1. The Big Mystery – What do these people do all day?
Alain Hung, CFA
Associate Director of Investments

6. WARF’s Approach Allocate risk not capital Separate beta and alpha
Maximize benefits of diversification

8. R = rf + β + α

9. Economic Diversification
Growth
Inflation
Rising
Stocks
Commodities
Real Estate
Private Equity
Style Premia
Inflation-linked bonds
Falling
Global nominal bonds

11. Risk Allocation by Economic Environments

12. Volatility Assumptions Leverage at Asset Level
Domestic Large Cap
16% 1x
Domestic Mid Cap
18%
Domestic Small Cap
21%
EAFE
17%
Emerging
23%
Frontier Markets
25%
Commodities
Real Estate
13%
TIPS 7% 2x
Global Bonds
5.6%
2.6x
Private Equity
Style Premia
12%
Alpha Portfolio 4%

13. Rising Growth
Falling Growth
Rising Inflation
Falling Inflation
Target Risk Budget
Capital Allocation
Domestic Large Cap
3.1% 7%
Domestic Mid Cap
1.5% 3%
Domestic Small Cap
1.2% 2%
EAFE
5.2%
10%
11%
Emerging
5.0% 8%
Frontier Markets
1.4%
Commodities
2.5%
5.7%
Real Estate
1.9%
0.9% 4% 5%
TIPS
6.6%
13%
17%
Global Bonds
7.9%
16%
20%
Private Equity
3.6%
Style Premia
1.3%
Alpha Portfolio
12%
54%
Total
100%

14. Beta Portfolio leverage
1.5
Total portfolio leverage
2.0
Portfolio risk target
10.3%
Expected excess return
6.1%
Sharpe ratio
0.6

15. 5-Year 10-Year Portfolio Return 7.80% 7.40%
Spending Rate % %
+3.30%
+2.90%

17. Quiz
What was the portfolio’s 10-year annualized return as of the end of FY2016 (6/30/16)?
What was the percentile ranking of that performance in a universe of the top 35 university foundations?

19. Reminder:
Investment contest due date, 3 p.m.