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OIG-C
Antioch University
Investment Committee Minutes
Indianapolis, IN
September 24, 2002
Attending were Committee members Niels Lyster, Chair; Bruce Bedford; Amy
Chappell and Jeff Kasch; Glenn Watts, Vice Chancellor and CFO; and Rosalie
Sturtevant, University Controller; Jennifer Kossow and Mike Birgeneau from The
Consulting Group of Smith Barney and various presenters from money
management firms.
The meeting was called to order at 10:00 AM.
The purpose of this special meeting was to choose a Large Cap Growth (LCG)
money manager to replace Cohen, Klingenstein and Marks on recommendation
of The Consulting Group, and to hear once again from K-2 Investors concerning
the use of a fund-of-fund hedge fund to alleviate portfolio downside risk.
Three LCG managers were interviewed: Baird, Friess Associates and TCW
Group.
Jennifer Funk of Baird explained the company’s portfolio philosophy. Baird holds
companies with large ($5B+) and mid range ($1-5B) in capitalization. They look
for quality companies and have small turnover in the portfolio, holding no REITS.
Their sell discipline activates if company valuation weakens, if it experiences a
breakdown in consistent growth, or shows quality deterioration. They have
selected their current investments in anticipation of an economic recovery. Their
philosophy is to hold up in the down years and keep risk to a minimum. Baird
feels that we are still in a healthy economy that they will be benefiting from
growth stocks. Their management fee is .45%.
Christopher Long presented the information on his company, Friess Associates.
Friess feels that their strength is in-depth, fundamental research on the
companies in the portfolio. They strive to understand “what’s the earnings driver”
for each component. When a stock hits its target price, they sell. They
experience around 200% stock turnover each year. Stocks are replaced in the
portfolio with another that looks like a better opportunity. Competition among
their individual managers keeps the combination vital. Their management fee is
1%.
Scott August represented TCW Group. TCW looks for stability in companies.
They want stocks that have a unique advantage, such as strong patents, or are
the low-cost provider. They confine themselves to owning the 30 best
companies, which is ‘conviction-weighted’. They experience a low turnover in
stocks. Their sell discipline is to sell when price reflects the most optimistic
outlook or becomes too large a portion of the portfolio; to take advantage of a
better opportunity; or when operational expectations fail to materialize. Their
management fee is .45%.
Resolution to hire Friess to replace Cohen, Klingenstein and Marks. Moved by
Amy Chappell, seconded by Bruce Bedford. All approved
Resolution to also hire TCW to replace Antioch’s other Large Growth manager,
Roxbury. Moved by Bruce Bedford, seconded by Amy Chappell. All approved
It was felt that the combination of these two money managers and their styles
and their approach to risk would add appropriate diversification to Antioch’s
portfolio.
The Committee next heard from Mercer Borden of K-2 Investors concerning a
fund-of-fund hedge fund. This was in addition to Mercer’s presentation at the
June Board meeting in Seattle. There are 22 managers in the fund, 14 long/short
and 8 low-volatility, which diversifies and balances the total fund. A hedge fund
inclusion in Antioch’s endowment investments would offer protection during
market declines. K-2 charges a1.25% management fee, plus 10% on any
increases over 7%.
The committee agrees that it would be prudent to include a 5% position in hedge
funds in our portfolio, but this requires an amendment to the investment policy to
allow these alternative investments. A suggested policy wording was presented
by Smith Barney, but rejected by the Committee as overly broad. A new policy
amendment is to be presented at the October meeting to be voted on, along with
a resolution to move 5% ($1M) into the K-2 hedge fund-of funds.
The meeting adjourned at 3:15 PM.
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