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COLLEGE LIFEOXIP – An interim report at the two-year stageOxford Investment Partners (OXIP) was aCatz initiative launched in May 2006 as aninvestment office for colleges seeking toemulate the best practice of North Americaneducational endowments such as Yale’s byimproving the returns on endowment and, atthe same time, reducing volatility. In the UK,only the Wellcome Trust has managed to matchthe returns of the best US funds, and it is thelargest UK charity endowment, with resources tomatch. Our more limited resources necessitatedsome innovative thinking about how to addressthe difficult challenges of search,implementation and continuous monitoringwhich face the manager of a genuinelydiversified portfolio. The result is a uniquecollaborative venture between five colleges (StCatherine’s, Christ Church, Balliol, New Collegeand St John’s), professional management andthe investment consultant Watson Wyatt. OXIP’sinvestment objective is to deliver at least 5% inexcess of inflation over rolling five year periods,with around half the volatility of equities.Can we do it? OXIP is now over two yearsold, so the record is still short, but we couldhardly have imagined a more rigorous test ofour underlying approach. In the twelvemonths to June 2007 asset prices continuedto accelerate rapidly. The equity market wasup 17.8%. We were sceptical, and positionedour fund accordingly. Our return wasnonetheless a reasonable 11.9%. The pay-offfor that caution came the following year. Inthe twelve months to June 2008 equitiesreturned -13% and the OXIP fund returned+0.8%. Protecting capital in a downturn is akey component of superior long-run returns.Over the two year period OXIP produced+12.8% against +4.0% for the equity index.That puts us in the top quintile of USendowments. It is now important that whenmarkets turn (as they will) OXIP is able tocapture sufficient of the upside to meet ourinflation plus 5% objective over rolling fiveyear periods. So far our key principles ofdiversification and seeking the most talentedmanagers have served us well despiteextremely testing conditions.OXIP was created primarily to manageendowment for the colleges, but a furtherobjective is to offer our product to other likemindedlong-term investors such as charities,wealthy individuals and pension funds. Despitethe relatively brief investment record, thebusiness has made steady progress. OXIP nowmanages over £200 million, up from £90 milliontwo years ago. £60 million comes from noncollegecharities and private investors.Watson Wyatt will be introducing OXIP toselected pension fund clients from the autumnof 2008. We are confident that the foundationswe have laid will bring an increasing number ofnew clients over the next year.Some alumni have asked us to explainthe distinction between OXIP and OxfordUniversity Endowment Management (OUEM).The latter is a professional fund managementoffice, set up by the University in September2007. Its structure and goals are flatteringlysimilar to ours, but, unlike OXIP, it will onlymanage money on behalf of the Universityand, if they so wish, individual Oxfordcolleges. We at OXIP consider thedevelopment of alternative sources ofprofessional investment expertise withinthe Collegiate University to be a positivedevelopment and look forward to a healthylevel of both cooperation and competitionwith OUEM. If you would like to know moreabout OXIP, you can find details of our fundsand performance at www.oxip.co.uk.16/AN INTERIM REPORT AT TWO-YEAR STAGE