Selection of Global Equity Investment Managers UM

Selection of Global Equity Investment ManagersUM University of Missouri System Board of Curators August 19, 2011 FINANCE COMMITTEE c

Investment Manager Selection Process • Rocaton Investment Advisors utilizes an objective process to identify “Best in Class” managers for each asset sector • Universe of potential managers is continuously identified, including screening for Missouri-based, women or minority-owned firms • Extensive qualitative and quantitative analysis is performed • Onsite due diligence conducted by Rocaton • From the “Best in Class,” University staff selects several managers for joint interviews with Rocaton, based on agreed-upon criteria, portfolio fit and available funding • In consultation with Rocaton, University staff selects investment manager(s) to recommend for Board approval, based on consideration and review of information obtained throughout the entirety of the search process d

Global Equity Manager Selection • Standard manager selection process was utilized. • Seven recommended firms were presented by Rocaton for consideration by staff. • Five firms were selected for interviews in St. Louis with the following University representatives: • Nikki Krawitz, VP Finance and Administration • Tom Richards, Treasurer • Robin Pellish, CEO, Rocaton Investment Advisors • Four firms were selected to recommend to the Board for approval. e

Global Equity Manager Selection • Transition to Global Equity mandate was approved at the June 2011 Board meeting. • Management is recommending the hiring of four active Global Equity investment managers (amounts are approximate): f

Global Equity Manager Selection • Management also recommends that existing passive exposure to the Russell 1000 index be transitioned to passive exposure to the MSCI World index. • Additionally, it is recommended that passive equity exposure be increased by approximately $53 million and $73 million in the Retirement Plan and Endowment Fund, respectively. g

Global Equity Manager Selection • New investments will be funded primarily through the termination of existing relationships with the following: • Alliance (Domestic Equity) • American Century (Domestic Equity) • Bernstein International (International Equity) • Capital Guardian International (International Equity) • JP Morgan (International Equity) h

Global Equity Manager Selection • Fees for the Global Equity allocation (including passive exposure) are estimated at 40bp in aggregate. • After manager transitions and rebalancing is complete, we anticipate that aggregate fees for the entire equity sector will remain unchanged at approximately 54bp. i

Ballie Gifford Global Alpha • Founded in 1908; based in Edinburgh, Scotland • $120 billion in assets under management; $8.5 billion in this strategy, which was started in 2005 • Invests in growth-oriented firms which have a dominant market position in their respective industries • As a result of the growth focus, this strategy holds 20-25% of the portfolio in emerging market stocks, the highest among the four managers • Has historically held 70-120 companies in the portfolio j

MFS Global Equity • Founded in 1924; based in Boston • $230 billion in assets under management; $33 billion in this strategy, which was started in 1988 • Invests in high quality companies which have an ability to generate above average sustainable revenue and earnings growth at attractive valuations • Typically less than 5% in emerging markets • Has historically held 80-120 companies in the portfolio k

Walter Scott Global Equity • Founded in 1983; based in Edinburgh, Scotland • $45 billion in assets under management; $23 billion in this strategy, which was started in 1986 • Invests in a relatively concentrated portfolio of about 50 stocks focused on leading growth companies which are held for an average of at least 3-5 years • Emerging markets exposure of approximately 5% • Low portfolio turnover; willing to hold contrarian views l

Wellington Global Value • Founded in 1928; based in Boston; Global Value portfolio team based in London • $663 billion in assets under management; $7.2 billion in this strategy, which was started in 2005 • Invests in securities that are out of favor in the marketplace, but which have significant upside potential • Emerging markets exposure has averaged 10-20% • Highest portfolio turnover; most value-oriented of the four managers m

Performance Statistics – As of 6/30/11 n

Summary • 66% of Global Equity (large cap, developed markets) has been targeted for active managers • Passive exposure will increase by approximately $126 million • Four active managers were determined to provide optimal sizing for our portfolios; results in net reduction of 1 active manager • Candidates have consistently delivered returns above the index over market cycles in excess of fees charged • Candidates are sufficiently diversified with low correlations relative to one another • A detailed analysis of each of the four candidates has been provided in Board materials o

Selection of Global Equity Investment Managers UM