Viewing page 44 of 239

This transcription has been completed. Contact us with corrections.

-13-

she had already responded positively to MAS's request to use MAS's Select Cash Fund for investment of cash balances.

The Chairman asked if there were any other issues for discussion. There was a general discussion and consensus that the present managers were doing a good job. Mr. Mott suggested that perhaps the Committee ought to examine the question of a stronger approach to asset allocation in the near future. There was a brief discussion on how new monies to the Endowment were allocated amongst the managers.

The Treasurer reported that divestment as mandated by the Regents was complete. The last equity holdings in Sullivan signatory companies doing business in South Africa were sold during the week of November 3rd. The portfolio is now "South Africa-free."

The Chairman suggested that the Committee reconvene during January (prior to the Regents' meeting) to discuss policy matters, possible changes in the investment guidelines of the Committee, and alternative investment strategies as a means of risk diversification. There was general agreement with Mr. McHenry's suggestion. (A luncheon meeting has now been set for January 19, 1988.)

The Chairman thanked the members of the Committee for their continued and dedicated participation and thereupon adjourned the meeting promptly at 5:00 p.m.

* * * * *

A special winter meeting of the Investment Policy Committee convened in New York at 12:00 noon on January 19, 1988. Members of the Committee in attendance were Barnabas McHenry, Chairman; Carlisle H. Humelsine; Jane Mack Gould; Charles H. Mott; and Donald Moriarty. Also in attendance were Robert McC. Adams, Secretary; Ann R. Leven, Treasurer; and John R. Clarke, Assistant Treasurer.

The Chairman welcomed the members and staff and introduced the first topic for discussion, a proposal from Fiduciary Trust that offers the Institution a potential savings in transaction costs where Fiduciary serves as the brokering agent for itself. Mr. Mott stated that the practice of serving as advisor and brokerage was generally accepted in the industry and that he had no real problem as long as it could be proven to be to the Institution's advantage and there was full public disclosure.

Mr. Moriarty cited several instances of the practice from his own experience, but said that what bothered him in these situations was that there was never any real clarification of how the savings in transaction costs are really derived, nor is there an explanation in this particular proposal. Mrs. Gould added that in any event the transaction costs and commissions were really immaterial in terms of performance, so there really ought to be some significant proven benefit to the Smithsonian before proceeding.