By Steven Orlowski
The December edition of aiCIO Magazine, a publication dedicated to institutional chief investment officers, profiles a number of CIOs and the portfolios each is responsible for. Many of these massive portfolios are increasing their allocation towards emerging markets.
The issue examines data covering the period from 06-30-2008 through 06-30-2012 for the Conrad Hilton Foundation. With Chief Investment Officer Randy Kim at the helm, the foundation decreased both U.S. Equity and Developed Foreign Equity, by 11% and 5% respectively, while increasing Foreign Emerging Equity by 8%, from 4% to 12%. These are big shifts by a big foundation. The Conrad Hilton Foundation currently has about $2 billion under management.
The University of Notre Dame Endowment was also profiled. The $7.5 billion fund has been overseen by Chief Investment Officer Scott Malpass since the late 1980s. The Notre Dame Endowment has seen its assets grow from $500 million in 1990 to $7.5 billion today, and in that time, according to aiCIO, the percentage allocated to U.S. equities has dropped from 45% to 7.5%. The emerging market sector now represents approximately 20% of the portfolio. Malpass is quoted in the article as endorsing a continued focus on emerging markets, one which may lead to the endowment needing to beef up its emerging market staff.
Catholic Healthcare Investment Management Company (CHIMCO), a wholly owned subsidiary of Ascension Health Alliance, has $23 billion under management. In addition to pursuing a profitable investment course the money manager is further challenged by having to meet the standard of values of the Catholic Church. Since 2009, the CHIMCO portfolio has changed markedly, with emerging market exposure rising from 5% of assets to 18% while exposure to US equities dropped from 75% to 50%.
Many of these increases should have been expected as well as attributable to growth in assets due to sector out-performance. But it is well worth noting the orientation toward emerging market investing is not diminishing. For managers of portfolios comprising billions of dollars, it is critical to not only target returns but also to manage risk. The now ancient perception that emerging market investing is more risky has even less credibility, as these high profile funds maintain and increase emerging market exposure. It is apparent that what may be most risky is a failure to have sufficient exposure to the fastest growing and most opportunistic markets.