SCOPE:
Since 2001, EnnisKnupp has worked with our client to develop and implement a comprehensive investment program. Because of the plan’s prior experience with its investment consultant, a critical aspect of working with our client has been to foster good working relationships among investment staff, trustees, and EnnisKnupp.
APPROACH:
We approached establishing our relationship with our client by assessing the existing portfolio to fully understand its asset allocation, manager structure, manager “lineup,” risk profile, and performance relative to benchmark. Our initial analysis of the portfolio produced four major findings:
- Insufficient diversification with an excess of highly aggressive investments
- No apparent strategy to help guide manager selection
- Too many managers
- Below-benchmark investment performance
RECOMMENDATIONS:
Since the inception of the relationship, EnnisKnupp has recommended and implemented actions designed to enhance the performance of our client's investment portfolio:
- Conducted a comprehensive style analysis to help determine
the portfolio’s exposure to different investment styles (large cap, mid cap, small cap, et. al. )
- Initiated an in-depth risk modeling process to help understand each style’s contribution to the risk and return of the portfolio
- Significantly reduced the number of managers
- Implemented indexing for the equity portion of the portfolio
- Enhanced diversification within all asset classes
- Added a core component and began building an opportunistic allocation within the real estate portion of the portfolio
- Hired a customized fund-of-fund manager to help our client diversify by vintage year and sector within the private equity allocation
OUTCOMES:
EnnisKnupp has helped our client restore confidence in the integrity of its investment program. The portfolio is now well diversified and has generated top-quartile investment performance for the five years ending 12/31/08 (within the public fund universe).
By helping our client build an investment program characterized by flexibility and increased openness to change where appropriate, EnnisKnupp has engendered a constructive working relationship among all three of the major constituencies ─ investment staff, trustees, and EnnisKnupp.