on a 70% weight applied to the previous year's spending adjusted for inflation (subject to a maximum cap of inflation of 2%) and a 30% weight applied to the amount that would have been spent using 3% of current endowment market value. Given current projections, the payout for the next two fiscal years is expected to be approximately 4%.

The spending rule has two implications. First, by incorporating the previous year's spending, the rule eliminates large fluctuations and so enables the university to plan for its operating budget needs. Second, by adjusting spending toward a long-term rate of 4% of endowment market values, the rule ensures that spending levels will be sensitive to fluctuating endowment market value levels, providing stability in long-term purchasing power.

Pooled Endowment Fund Market Values

The following table summarizes the growth of the PEF over the past 10 years, based on market values.

Recent annual returns to the Pooled Endowment Fund (before fees) are listed below:

Year	Mar-31	Jun-30	Sep-30	Dec-31
1998	28.1%	19.1%	6.3%	14.5%
1999	5.2%	5.4%	8.1%	2.4%
2000	3.7%	6.9%	15.8%	17.7%
2001	16.0%	11.5%	5.5%	5.7%
2002	9.7%	4.1%	-0.4%	-2.2%
2003	-10.4%	-0.1%	7.6%	11.4%
2004	22.3%	16.1%	13.4%	11.1%
2005	9.7%	11.7%	14.7%	10.7%
2006	12.7%	6.5%	8.3%	14.8%
2007	12.2%	17.0%	12.1%	3.3%
2008	-3.4%	-4.6%	-14.4%	-21.5%
2009	-21.9%	-15.0%	2.9%	15.5%
2010	24.4%	7.8%	7.0%	9.4%
2011	10.6%	16.7%	0.1%	0.2%
2012	3.39%	1.74%	14.6%	12.3%