Monday, October 11, 2004
Update on MacArthur Foundation Performance
Printed from ChicagoBusiness.com
MacArthur's investing genius - Diversified mix yields 26% return in '03, a $914 million gain
By Jeremy MullmanOctober 09, 2004
The John D. and Catherine T. MacArthur Foundation, long an investment laggard, has diversified its portfolio and morphed into a money-managing juggernaut.The $4.4-billion foundation made $914 million on its investments last year, according to its recently available annual report. At 26%, MacArthur's return outpaced the national foundation average of 17%. 2003 also was the fifth straight year the institution best known for "genius grants" either matched or outperformed the Standard & Poor's 500 index.The trend appears to be continuing. As of Aug. 31, MacArthur's investments were up 4.5% for 2004, vs. a 1.2% loss for the S&P 500, according to Chief Investment Officer Susan E. Manske."That's exceptional performance," says John S. Griswold Jr., executive director of the Commonfund Institute, the research and education arm of Commonfund, which manages more than $30 billion for endowed institutions. "They've clearly got an asset mix that's protecting them in downturns and kicking in some horsepower on the way up."For most of its history, MacArthur's investment performance sagged under the weight of massive Florida real estate holdings inherited from founder John D. MacArthur.The land, 100,000 undeveloped acres near and in Palm Beach, was valuable on paper, booking at more than 40% of MacArthur's total endowment. But despite that value, it neither generated income nor, because of a major real estate slump , did it appreciate much.It took MacArthur 20 years to unload the land, with the last major parcels selling for $250 million in 1998. "It was challenging," says Joshua J. Mintz, a MacArthur vice-president. "But selling the real estate let us focus more on private equity and some alternative investments that have been lucrative."Results improved — in bull and bear markets alike. In 1999, when the S&P 500 rose by 19%, MacArthur's endowment jumped 22.4%. When the S&P 500 plunged 23% in 2002, MacArthur's portfolio declined only 4.8%.According to Rensselaer Polytechnic Institute Treasurer Walé F. Adeosun, who managed MacArthur's $1.6-billion stock portfolio from 1999 to 2003, the foundation avoided the worst of the downturn by shifting its assets more heavily into fixed-income investments, such as corporate and government bonds.In 2003, however, MacArthur shifted its weight back into the bottomed-out U.S. and international stock markets, and its portfolio of more than 1,500 stocks reaped the benefits.At the end of 2003, MacArthur had 54% of its investments in equities, 18% in fixed-income holdings, and 28% in alternative investments such as hedge funds. The company's single largest stock holding as of Dec. 31, 2002, the date of its most recently publicly available tax return, was a $55-million stake in Florida-based WCI Communities Inc., the developer that bought the last 14,000 acres of MacArthur's Palm Beach real estate in late 1998. (MacArthur's WCI holding dates back to 1995, seven years before the firm was publicly traded.)By November 2003, when MacArthur sold most of its 5.4 million shares in a secondary public offering, they'd doubled in value, to more than $110 million."WCI was a good investment for us," says Mr. Mintz.©2004 by Crain Communications Inc.
MacArthur's investing genius - Diversified mix yields 26% return in '03, a $914 million gain
By Jeremy MullmanOctober 09, 2004
The John D. and Catherine T. MacArthur Foundation, long an investment laggard, has diversified its portfolio and morphed into a money-managing juggernaut.The $4.4-billion foundation made $914 million on its investments last year, according to its recently available annual report. At 26%, MacArthur's return outpaced the national foundation average of 17%. 2003 also was the fifth straight year the institution best known for "genius grants" either matched or outperformed the Standard & Poor's 500 index.The trend appears to be continuing. As of Aug. 31, MacArthur's investments were up 4.5% for 2004, vs. a 1.2% loss for the S&P 500, according to Chief Investment Officer Susan E. Manske."That's exceptional performance," says John S. Griswold Jr., executive director of the Commonfund Institute, the research and education arm of Commonfund, which manages more than $30 billion for endowed institutions. "They've clearly got an asset mix that's protecting them in downturns and kicking in some horsepower on the way up."For most of its history, MacArthur's investment performance sagged under the weight of massive Florida real estate holdings inherited from founder John D. MacArthur.The land, 100,000 undeveloped acres near and in Palm Beach, was valuable on paper, booking at more than 40% of MacArthur's total endowment. But despite that value, it neither generated income nor, because of a major real estate slump , did it appreciate much.It took MacArthur 20 years to unload the land, with the last major parcels selling for $250 million in 1998. "It was challenging," says Joshua J. Mintz, a MacArthur vice-president. "But selling the real estate let us focus more on private equity and some alternative investments that have been lucrative."Results improved — in bull and bear markets alike. In 1999, when the S&P 500 rose by 19%, MacArthur's endowment jumped 22.4%. When the S&P 500 plunged 23% in 2002, MacArthur's portfolio declined only 4.8%.According to Rensselaer Polytechnic Institute Treasurer Walé F. Adeosun, who managed MacArthur's $1.6-billion stock portfolio from 1999 to 2003, the foundation avoided the worst of the downturn by shifting its assets more heavily into fixed-income investments, such as corporate and government bonds.In 2003, however, MacArthur shifted its weight back into the bottomed-out U.S. and international stock markets, and its portfolio of more than 1,500 stocks reaped the benefits.At the end of 2003, MacArthur had 54% of its investments in equities, 18% in fixed-income holdings, and 28% in alternative investments such as hedge funds. The company's single largest stock holding as of Dec. 31, 2002, the date of its most recently publicly available tax return, was a $55-million stake in Florida-based WCI Communities Inc., the developer that bought the last 14,000 acres of MacArthur's Palm Beach real estate in late 1998. (MacArthur's WCI holding dates back to 1995, seven years before the firm was publicly traded.)By November 2003, when MacArthur sold most of its 5.4 million shares in a secondary public offering, they'd doubled in value, to more than $110 million."WCI was a good investment for us," says Mr. Mintz.©2004 by Crain Communications Inc.
# posted by Tom @ 8:40 AM 
