Oklahoma State Regents

Oklahoma State Regents

Presented on September 27, 2006 by

Michael H. Strauss, Chief Economist and Chief Operating Officer of Commonfund Asset Management Company Crissie L. Tewell, Managing Director

Commonfund 15 Old Danbury Road P.O. Box 812 Wilton, CT 06897-0812 Telephone: 888-823-6246Securities offered through Commonfund Securities, Inc., a member of the NASD

Presented to

2Oklahoma State Regents

Why Invest with Commonfund

To improve investment management practices and to enhance the financial resources of the nonprofit community

STRONG FINANCIAL RESOURCES

SERVICEEDUCATIONAL PROGRAMSPERFORMANCE

COMMONFUND MISSION

The Pillars That Support Our Mission


A History of InnovationCommonfund has a History of Providing Programs Across a Broad Range of Asset Classes

1Hedge strategies first used as diversifier in Commonfund equity portfolio2Distressed debt first used as diversifier in Commonfund Multi-Strategy Bond Fund.3This service existed as the Endowment Planning Model since 1990.

U.S. Equities 1971

Cash (Short Term Fund) 1974

Fixed Income 1976

Hedged Equity1 1982

International Equities 1983

Real Estate 1988

Private Capital 1988

Distressed Debt2 1989

Absolute Return Strategies 1991

Commonfund Strategic Solutions® 2001

Allocation Planning ModelTM3 2002

Commodities 2005

Program Initiated


Education and Best PracticesA Commitment to Professional Development and the Sharing of Best Practices

Commonfund Benchmarks Study® Series

Endowment Institute

Regional Roundtables and Seminars

Publications and White Papers

Commonfund Forum Annual Conference

Treasury Institute for Higher Education

Higher Education Price Index (HEPI)

Commonfund Forum (Annual)

Commonfund Investment Management & Governance Seminars (3 per Year)

Commonfund Trustee Roundtable Series (Twice monthly on average)


Asset Allocation for Total Institutions

3%

16%

18%

35%

28%

Dollar-weighted asset mix

As of June 30, 2005

Domestic Equities

International Equities Fixed Income

Alternative Investments

Short Term/Cash

Copyright 2006 The Common Fund for Nonprofit Organizations.All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may beused without the express written permission of The Common Fund for Nonprofit Organizations.

2006 Commonfund Benchmarks Study® Educational Endowment Report

Hot Charts\CFBenchmarks_Study_2006


9.7

13.9

11.8

10.39.4

8.6 8.79.5

3.5

5.14.3

3.5 3.3 3.0 3.3

8.89.49.810.6

11.6

9.6

0

5

10

15

20

TotalInstitutions

Over $1Billion

$501 Million - $1 Billion

$101 Million -$500 Million

$51 Million - $100 Million

$10 Million - $50 Million

Under $10Million

9.6%

Average Reported One-, Three- and Five-Year Returns1

Ann

ual N

et T

otal

Ret

urn

%

Fiscal Years 2000-2005 ending June 30

1 Net of fees. 729 InstitutionsCopyright 2006 The Common Fund for Nonprofit Organizations.All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may beused without the express written permission of The Common Fund for Nonprofit Organizations.

FY2005 total return3-year return5-year return


3.5%

Average return



Asset Allocation1 Trend for Total Institutions

2426

32 33 34 35

0

10

20

30

40

50

2000 2001 2002 2003 2004 2005

Domestic equitiesFixed incomeInternational equitiesAlternative strategiesShort-term securities/cash/other

Perc

ent (

%)

Total Institutions 563 617 637 657 707 729

1 Dollar WeightedCopyright 2006 The Common Fund for Nonprofit Organizations.All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may beused without the express written permission of the Common Fund for Nonprofit Organizations.

Fiscal Years 2000-2005 ending June 30




Is there a correlation between performance and liquidity?

Source: 2006 Commonfund Benchmarks Study® – Educational Endowment Report, Based on 729 institutions that provided asset allocation data2006 The Common Fund for Nonprofit Organizations. All rights reserved. "Commonfund" and "Commonfund Benchmarks Study" are trademarks of The Common Fund for Nonprofit Organizations. No part of this material may be used without the express written permission of The Common Fund for Nonprofit Organizations. Source: 2005 NACUBO Endowment Study, the two smaller fund groupings as reported by NACUBO, $26M - $50 M and <$25M, are represented in the Commonfund $10 - $50M grouping equally weighted.

86.5%

81.9%

70.9%

53.3%

75.4%

8.1%

8.7%

9.3%

10.3%

12.0%

55.00%

89.60%87.80%

81.80%

74.50%

50%

60%

70%

80%

90%

$ 10 - 50 Million $50 - 100 Million $100 - 500 Million $500 Million - $1 Billion > $1 Billion

Liqu

idity

(%)

7%

8%

9%

10%

11%

12%

13%

Perfo

rman

ce (%

)

Daily Liquidity of Portfolio - FY2005

NACUBO 10-Year Annualized

Daily Liquidity of Portfolio (FY 2004)


Population Demographics

Technological Advances

Global Competition

Economic Shocks

Education Competitiveness

Internal and external forces effecting the Campus of the Future

China-IndiaImpact

Intergenerational Equity“The Trustees of an endowed institution are the guardians of the future against the claims of the present. Their task is to preserve

equity among generations.” - James TobinYale University


Primary Issues in Investment Management

Asset allocation is the key to successful investment management.

Investments should grow to offset inflation.

Over long periods of time equities typically produce higher incremental returns than cash or bonds.

Diversification among asset classes and managers is a key to increase return and reduce volatility.

Access quality portfolio managers and monitor them on a regular basis for compliance with guidelines and performance measurement.

Conduct periodic asset allocation review.

Minimize costs.

Hot Charts\Asset Allocation\Primary_Issues_InvstMngmnt


Cumulative Inflation-Adjusted Performance

Historical Perspective

0

20

40

60

80

100

120

140

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

Cum

ulat

ive

Val

ue (R

eal $

)

Source: Ibbotson, Bloomberg, Commonfund InstituteThe equity portion of the hypothetical portfolio is based on monthly returns of the S&P 500 Index (12/65-03/05), and the fixed income portion is based on monthly returns of the Lehman Brothers Aggregate Index (1/73-03/05) and the Ibbotson Associates Long Term Corporate Bond Index (12/65-12/72). HEPI data from 7/04 to 03/05 is replaced with CPI+1%. The hypothetical portfolio is rebalanced to 70/30 annually on 1/1/yy and 5% is distributed annually on 1/1/yy.

CPI

HEPI

Consumer Price Index (CPI) versus Higher Education Price Index (HEPI)

12/31/99$126.7

12/31/99$105.6

7/30/82$33.8

7/30/82$33.2

12/31/05$67.5

December 1965 – December 2005 / Consumer Price Index (CPI) versus Higher Education Price Index (HEPI)

12/31/05$87.4

Hypothetical Portfolio(70% Equity/30% Fixed Income, 5% Spending)


World Economic Growth

Source: SG Research, Global Economic Forecast, June 2006

-2

0

2

4

6

8

10

12

2002 2003 2004 2005 2006 2007

Perc

ent (

%)

-2

0

2

4

6

8

10

12

2002 2003 2004 2005 2006 2007

Perc

ent (

%)

World US Japan EU Emerging countries China Latin AmericaEastern Europe


-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

PER

CEN

TU.S. Real GDP (% yr/yr change)

Source: BEA


World Inflation

Source: SG Research, Global Economic Forecast, June 2006

-2

0

2

4

6

8

10

12

14

16

18

2002 2003 2004 2005 2006 2007

Perc

ent (

%)

World US Japan EU Emerging countries China Latin AmericaEastern Europe


Employment

Civilian Unemployment Rate (%)

3.5

4.5

5.5

6.5

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Perc

enta

ge

Nonfarm Payroll Employment 3 month average (000's)

-300

-200

-100

0

100

200

300

400

500

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Non

farm

Pay

rolls

(000

's)

Source: BLS


Housing Sector Weakening

Source: ISI Group


Y/Y% Change

Y/Y% Change Y/Y% Change

Percent Change

Retail Sales and the Consumer

Source: ISI Group


Energy Prices

Source: Bloomberg, EIA


Consumer Price Index

0.0

1.0

2.0

3.0

4.0

5.0

Jan-

96

Jul-9

6

Jan-

97

Jul-9

7

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Perc

ent

CPICPI-Core (ex-food & energy)CPI-Core less shelter

Source: BLS


The Fear of the Three Bears


This document is intended only for qualified, pre-existing investors in Commonfund Capital, Commonfund Realty and Commonfund Asset Management Company programs, Members of The Common Fund For Nonprofit Organizations (“Commonfund”), or other eligible institutional investors approved by Commonfund Securities, Inc. It is not intended to constitute an offer to sell, nor the solicitation of an offer to buy, securities. Any such offerings will be made only by means of information memoranda and related subscription documents that will be made available by Commonfund Securities, Inc. (a broker-dealer affiliate of Commonfund Capital, Commonfund Realty and Commonfund Asset Management Company) only at the time an offering is in progress and only to investors qualified and eligible to invest.

Important Information About Procedures for Opening a New Account:To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each customer who opens an account.

What this means for you: When you open an account, we may ask for documents or information related to: your principal place of business, local office or other physical location; taxpayer identification number; and other documents demonstrating your lawful existence such as certified articles of incorporation, a government-issued business license, a partnership agreement, or a trust instrument, and other identifying documents.

Important Notes for Private Programs

Oklahoma State Regents

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