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Endowments

There are four major endowment fund groups. The four major endowment fund groups are the Permanent University Fund (PUF), Permanent Health Fund (PHF), Long Term Fund (LTF) and Separately Invested Funds (SIFs).

Endowments Bond Fund seeks current income consistent with preservation of capital. The fund invests primarily in investment-grade fixed-income securities. These securities may have stock conversion or purchase rights; however, this sector of the portfolio normally does not represent more than 20 percent of the fund's assets.

Endowments Growth and Income Fund seeks capital appreciation; current income is secondary. The fund invests primarily in common stock and convertible securities, emphasizing those companies with potential for long-term growth of both capital and income. It may also purchase preferred stock and high-quality corporate debt securities. The fund may invest up to 10 percent of assets in foreign securities.

Four factors affect an endowment fund's ability to meet the conflicting needs of current and future beneficiaries. These factors are fund investment return, fund expenses, the rate of inflation, and fund distributions.

Investment returns generated by the endowment funds are determined primarily by the allocation of fund assets to different classes of investments and by the ability of The University of Texas Investment Management Company (UTIMCO) staff to add value by earning returns greater than those generally available from each asset category. UTIMCO draws on years of investment experience and expertise to determine the best allocations to different categories of assets in order to achieve the returns necessary to meet objectives while protecting endowment assets from severe losses in an adverse market environment. Once allocation decisions are made, UTIMCO focuses on earning the highest returns possible within each asset category while maintaining strict risk control through a quantitative risk budgeting process.

Objective of this fund is Provide for future beneficiaries by increasing the market value of endowment assets so that distributions to future beneficiaries will buy the same or better level of goods and services received by today's beneficiaries.

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