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ALA Endowment Fund AKA Long-Term Investment Fund

ALA Endowment Fund AKA Long-Term Investment Fund. Fun Facts to Know About Your Endowment. Responsibilities. The Endowment Trustees (4)* have the primary responsibility for the day-to-day management of the Endowment Fund

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ALA Endowment Fund AKA Long-Term Investment Fund

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  1. ALA Endowment FundAKA Long-Term Investment Fund Fun Facts to Know About Your Endowment

  2. Responsibilities • The Endowment Trustees (4)* have the primary responsibility for the day-to-day management of the Endowment Fund • Theirwork is supplemented by the ALA Finance staff and the input of an Investment Advisor – Merrill Lynch. • The ALA Executive Board has the final fiduciary responsibility *Looking to increase that number by 1 for a total of 5 at this Midwinter Meeting and the authority to increase to a maximum of 7

  3. Investment Objectives • The performance objective is inflation + 4% • The ALA Benchmark is a combination of the Russell 3000 (55%), MSCI EAFE (10%) and the Merrill Lynch Master Bond Index (35%) • Results of first two bullets annualized over a three- to five-year rolling time period and a full market cycle. • Growth the assets at a rate that is in excess of inflation, net of expenses • To diversify the assets in order to reduce the risk i.e.large swings in value and big losses • Produce results that are favorable to other endowments of similar size • Invest in a manner that is consistent with the values of the Associations’ membership

  4. Portfolio and Fund Characteristics • There are 73 individual funds in the ALA endowment • There is only one investment account, which currently totals $31.0 million. • There are twelve (12) portfolio managers or asset categories • Each manager has a different investment objective • They’re combined actions help maximize returns and minimize our risk • Monthly results – gains, losses, interest/dividends and bank fees are allocated proportionally

  5. Asset Allocation @ 12-31-11

  6. Spending/Payout Authority • Governed by ALA policy 8.5.1 • Establishes a 3% - 5% spending limit foreach funds average 20 quarter rolling net asset balance • The rate is reviewed and established by the Trustees annually. • The rate is reviewed and approved by the Finance & Audit committee and the ALA Executive Board • The current rate is 4%

  7. How to Get Started • The current minimum is $25,000. However the Trustees are recommending that the minimum be raised to $50,000. • Unless it is a donation, gift or the result of a fund raising effort, it must be part of the budget development process i.e. no out of budget cycle endowments

  8. What Can the Proceeds Be Used For? • To provide support to your general operation – speaker fees, operating etc. • To fund a special initiative – membership campaign, CE development etc. • To support a new program – webinars, leadership development etc. • To fund a scholarship or award – library school support, to honor someone in the profession etc.

  9. Things Happen When Investing • Historically, outside side of real estate there is no better way to create wealth - However • The market has a mind of its own • The market is not always rational • The market can be impacted by things that are outside of your control or make no sense • During investor capitulation, even good companies with great fundamentals can be taken it down – see 2008 (herd mentality)

  10. Things That Have Impacted the Financial Markets in 2011 • Sovereign debt issues in Europe – Italy, Spain, Greece, Ireland, Portugal etc. • Slowing economies in China and India • Brinksmanship in Washington over the federal deficit • Rising and falling oil prices • Conflict in the Mideast • Presidential Politics • Flight to safety in times of trouble i.e. United States • Mideast “Spring Uprising”

  11. World Market Performance - Market Returns for the Calendar Year 2011

  12. Nothing Creates Wealth Like Investing The last “Secular” bull market ran from 1983 – 2007 Where high returns were realized

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