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NEPC tells trustees markets favored index investors; fossil-fuel exposure in UMS portfolios falls to about $600,000
Summary
NEPC reported strong Q3 equity performance, flagged active-manager underperformance in several global equity mandates and said the University of Maine System's fossil-fuel exposure across three pools has fallen from about 2.5% (~$14M) to roughly 10 basis points (~$600k), with limited remaining exposure concentrated in a hedge fund.
NEPC presented a capital-markets and portfolio review to the University of Maine System Investment Committee on Dec. 1, reporting strong equity returns for the quarter and year-to-date and recommending monitoring and, where appropriate, rebalancing to policy targets.
Matt from NEPC said U.S. large-cap and small-cap indices posted strong gains and noted that active managers have struggled in a market concentrated in a small group of high-performing technology names. He outlined underperformance concentrated among three global equity managers — Walter Scott, Impax, and Lindsell Train — and said NEPC is reunderwriting managers and has placed certain firms on watch following personnel changes. "We've put BlackRock on watch," he said, citing the senior portfolio manager departure.
On fossil-fuel exposure, Kelly (NEPC) told trustees the System's 2022 divestment goal has made substantial progress. Kelly summarized the change: "When we started looking at fossil fuel exposure ... we were looking about 2 and a half percent of total assets exposed to fossil fuels, or that was about $14,000,000. When we look at that today, we have about a 10 basis point exposure to fossil fuels or about $600,000." NEPC attributed the decline to manager changes and more granular analysis against the Carbon Underground 200 list; remaining exposure is limited largely to a single hedge fund (Lighthouse) and small legacy holdings that are being replaced.
NEPC said it will continue to assess options to remove remaining fossil-fuel exposure and will recommend actions to the committee when feasible. Trustees thanked NEPC for the update and asked for a follow-up or presentation to the full board in January to highlight progress.
