The investment management process is comprised of four interrelated steps, Asset Allocation, Manager Selection, Portfolio Construction and Security Selection. Morgan Creek focuses on the first three components and leaves Security Selection to the managers selected.

Asset Allocation focuses on establishing both strategic targets and tactical ranges for each of the ten primary asset classes in the portfolio. The Morgan Creek process develops expected return forecasts for each asset class and then establishes recommended weightings for each asset class on an ongoing basis.

While asset allocation is the primary driver of investment returns, Manager Selection is also a critical component of the investment process. Manager due diligence is central to our process and we estimate that on an annual basis, members of the investment team engage in over 2,000 interactions with investment firms in order to monitor current managers as well as develop new relationships and identify talent in each asset class. Our investment professionals spend a substantial portion of their time traveling and conducting due diligence with both established and new emerging manager talent. Through the relationships developed by members of our team while at UNC, Duke, Notre Dame and other prior investment experiences, we believe we have an edge in identifying emerging talent in the investment industry. In addition, the integration of public and private investment disciplines, and the collaboration of dedicated Morgan Creek specialists in each area, has obvious synergies. It also provides for more comprehensive analysis and further refines our manager selection process.

Portfolio Construction is perhaps the most under-appreciated element of the investment process, but can be a source of significant return enhancement over time. Appropriately sizing exposure to various managers and diligent rebalancing are critical to successful portfolio management. We take an active approach to portfolio construction in order to position the portfolio to be exposed to an optimal mix of asset classes and managers.