Investment Fund of the Diocese of Long Island

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Investment Fund of the Diocese of Long Island
Presentation to the 140th Annual
Convention November 10-11, 2006
John H. Andren, Jr. Treasurer Trustees of the
Estate Belonging to the Diocese of Long Island
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Objectives of the Fund

• Provide professional investment management to any
  institution of the Episcopal Diocese of Long
  Island
• Maximize total long-term rate of return with
  reasonable risk by seeking capital appreciation
  and current income.

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Brief History

• 2006 marks the 60th anniversary of the Fund
• Authorized by 1940 Diocesan Convention
• Necessary legislation not passed by Albany until
  1946

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The Whys of the Present Structure

• The stock market debacle of 2000-2002 (dotcom
  implosion, Enron and friends) pointed out
  weaknesses in our controls, procedures and
  allocations
• Investment Committee undertook a zero-based
  review of our policies and our managers, leading
  to significant changes and to hiring an advisory
  firm

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Responsibility of the Trustees

• Approval of Allocations
• Approval of Managers
• Approval of Dividend Rates
• Where the buck stops

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Advised by Investment Committee

• Composed of Trustees and other business
  professionals
• Monitors the performance of the managers
• Recommends changes, when appropriate, for
  approval by the Trustees.

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Using an Outside Consultant

• Consultant, with extensive databases
• Tracks performance of many managers
• Is alert to management changes
• Is alert to market trends

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Fund Characteristics

• Quality professional management of the portfolio
• Fiduciary oversight
• Independent of General Funds of the Diocese
• Diversification among various asset classes and
  strategies
• Enhanced investment structure fully implemented
  as of 2005
• Difference between Total Return and Dividend
  Payout - Total Return is intended to accomplish
  two goals provide income and preserve buying
  power by accounting for inflation. Hence a
  portion of the total return (currently 3) is
  retained in the fund.

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Financial Highlightsas of September 30, 2006
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More Financial Highlightsas of September 30, 2006
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Performance

• Historical
• Current
• Projected

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Fund Performance

• The Total Fund posted a gain of 11.7 for the
  one-year period ended September 30, 2006,
  surpassing both the SP 500 Index and the average
  balanced manager by a notable margin.
• The portfolio exhibits strong, relative
  long-term performance with a five-year return of
  9.1 compared to the SP 500 Index return of 7.0
  and the 6.6 return of the median balanced
  manager.

Returns are reported net of all fees.
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Historical Share Price
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2006 Share Price
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Future Performance
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Asset Allocation

• Goals of the allocation process
• Maximum return consistent with prudent trust
  management
• Reduced dependence on equities
• Broadened international scope
• Lowered volatility
• Consistent returns

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Asset Allocation

• International equity managers have outpaced
  international benchmarks and domestic equity
  returns
• The real estate securities portfolio increases
  both diversification and yield
• The fixed income allocation is maintained within
  the Fund to minimize volatility
• Hedge fund of funds are used to add further
  diversification and provide a low-volatility
  return enhancement to the fixed income
  allocation.
• The fund comprises a wide variety of domestic
  equity managers covering both large cap value and
  growth as well as small cap core

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Asset Allocation Comparison
As of June 30, 2006
Russell/Mellon Trust Fund Endowment Universe
Diocese of Long Island Current Allocation
Source Russell/Mellon Endowment Universe, June
30, 2006
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Returns
The return to investors has two elements the
amount credited to the accounts and the increase
in the value of the shares. This is the total
return. It includes all fees and expenses.
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Inflation effect

• Why is it a concern?
• Need to maintain purchasing power
• Mandatory consideration in managing trust
  funds
• Common sense says its the right thing

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Inflation how do we deal with it

• We estimate total return, e.g, 8
• We subtract an inflation factor, using Consumer
  Price Index as a guide, currently 3
• Expenses historically average .5
• Making the dividend rate 4.5

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Amount Credited vs. Total Return
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Dividend History
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Subscribing to the Fund

• Participation in the Fund is open to all Parishes
  and Diocesan Organizations.
• Our charter does not allow us to accept accounts
  from individuals
• Contact the Diocesan Office. Details are in your
  handouts.