Risk Pools

The investment policy of Waco Foundation has been expanded to ensure donors and organizations have the option to invest funds in assets that meet the growth and income needs across a variety of time horizons. Before making a decision on how to invest your fund, you should consider how long you expect to hold the majority of the balance of the fund, whether or not you hope that it appreciates and if you can tolerate fluctuations in the balance. Funds exposed to anything other than cash will experience both appreciation and depreciation, but they will grow over time. Funds exposed only to cash or bonds will maintain current value, but the real value of these funds will erode over time because of inflation.

Endowment Pool: Consistent income over time

The purpose of this portfolio is to generate income in perpetuity without invading corpus of the fund by providing a steady stream of income and consistent purchasing power for funds on a permanent time horizon. Assets are held in a conservatively and prudently-managed diverse portfolio which includes a mix of both active and passive investment strategies. The asset allocation strategy includes stocks, fixed income, emerging markets, inflation-protected securities, alternative investments and real assets invested in both domestic and international markets. Waco Foundation’s Unrestricted Fund is invested in the Endowment Risk Pool. Allocation to this pool is as follows:

Asset Class Fund Name Target Benchmark
U.S. Large/Mid-Cap Equity DFA US Core Equity
Vanguard Index Fund
Luther King Capital Mgmt
Artisan Global Opportunities
24.0%

S&P 500 Index
Russell 1000
MSCI AC World

U.S. Mid/Small-Cap Equity DFA US Small Cap Value
Vanguard S&P 600 Index Growth
6.0%

Russell 2000
S&P Small Cap 600 Growth

International Equity

Artisan International Value
Marathon - London

18.0% MSCI EAFE
Emerging Markets Aberdeen Emerging Markets
Highclere International SMID
7.0% MSCI Emerging Markets
U.S. Core Fixed Income
Vanguard Total Bond Fund
11.0% Barclays Capital Aggregate
Global Bonds Colchester Global Bond 4.0% Citigroup World
Gov’t Bond
High Yield/Bank Loans

Oaktree High Yield Fund, LP

3.0%

Merrill High Yield

Real Assets

Aberdeen Energy & Resource Ptrs II
Aberdeen Real Estate Ptrs II
Denham Commodity Partners VI
Van Eck Global Hard Assets
Aether Real Assets Fund III
Och-Ziff Real Estate Fund III
Crow Holdings Realty Partners VII-A

7.0% Bloomburg
Commodity Index
Multi-Strategy Hedge Funds Wellington Pagosa
Canyon Value Realization
9.0%

HFRI Fund of
Funds
T-Bills + 5%

Long/Short Hedge Funds

Forester Offshore
Bay Resources Offshore
Permian Capital
Cat Rock

9.0%

HFRI Equity
Hedge Index
S&P 500

Cash & Cash Equivalents Vanguard Short Term Bond Fund 2.0% Barclays Gov't/
Credit 1-3

Short-Term Pool: Current grantmaking strategy

The purpose of this portfolio is to provide a high level of liquidity for funds with short-term grantmaking strategies (minimal risk and minimal return). This pool is designed with a time-horizon of three years or less. Allocation to this pool is as follows:

Asset Class Fund Name Target Benchmark
US Fixed Income Bonds
Vanguard Short-Term Bond Index 40.0% Barclays Gov't 1-3 yr
Cash/Cash Equivalents Cash 60.0% US Treasury Bills

Intermediate Term Pool: Intermediate term grantmaking strategy

The purpose of this portfolio is to balance mild liquidity needs with a reasonable level of expected appreciation over full market cycles (low risk and small return). This pool is designed with a time-horizon between three and seven years. Allocation to this pool is as follows:

Asset Class Fund Name Target Benchmark
U.S. Large/Mid-Cap Equity Vanguard Index 500 15.0% S&P 500 Index 
U.S. Small-Cap Equity Vanguard Small Equity 5.0% Russell 2000 
International Equity Harbor International Value
EuroPacific Growth Fund
10.0% MSCI EAFE
U.S. Core Fixed Income
Vanguard Total Bond Market Index
30.0% Barclays Capital Aggregate 
U.S. Short-Term Bonds Vanguard Short-Term Bond Index 20.0% Barclays Gov’t/Credit 1-3 year 
Money Market Cash/Cash Equivalents 20.0% U.S. Treasury Bills

Long-Term Pool: Income determined by equity & bond performance

The purpose of this portfolio is to mimic the Endowment as close as possible without including Alternative Investments. This pool is designed for non-permanent funds which will last more than seven years. Allocation to this pool is as follows: 

Asset Class Fund Name Target Benchmark
U.S. Large/Mid-Cap Equity Vanguard Index 500 Fund 33.0% S&P 500 Index 
U.S. Small-Cap Equity Vanguard Small Equity 6.0% Russell 2000 
International Equity Harbor International Value
EuroPacific Growth Fund
23.0% MSCI EAFE
Emerging Equity Vanguard Emerging Markets 8.0% MSCI Emerging 
U.S. Core Fixed Income
Vanguard Total Bond Market Index 20.0% Barclays Capital Aggregate 
U.S. Short-Term Bonds Vanguard Short-Term Bond Index 10.0% Barclays Gov’t/Credit 1-3 year 

Growth Pool: Income determined by market performance

The purpose of this portfolio is to experience the growth and fluctuations of the market while adhering to an acceptable level of risk through equity level diversification. By removing fixed-income securities and cash equivalents, this portfolio can mirror the direction of the overall equity market more closely.  This portfolio has the highest risk yet generally offers the highest return. Allocation to this pool is as follows:

Asset Class Fund Name Target Benchmark
U.S. Large/Mid-Cap Equity Vanguard Index 500
25.0% S&P 500 Index
U.S. Small-Cap Equity Vanguard Small Cap Fund 20.0% Russell 2000 Index
Non-U.S. Developed Equity Harbor International Value
EuroPacific Growth Fund
50.0% MSCI AC World
MSCI EAFE
Real Estate Vanguard Specialized REIT Index Fund 5.0% Russell Nareit Index
Contact

Phone: 254-754-3404
Fax: 254-753-2887

Location

1227 N. Valley Mills Drive
Suite 235
Waco, TX 76710
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