Trust Funds

Investment Options

Trust Funds' assets are managed through three different investment pools or "funds."  Each of these funds is accounted for on a unitized basis, similar to a mutual fund.  A description of each of the funds is given below. 

 

Long Term Fund

This Fund is used primarily for donor or Regent-designated endowments and other monies with expected investment horizons of seven to ten years or more. The Long Term Fund is managed by multiple external investment advisors and is custodied externally.  The Fund is very broadly diversified among asset classes grouped into three major categories:  1) “growth assets/strategies” (e.g., publicly-traded equities, including domestic, international, and emerging markets; private equity, including venture capital and corporate finance partnerships; U.S. and non-U.S. high-yield debt; and global tactical asset allocation); 2) “risk reduction, deflation-protection assets/strategies” (e.g., U.S. Treasurys, and “cash”); and 3) “real, inflation-protection assets/strategies” (e.g., Treasury Inflation Protection Securities, real estate, commodities, and timber).  Assets invested in the Long Term Fund receive an annual “spending rate” distribution of a set percentage (currently four percent) of the average market value over the prior twelve quarters (three years).  The spending rate percentage is reviewed annually by the Trust Funds Office and the Business, Finance and Audit Committee of the Board of Regents.  This Fund is valued quarterly, allowing for deposits, withdrawals, and transfers on a quarterly basis.  

Intermediate Term Fund

This Fund is used predominately for the following: 1) gifts/bequests for which neither the donor nor the Regents have restricted the use of principal (gifts classified as “quasi-endowments”), and the expected investment horizon is approximately two to seven years; 2) other monies with similar investment horizons; and 3) unspent Income Fund balances, which are annually swept into the Intermediate Term Fund.  This Fund is also managed by external investment advisors, is custodied externally, and is predominantly invested in high quality, intermediate domestic fixed income instruments.  The Intermediate Term Fund is valued quarterly, and assets invested in the Fund receive quarterly distributions of all interest income earned, net of expenses.

Income Fund

This Fund is used primarily for the following: 1) spending rate and interest distributions from the Long Term and Intermediate Term Funds, respectively (these amounts become currently “expendable” income); 2) other monies which are needed for expenditure, generally within the next twelve to eighteen months; and 3) pending investment of new monies awaiting eventual investment in longer-term Funds.  The Income Fund resides with the State, as part of the State Investment Fund, is managed by the State of Wisconsin Investment Board (SWIB), and is 100 percent invested in short-term fixed income (or “money market”) instruments.  The Income Fund is in essence a daily-valued fund (its share price remains $1.00 at all times), allowing for transactions on a daily basis.