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Author(s)

Karl Schmedders

Russell Walker

Michael Stritch

The Arbor City Community Foundation (ACCF) was a medium-sized endowment established in Illinois in the late 1970s through the hard work of several local families. The vision of the ACCF was to be a comprehensive center for philanthropy in the greater Arbor City region. ACCF had a fund balance (known collectively as "the fund") of just under $240 million. The ACCF board of trustees had appointed a committee to oversee investment decisions relating to the foundation assets. The investment committee, under the guidance of the board, pursued an active risk-management policy for the fund. The committee members were primarily concerned with the volatility and distribution of portfolio returns. They relied on the value-at-risk (VaR) methodology as a measurement of the risk of both short- and mid-term investment losses.

In its report for the investment committee, the ACCF risk analytics team recommended the daily VaR at 95% confidence as a measure for short-term risk and reported the corresponding numbers. It is now the task of the investment committee to interpret these figures. The case questions guide the executive students to a critical evaluation of both the reported VaR figures as well as of the VaR methodology.

Date Published: 11/02/2011
Discipline: Finance;Non Profit;Statistical Methods
Key Concepts: Value at Risk, VaR, VaR Calculation, Diversification, Risk, Risk Management, Foundation, Fund Management, Portfolio Analysis
Citations: Schmedders, Karl, Russell Walker, Michael Stritch. Arbor City Community Foundation: Executive Education Version. 5-310-503 (KEL588).