University of Missouri System Board of Curators June 16, 2011 FINANCE COMMITTEE

1. Action Item 4 – Revised Asset Allocation for Retirement Trust Fund and Endowment Fund, UM University of Missouri System Board of Curators June 16, 2011 FINANCE COMMITTEE b

2. Overview of Objectives • Shift asset allocation policy for public equities from a “domestic vs. international” orientation to a “globally-focused” orientation • Underlying asset allocation targets remain essentially unchanged • Allows for more efficient execution of our existing public equity strategy c

3. Public Equity Investing – Current Approach d

4. The Case for Global Equity • Many investment managers have reorganized research efforts to capture global perspectives • Large/mid cap companies are increasingly operating on a global basis • Increasing correlations among equity markets make distinctions between US and non-US equity markets less clear e

5. The Case for Global Equity • This table represents the percentage of total company revenues by region • Especially in the large cap space, the distinction of being a “domestic” company is no longer meaningful with respect to where a company actually does business f

6. The Case for Global Equity Current Proposed • Within Large Cap global equity, passive investing range will be 33-50% • Dedicated US/non-US Small Cap managers remain • Dedicated Emerging Markets managers remain, but will be somewhat reduced as Large Cap Global Equity typically contains some Emerging Markets exposure Active US Large Cap Passive US Large Cap Active Global Equity Passive Global Equity Active non-US Large Cap Active Emerging Markets Active Emerging Markets Active US Small Cap Active US Small Cap Active non-US Small Cap Active non-US Small Cap g

7. The Case for Global Equity • The MSCI All Country World Investable Market Index (ACWI IMI) is recommended as the composite benchmark for the global equity asset allocation sector • The ACWI IMI is consistent with our existing policy targets. Our existing overweight to the benchmark in Emerging Markets would remain the same h

8. Impact on Investment Managers • Existing US Large Cap index fund would be replaced with a Global Large Cap index fund • 5 existing active manager mandates would be eliminated • 2-3 new global equity managers would be hired • Net reduction of 2-3 active managers • A review of existing small cap equity managers would be performed once the shift to global equity was completed i

9. Proposed Plan of Action • To move forward with the Global Equity mandate, management is recommending changes to the following sections of the Collected Rules: • 140.011 Investment Policy for Endowment Fund • 140.012 Investment Policy for Retirement, Disability and Death Plan • If Global Equity mandate is approved by the Board, management will bring back recommendations for investment managers at the July or August Board meeting j