University of Tennesee System

1. You partner with Cambridge Associates and rely on an external consultant to find managers with a repeatable strategy, strong culture, and risk management.

A boutique, owner-managed, high-conviction fund with institutional-grade processes and a long track record fits a consultant-led search focused on repeatability and risk controls.

Evidence

“The UT System partners with Cambridge Associates for management of the University’s investment portfolios.” “The University works with an outside consultant to find managers that possess a repeatable strategy, solid investment culture, and emphasis on risk management.” “If a manager’s strategy is deemed to be a fit for the Endowment, that manager undergoes a rigorous review, including strategic and operational due diligence.”

2. You accept returns that may diverge materially from common indices and use active management where it fits.

A concentrated, best-ideas, high-conviction manager with low correlation is aligned with an allocator comfortable with benchmark deviation and active approaches.

Evidence

“The Endowment invests across a wide range of asset classes, and over any time period, its return may differ significantly from popular indices such as the S&P 500, individual mutual funds, and peers.” “it has implemented a disciplined strategy that incorporates both active and passive management, depending on the target market or manager strategy.”

3. Your policy benchmark is explicitly global (MSCI ACWI IMI) and you keep a large public equity allocation.

A global, international mandate can slot into a portfolio measured against ACWI IMI and contribute to your sizable public equity bucket.

Evidence

“Current benchmark is comprised of 60% MSCI ACWI IMI, 39% Bloomberg Barclays Global Aggregate Index, and 1% US 91 -day Treasury Bills.” “Public Equity 45%”

4. You explicitly include Emerging Markets in policy and have invested in EM equity/debt funds.

A global manager with EM capability can help fill your EM sleeve and complement ACWI IMI-linked equity exposure.

Evidence

“MSCI ACWI IMI Index includes large, mid, and small-cap stock market exposure across both Developed and Emerging Markets.” “Emerging market international equity 6.36% 4%” “DFA EMERGING MARKETS SMALL CAP I SHARES FUND 834,154.263 $ 16,000,000.00 $ 15,949,029.51”

5. You use hedge funds/alternatives to add low-correlation diversification and accept standard lock-ups.

A low-correlation, risk-managed return profile with institutional liquidity terms aligns with your use of alternatives to reduce volatility.

Evidence

“The purpose of this alternative investment class is to increase portfolio diversification and reduce risk due to the low correlation with other asset classes.” “Hedge Funds Long/short equity $ 86,687,696.86 ... Credit ... Diversified ... Total hedge funds $ 189,016,899.32” “These restrictions include lock ups and withdrawal restrictions. Lock up restrictions range from 12-36 months.”

6. You are comfortable investing via pooled/offshore fund structures valued at NAV.

An entrepreneurial, owner-managed hedge fund offered in a commingled/offshore vehicle fits your accepted structures and reporting (NAV, third-party administered).

Evidence

“The university holds investments in limited partnerships , limited companies , corporations , and limited liability corporations which are carried at estimated fair value provided by the management of these funds.” “Like certain pooled investment vehicles, hedge funds are measured at net asset value per share (or its equivalent), provided to investors on a recurring basis.” “POINTER OFFSHORE LTD AE-I-SERIES ONE”

7. You give equal consideration to all managers (no local bias) but require institutional standards and rigorous due diligence.

A small-AUM, owner-managed firm outside Tennessee that meets institutional DD standards can be a fit within a merit-based selection process.

Evidence

“No preference is given to Tennessee-based managers or to managers with a tie to the University.” “Every manager is given equal consideration and must meet the same due diligence benchmarks.” “Given the Endowment’s all-important task of preserving and growing the asset base for future generations, managers must at least meet “institutional” standards before being considered for investment.”

8. You manage to a long-term CPI+spend objective and a total-return approach through full cycles.

A long-tenured, high-conviction strategy with a strong multi-cycle record and capital preservation mindset aligns with your real-return mandate.

Evidence

“Its primary objective is to achieve an annualized return greater than the rate of inflation plus spending, while preserving capital through a full market cycle.” “The university’s Consolidated Investment Pool is invested to maximize total return rather than current income...”