The purpose of our investment portfolio is to provide the financial resources to achieve impact through our programmatic work and, ultimately, our mission: expanding opportunity for the people of California.
Fortunately, our long-term returns have allowed us to grow our grantmaking capacity over time. As a result of strong historical investment results, Irvine’s Board of Directors approved an increase in how much we can give as grants, from a $96 million budget in 2018 to $102 million in 2019. And that, at the end of the day, is why we are in business.
2018 was a busy year for the Investment team, as we completed a number of strategic projects that I identified when I joined Irvine as CIO two years ago. In addition, we successfully added a new Investment Director and began recruiting a new Investment Associate.
We also continued to streamline and rebalance capital among managers to align with our investment principles, and we completed some secondary sales of private assets.
Irvine’s Investment Principles
Our relationships with investment partners are critical to our continued success. That’s why, early in my tenure as CIO, the Investment team articulated our shared Investment Principles.
We believe it is important to share these with our investment partners so they can better understand Irvine’s approach to investments and what drives our behavior. I believe these principles are the foundation for building a successful investment portfolio:
Irvine’s Portfolio Results
Partnering with top investment managers will help Irvine continue to evolve its investment strategies. Like many endowments and foundations, Irvine’s investment portfolio currently has a significant exposure to equity securities, both public and private. This includes a significant commitment to venture capital and private investments.
Irvine has benefited significantly from this positioning over the long term. Due to strong performance during the year, private investments increased from 33 percent of the portfolio at the end of 2017 to 36 percent at the end of 2018.The private investment portfolio continues to track above the target allocation of the total portfolio due to multiple years of strong performance, and it would have been even higher without the secondary sales that we completed in 2018.
As a long-term investor, it is important to measure performance over long time periods, especially when the portfolio has a significant amount of private investments. The Foundation has been rewarded as a long-term investor, generating more than a 10-percent portfolio return over the past 10 years. Two key contributors drove Irvine’s long-term returns: superior manager selection and an overweight to quality private investments.
On shorter time horizon, 2018 was a challenging year for financial markets, with the global public equity market declining more than 9 percent. Despite this challenging backdrop, Irvine’s portfolio was able to deliver more than a 4-percent return for 2018.
While this return is below our long-term expectations, it is an exceptional return relative to other institutions with similar portfolios. Irvine’s disciplined approach to portfolio construction with a focus on conviction-based investing allowed Irvine’s portfolio to perform different than the broad financial market.
We would like to thank all of our investment partners for their contributions in allowing us to increase our grantmaking budget and our ability to support organizations working to expand opportunity for the people of California.