Fun Facts to Know About Your Endowment

ALA Endowment FundAKA Long-Term Investment Fund

ResponsibilitiesThe Endowment Trustees

(4)* have the primary responsibility for the day-to-day management of the Endowment Fund

Their work 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

Investment ObjectivesThe 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

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

Asset Allocation @ 12-31-11

London Core

$4,122,115 13.3%

IDP Large Cap Growth

$4,310, 13.9%

IDPLarge Cap Value

$3,056,366 9.9%

NFJ Small Cap Value

$1,490,768 4.8%

IDPInternational

$1,822,783 5.9%

InvescoREIT

$1,581,990 5.1%

Neuberger Intermediate

$1,620,677 5.2%Lord Abbett

Convertible$815,910

2.6%

Global Bond/RE$4,416,635

14.3%

PimcoBonds

$3,866,490 12.5%

Ariel$514,584

1.7%Endowment Fund

Alternatives$3,339,372

10.8%

Spending/Payout AuthorityGoverned by ALA policy 8.5.1Establishes a 3% - 5%

spending limit for each 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%

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

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.

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 ownThe market is not always rationalThe 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)

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 IndiaBrinksmanship in Washington over the federal

deficitRising and falling oil pricesConflict in the MideastPresidential PoliticsFlight to safety in times of trouble i.e. United StatesMideast “Spring Uprising”

World Market Performance - Market Returns for the Calendar Year 2011

-17.0%

-5.6%

5.5%

-20.0%

-17.7%

-1.8%

-14.7%

-17.3%

-21.7%

0.0%

-25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0%

CAC - 40

FTSE 100

Dow Jones

Hang Seng

Eurostoxx50

DAX

Nikkei 225

Shanghai Comp

S&P 500

NASDAQ

Nothing Creates Wealth Like Investing

The last “Secular” bull market ran from 1983 – 2007 Where high returns were realized