The primary investment objective is to preserve the purchasing power of PUF assets by earning an average annual real return of 5.1% over rolling ten year periods or longer. Earning an average annual real return of 5.1% permits the PUF to achieve two goals:
1. Provide for current beneficiaries by increasing the annual distribution at a rate at least equal to the current rate of inflation so that real purchasing power is maintained, and
2. Provide for future beneficiaries by increasing the market value of endowment funds after the annual distribution at a rate at least equal to the rate of inflation so that future distributions maintain purchasing power as well.
The design of the PUF's investment portfolio is based on a combination of quantitative analysis and market judgment employed by UTIMCO's Board of Directors and investment staff. Sophisticated statistical techniques are combined with the judgment of investment professionals to test many asset allocation alternatives, including the sensitivity of potential future results to changes in assumptions, in order to make portfolio construction decisions. Investment management involves as much art as science, and qualitative considerations often play an extremely important role in successful portfolio management decisions. Investment art and science were used to develop the target and current PUF portfolios as shown in Figure D.