Case Analysis

Yale University Investments Office: August 2006

it should stop holding fixed income investments and just keep the liquidity in an equity-income fund. real assets and private equity.00% 25. growing it at average annualized rate of 15. It is recognizing some changes in the private equity industry that has been an integral part of its long-term success that is causing it to consider its current investment strategies and use of domestic and international private equity investment funds.00% 12.Executive Summary The Yale Investments Office has managed the university’s endowment well. Our review of the domestic and international private equity industry and the Investment Office’s investment strategy should continue to be a viable strategy.00% 14. and hedging against overexposure in its private equity investments.12% 0. The Investments Office reports to the university’s Investment Committee. The results are presented in the table below.00% 30. Asset Class US Equities Foreign Equity Fixed Income Equity-Income Real Assets Private Equity Absolute Return Expected Return Expected Risk Sharpe Ratio Target Allocation 9. However. Also.4% over the last 20 years. identifying and selecting top notch investment advisers. determining the target asset allocation mix for future investment periods.00% 20. the endowment would benefit from increasing its allocations in foreign equity. many of whose members are from the world of investment management. The Investments Office is responsible for managing the endowment’s fixed income assets. we do recommend some changes to its current allocation. Therefore. It has helped pioneer the extensive use of private equity and other alternative asset classes to produce superior growth and increase the diversification of its assets.42% 14. Finally. high-quality staff allows it to maintain long-term mutually beneficial relationships with its investment advisers. Its unique investment philosophy combined with long-term.987 . where their particular knowledge and expertise allows them to earn excess profits by taking advantage of the information asymmetries in those less efficient markets.00% 0. setting the endowment’s investment philosophy and strategies. it should reduce its allocations of US equities and absolute return funds. we determined that there will still plenty of opportunities for the endowment to benefit from private equity investment funds. The endowment’s chief rationale behind using private equity and alternative investment classes revolves around their investments in less efficient markets.00% 4. Regarding whether the Investments Office needs to make any changes to its investment strategies and allocations.

which is also comprised of many Yale alumni who were accomplished investors in their own rights. it has grown from $1.3 billion to over $18 billion by the end of fiscal year 2006. investment in bonds produced predictable streams of income that could be quickly eroded by inflation. The University recruited the first and only head of the Office. from Lehman Brothers. after the dissolution of the relationship between Yale and the Endowment Management and Research Corporation that had originally been formed to manage the University’s endowment. The end of that relationship was precipitated by huge losses to the value of the endowment during the turbulent economy of the 1970s. Yale continued to receive gifts for its endowment and eventually required professional investment management. Strong belief in investing in equities Hold a diversified portfolio Seek opportunities in less efficient markets Use outside managers for most investments Don’t ignore the explicit and implicit incentives of investment managers The first principle is based on Swensen’s (who has a PhD in economics) research that public and private equity were a good investment because they provided returns that were significant. The principles can be listed as follows: 1. The purpose of the Office under Swensen was to set the endowment’s investment policies and rigorously select the investment advisers who would manage Yale’s endowment accounts. However. Yale University Investments Office The Yale University Investments Office (Office) was formed in 1979. Through the benevolence of many wealthy and well off alumni. 3. acquire land for future growth and construct new facilities for current growth.Introduction Yale University began its endowment in 1818 to fund its theological programs. . 5. The Office reports to Yale’s Investment Committee. The Office was so successful that its value contributed to the highest credit ratings for the University. Investment Philosophy The Office’s investment philosophy was driven by five investment principles. David Swensen. In the modern era of its endowment. even when adjusted for inflation. which facilitated lower borrowing costs on new facilities. However. The University began to directly oversee the investment managers responsible for growing and protecting its endowment. 2. Swensen focused on bringing in highly qualified and competent staff to help build the organization. its disciplined endowment management are reevaluating some of the strategies that have helped the fund outperform all of its peers for the past 20 years to accommodate the changing landscape of investing and asset management. 4. The endowment has been well run and has done exceptionally well under the leadership of David Swensen since 1985. after 20 years of spectacular growth in an investment fund that routinely spends around 4% of its value annually.

even corporate bonds. Swensen felt that there were inherent conflicts of interest in many investment management firms. The third principle emphasizes seeking returns in less efficient markets. The Office would only manager indexed or fixed income investments. The endowment would avoid trying to time the market to produce returns. 14% 12% Annualized Return Annualized Asset Returns 1925 ‐ 2005 10% 8% 6% 4% 2% 0% Large Company  Stocks Small Company  Stocks US Treasury  Bonds US Treasury Bills Asset Class The second principle requires a diversified portfolio – a basic tenet of portfolio management. especially those that were owned by larger financial institutions.Plus. The Office would focus its time and energy of developing relationship with investment managers that displayed the kind of investment discipline and innovation that was thought necessary to meet its objectives. the long-term returns from equities were superior to that of bonds or other fixed income instruments. To Swensen. This will reduce the cyclicality in the annual returns for the endowment. In inefficient markets the middle 50% was much wider than in traditional investment asset classes. The fifth principle is closely related to the fourth principle. this meant that there were more opportunities to obtain excess returns. Additionally. The fourth principle was based on Swensen’s thought that the Office could do a much better job of picking good investment advisers than it could at managing investments. the Office only wanted to work with investment managers who were willing to abide by a different compensation structure – one that rewarded them for producing returns rather than rewarded them for managing an ever-increasing amount of assets. . This minimizes risk for the endowment by limiting its exposure to any particular asset class. It also meant that the endowment would be less liquid than others. as shown in the chart on the following page. which would be one way to produce excess returns because of the lack of publicly available critical information for decision making. Swensen based this on the slender box plots for the performance of the middle 50% of investment managers in different asset classes.

Therefore. it increased its diversification by asset class and increased its allocations to classes that produced higher average returns.and fifty-year Monte Carlo analyses for downside risk in proposed portfolios. it did put limit some of the possible solutions by placing limits on the proportion of the endowment that could be invested in any particular asset class to ensure a certain degree of diversification. The success of the Office resulted in increasing spending rates several times between 1992 and 2004. the model would say not to hold any US equities.Asset Allocation The Office used mean-variance analysis to help it make asset allocations. That also meant that the Office ran five. so it could not completely rely on historical relationships. Annualized Return (r) . Risk‐Return Relationships for Different  Asset Classes 15% 12% 9% 6% 3% 0% 0% 5% 10% 15% Risk (σ) 20% 25% 30% 35% US T‐Bills US Equity Real Estate  (REITs) International  Equities Small US Stocks Private Equity Emerging Markets US T‐Bonds As the Office become more knowledgeable and comfortable with private equity and other less common asset classes. Some of the asset classes were simply considered as hedges against a worstcase market melt own. The change in asset allocation from 1985 through 2006 can be seen in the chart below. However. An example of the limitations of computational approaches is that private equity was expected to produce nearly twice the return as US equities with only 50% increase in risk. its optimization model would leave out whole asset classes. The asset class limits were also an acknowledgment that there were limits to the Office’s ability to assess future risk. The limits were also necessary because the Office knew that the relationships between different asset classes change over time. Otherwise.

such as Asia. the average individual investor is told to just invest in index funds for the long haul. The Office decided that passive index investments were not going to be a part of its equity portfolio. Latin America and Eastern Europe. the Office felt that it could do better by employing a handful of high-performing active managers who were disciplined and fundamentals-based. The Office also preferred funds that were not owned by large financial institutions. However. He also felt that bond fund managers were incentivized to take greater risks than they should. The Office manages bond investments internally with a target weight of 4% with a maximum allowable weight of 5%. Any cash held over and above the amount to be spent by the Yale was kept to a negligible portion of the endowment and was slated to be allocated to zero. In general. Foreign equity allocations were comparable to domestics with a higher allocation target because they represented opportunities in some of the fastest growing economies in the world.Yale Endowment Asset Allocatin by Class 100  90  Percent of Endowment 80  70  60  50  40  30  20  10  0  1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Absolute return Private equity Real assets Cash Bonds Foreign equity Domestic equity Year Bonds and Cash The bond investments and cash holding investments are used as hedges against market volatility. it was more difficult for the Office to find active managers that met its requirement because many of the domestic active . Managers who could not clearly articulate their strategies or attempted seat-of-the-pants market timing or contrarian strategies were also overlooked. Swensen also wasn’t confident that corporate bonds provided enough compensation for default and callability risk. Domestic and Foreign Equity The Office had over 25% of the endowment allocated to publicly traded equities. Equity investment managers had to coinvest and accept compensation incentives consistent with making Yale’s endowment larger before they collect fees for anything except their operating costs. However. The market for bonds was considered to be so efficient that there was no advantage in having an external manager. which was substantially lower than its peers.

oil and gas fields. the funds use a wide variety of strategies that employ stocks. The Office avoided real estate related investment vehicles that contained mortgages or other similar derivative investment tools. short selling. Absolute return funds are a broad group of funds that attempt to produce a positive return regardless of the performance of the market as a whole. The Office categorized them as either event driven or value driven investments. It includes many hedge funds and other potentially volatile funds. and timberland. Value driven funds sought mispriced securities to exploit. not the managers’ compensation needs. which is a hit or miss type of investment. Real Assets Real assets constituted about 27% of the targeted portfolio for the endowment and are among its most illiquid. However. The Office purchased of oil and gas fields with a focus on enhancing the operations to produce superior returns. Private Equity The Office also allocated 17% of its portfolio for private equity funds. It selected managers who were disciplined and had a value approach to their investments. Plus. arbitrage and anything else that a financial genius can devise. Absolute Return The Office allocates 25% of its funds to absolute return funds. Significant returns in value could be earned over long periods of time by improving the operations of a company. which engage in leveraged buyouts. options and other derivatives. Managers who were focused on value did not need to find the next deal in order to create value for their investors the way leveraged buyout firms did when they flipped a company for a profit. mezzanine financing. where event-driven funds attempt to create profitable hedges of asset plays centered on events such as mergers or bankruptcies. commodities. Compensation of private equity managers was in alignment with Yale’s investment needs.managers had been recommended by investment committee members or other trusted sources that it did not have overseas. Foreign equities also increased the diversification of the endowment because they were poorly correlated to US equities. The Office had a long investment horizon and could afford to take advantage of deals that may take several years to produce high returns. bonds. Timberland investments focused on sustainable harvesting of softwood and hardwood forestland in the US. venture capital and company acquisition. The real assets the Office invested in are categorized as real estate. The Office paid its private equity managers enough in fees to cover their operating costs and the fund would receive the rest of its profit not from managing a large amount of assets. Most of the private equity managers were recommended by members of the Investment Committee. futures. The Office sought to hedge its investment from capital flight by having separate accounts for its investments so that they could not be sold to provide capital for other investors cashing out during a market free fall. but from . The Office used the same approach for private equity fund managers as it did with its equity managers. it was much less risky than exploration.

Therefore. However. if a fund significantly changed its strategy or compensation structure. The focus on out of favor segments of real estate was a specific strategy that the firms could not deviate away from. the Office primarily used small. In a few cases. while the Office gave its private equity managers wide latitude in investments. For foreign equity managers. while it let the individual private equity managers make their decisions. . if it felt the need to do so. they simply would not change the way they did business. In real assets. So if the Office thought that a particular fund was an attractive investment. they would not make a profit. For venture capital funds. The real asset firms went along with the Office’s compensation structure. it would simply cash out. The Office used a different strategy with its private equity manager than it did with other asset classes. if they did not adopt the Office’s compensation structure or if they were connected to a larger financial institution. if they could not grow the funds under management. the Office would make exceptions to its compensation philosophy. And. Finally. The Office entered many of its earlier deals as a partner. then the Office would decide to no longer do business with that fund. For other asset classes. where the fund was sufficiently well-run. Therefore. such as buildings that were in depressed areas. the Office didn’t do business with them. new or unheard of firms for real asset investment or management companies whose investment strategies and operational expertise were complimentary to the endowment’s investment goals. the Office hedged to prevent overexposure to any particular market. it carefully tracked those investments to create additional hedging strategies with short sales and put options to create offsetting profits if a large equity holding suffered a price decline. It was sometimes approached by private equity firms to participate in their funds. shopping centers that needed reconfiguration. The firms it used in private equity were usually established top-rated firms in their industry who had the discretion to invest the funds in whatever way they saw fit because their underlying investment strategies were compatible with the Office’s investment philosophy. This was one of the means of controlling private equity managers from taking unnecessary risks because they were putting their profits at risk. or highly illiquid developable land. Additionally.producing real returns for the endowment. Real property that was invested was derived from specific types of real property. the Office kept investing with its private equity managers. the Office would still decide to invest with a particular fund. even when it did not want to because it wanted to be a reliable partner who kept most of its funds invested instead of cashing out whenever it didn’t like something. it had to take a little more risk in that it did not have extensive reliable contacts for recommendations and it kept its foreign equity investments in a handful of emerging markets that the managers could not deviate from. Compared to the investment strategy with managers of other asset classes. even with an unfavorable compensation structure. as well. private equity managers were incentivized to make the endowment money rather than just sit on a pile of assets where their management fees would make them money while the client lost value. It did not feel the need to hedge as a strategy with the other asset classes.

the Office was able to find a number of new emerging market funds that were better incentivized than the larger global funds because they were run by general managers who were not bothered by coinvestment or the Office’s approach to compensation. Instead. In the end. However.0% 35.0% 0. it compared each asset class to a comparable index to make sure that each element of its endowment was producing satisfactory returns.0% 10.0% 25.0% 15. where private equity was getting larger and larger with more firms pursuing the available deals. There were fewer funds competing for deals.0% Domestic  Foreign  equity equity Fixed  Real assets Private  income equity Yale 2006 Return Benchmark Absolute  return Total . Those made the Office consider looking at the global private equity funds of well-established US private equity firms.S. One of the noticeable differences between its strategy with domestic versus international private equity managers was that international private equity was primarily with smaller firms with favorable compensation structures. Also. The Office sought to expand its private equity investments outside of France and the UK to emerging markets.S. Past experience with international private equity had produced annualized average returns in the mid-20s. They were run by experienced and hungry to take advantage of known opportunities. The chart below shows how the Office compared to its indices. there were more opportunities to produce excess returns internationally than in the U. Those types of arrangements also made it more difficult for the Office to assess their performance and record. it could not settle for just comparing itself to similar endowments. FY 2006 Yale Endowment Performance 40.0% 20.0% 30. it made its international private equity investments while avoiding those funds associated with large financial institutions.0% 5.International Private Equity Investments..0% ‐5. but the returns had been much more volatile and risky than those in the U. Performance Monitoring Because Yale’s endowment had an atypical asset allocation compared to other similar endowments and it had high investment goals.

However. the Office can continue to evaluate the performance of their private equity managers and continue to find more disciplined managers. Every major institutional investor has looked at the U. This is similar to the risk exposure that investors faced from AIG having sold so many credit default swap policies without setting aside money for future or potential claims. Investors in subprime mortgage backed .Not only did Yale’s endowment outperform its respective benchmarks. The greatest risk that these changes in the private equity industry posed to Swensen’s strategy is that the autonomy that he has given private equity managers could create greater risk that is difficult to hedge. Changes in the Private Equity Industry The Yale Investments Office had ridden private equity from its infancy until it became an investing juggernaut with more and more money being poured into its funds. It solved it in some case by seeding the start up of some funds. but then it accepted manager risk for having a large proportion of funds under management by one fund. There are only so many opportunities to invest in at a given time. many private equity funds were incredibly large billions of dollars. as a traditional insurer does. The performance of the endowment has been such that it has experienced negatives only twice in the last 20 years. This includes overseas institutional investors. An example of that is Fidelity’s Magellan Fund. It hit its maximum net assets under management at $119 billion. many of whom are in China. Also. but it also beat the performance of 99% of all large institutional investors. When compounded over 20 years that translates into an endowment that is twice the size as a similar sized one 20 years ago. which includes the technology stock bubble bursting. especially if some of its investments are in exotic investment vehicles that could be indirectly linked to some riskier investments. Not only was the money chasing it for higher returns. The endowment’s 15. which had to stop taking money because of limited opportunities.4% annualized return over 20 years was nearly 4% greater than its peers and nearly 6% greater than all endowments. The Office investment staff was becoming concerned about changes in the private equity industry.S. More investment managers and financial institutions were creating their own private equity funds for the higher management fees and greater management compensation. private equity market to gain higher returns. The Office also has equally impressive 10-year results. the amount of the endowment in private equity could lead to lower diversification if too many private equity funds chase the same kind of opportunities. there is more competition to contribute money to private equity funds. Swensen is concerned that they may pursue having large amount of assets under management that produce lower returns rather than pursue the high-return strategies that have served them well. This could cause price competition for asset acquisitions and it became more difficult for the Office to get sufficiently large allocations to some funds because of the demand for them. Second. First. state pension funds (who are chasing returns to make up for underfunding) and some of the world’s newly minted multi-millionaires and billionaires. Missteps by fund management could lead to capital flight or total illiquidity of some investments.

0% 20. private equity still provides certain benefits for the Office. especially as it concerns private equity. regulatory issues that could affect its asset classes. combined with emerging markets.0% 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 Return w/Private Equity Return w/o Private Equity Private Equity Considerations Although changes in the private equity industry require vigilance. .0% 30.0% 40. The Office has strong working relationships with many of the best private equity managers that would be hard to duplicate if it backed out of private equity. Endowment Annual Returns with and  without Private Equity 50. even though they were still paying interest to the eligible investment tranches. as shown in the chart below. It has delivered superior annualized returns for the Office and continues to beat the larger markets. Future Investment Alternative Strategies The most serious decision that Swensen will have to make regarding the investment strategy of the Yale Investments Office is whether to continue in the direction that it has been heading or to adopt another approach. return requirements and its risk tolerance. the differences in return are relatively small.0% 10. even if you exclude the returns associated with private equity.0% ‐10. it has done very well.securities had to mark their investments down to zero because there was no market for those investment instruments. Improving global capital markets.0% 0. private equity causes the change in the value of the endowment to be greater than it otherwise would be. However. There are a number of issues to be considered that could future alternative investment strategies – the Office’s investment horizon. As beneficial as private equity has been for the Office. More than 70% of the time. provided many more opportunities for private equity to produce excess returns because new markets were less efficient than established markets.

Even without private equity. which could affect their valuations. such as the decennial recessions and market bubbles. Overall. history has shown that if investors had held onto their assets. it would be prudent for Mr. Therefore. we would recommend the following changes in the Office’s investment strategies and allocations. it probably would have no effect on the number of private equity funds. as much as private equity has contributed to the growth of the endowment. they would have been better off than if they had sold them at a discount and then reinvested the proceeds. Risk Tolerance The Office has high risk tolerance because it invests in atypical asset classes like real assets.S. If such a change occurred. which was peddling worthless companies that never made a profit. a little added risk can produce a much greater reward. that does not mean that it does not attempt to minimize its risk by having quality long-term relationships with an easy exchange of information and it keeps doing its own research on new investment opportunities and continues to look for the best performing and disciplined investment advisers. . the endowment has grown significantly. This would be comparable or just slightly higher than the real return achieved that year. Return Requirement Based on its efficient frontier for 2006.Investment Horizon The Office is a long-term investor that can take into account shorter-term cyclical effects. Swensen to adjust his private equity strategy. Therefore. This primarily affects the compensation of private equity fund managers and hedge fund managers who pay much lower taxes on the carry portion of their compensation.S. The Office has the capacity to take a long view. This doesn’t eliminate risk. but it lowers it because its size makes the markets somewhat more efficient for it than it does for individual or small investors. except for the technology bubble. when it had a return above 14%. However. and around the world. it still would beat its peers without its influence. 1. For most bubble markets. That could lower the future profit margin rates of some companies. equities. The possibility of reforming the tax code could have a longer term impact because it will normalize the earnings of industries that benefit from subsidies. Increase allocation of assets invested in private equity. Also. The Office has done a great job of finding talented and consistent private equity managers. the Office wants to achieve real returns in the future similar to what it had accomplished in 1998. tax credits and favorable industry tax rates. private equities have had a higher Sharpe ratio than U. This also applies to international private equity. Tax/Regulation Issues There is talk in political circles of the President wanting to eliminate the tax advantages that private equity fund managers have over traditional investment fund managers. absolute funds and private equity. Recommendations Given what is known about near-term possibilities in the U.

Many dividend paying blue chip stocks are stable with consistent cash flows and modest growth. All forms of real assets are under demand pressure from a growing U.0  Income  Fund 0. developable land. Current vs. February 20. population. The Office would be better off investing its funds in a high-quality equity-income fund because it would produce higher returns and have an upside in capital appreciation in exchange for the increased volatility.0  4.0  30. Volatility aside.0  0. where it is complementary to the Office’s investment strategy. which explains how their CEO managed to increase U. oil and gas and wood-related products are only expected to increase. Eliminate bond holdings for stable dividend paying stocks. same store sales by 50% in 7 years. and globally. Currently.0  Current Allocations Recommended Allocations Current Allocations Recommended Allocations . Demand for commercial property in desirable areas.0  20. Recommended  Asset Allocation 35  30  25  20  15  10  5  0  Asset Allocation  (%) Domestic  Equity 12. Many utilities are cash cows and are reliable sources of income.0  Private  Equity 17. real assets provide certain long-term benefits.S.S.0  Bonds 4. Global and domestic oil and natural gas consumption are only expected to increase in the U. Many absolute return funds have high correlations to the stock market. Increase the allocation of foreign equities. firms like McDonald’s actually do better during recessions because they are cost competitive. Investment Week. 4.S. 2012). 5.0  25.0  9. Although it would increase the illiquidity of the endowment.0  Real  Assets 27. 3. Reduce holdings in absolute return funds.2.0  Foreign  Equity 15. which makes them slightly redundant and not as good for diversification as thought (Dan Jones. Increase allocation of real assets. so they should continue to outperform the market because the Office can wait until their disposition maximizes their return.0  Absolute  Return 25.0  12. the economic growth engines are overseas and the best way to take advantage of that is to be invested in those markets. They can produce income even when the market value is down. The same task of producing returns during a down market can be addressed by private equity funds.

1 0.07 0.12% and a Share ratio 0.08 0.06 0.08 0.987. The efficient portfolio associated with the choices of the Office’s investment options is presented in the chart below.05 0.07 0.08 0. Utility as a Function of Allocation of Risky Assets 0.10 0.07 0.11 Risk and Risk  Aversion (2 ‐ 4) 2 3 4 Utility .42% with volatility of 14. as provided in the chart below.09 0.09 0.06 0.09 0.06 0.10 0.The recommended weightings would produce an expected annual return of 14. Risk‐Return 16% 15% 14% Return 13% 12% 11% 10% 7% 8% 9% 10% 11% 12% Recommended  Weightings 13% 14% 15% 16% Risk The weightings and their resulting risk-return relationships produce the utility curve for different risk aversions.

So.30 20. there will be more risk. The Office has been a diligent and disciplined investor that has taken calculated.20 6.64 19. Fidelity halted contributions to the Magellan fund when they thought that it had gotten too large. such as occurred in Venezuela. . Additionally. Events like continued conflict in the Middle East are likely to hurt the overall global economy. such as asset nationalization. There are country risks that have to be managed in the Office’s foreign equity and international private equity investments. well-researched risks. market cyclicality periodically affects real assets and the price of gas and oil have become more volatile due to the speculators and futures market. Conclusion Although there are some risks from the investment strategy adopted by the Yale Investments Office. Many corporations manage cash and investment accounts much larger than the Office’s endowment. but may have other risks. Long‐Term Risk‐Return Assumptions for Endowment Asset Class  US Equities  Foreign Equity  Fixed Income  Equity‐Income  Real Assets  Private Equity  Absolute Return Risk (%) 9.71 Return (%) 20. its endowment is by no means unmanageable. which makes guesses or assumptions about the price of oil or gas in the future.58 9.48 14.50 29. gains in some asset classes could come at the expense of others. As previously mentioned. while providing increased returns for holders of oil and gas assets. but it was five times the size of Yale’s endowment when that happened. But there will also be more reward and more opportunities for the endowment’s investment advisers to take advantage of market inefficiencies.10 15.00 12.The underlying assumptions for the different asset classes and proxy indices for those classes were used to calculate their covariances are presented in the table below. As the allocation of assets increases in its international component. Also.70 4. the lack of transparency in some emerging markets could be hiding potential time bombs in terms company profits.00 16.00 12.74 Proxy Index Wilshire 5000 MSCI Emerging Markets Barclays Aggregate Bond Index T Rowe Price Equity Income Fund NCREIF Cambridge Associates 1‐Year T‐Bill + 6% Caveats The investment allocation recommendations could potentially increase the risk of the endowment’s portfolio if there is too much duplication in the portfolios of the various public and private equity funds that the Office invests in. Increasing international investments may not increase market volatility.00 14. currency deflation or regime change.

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