Letter from the Chief Investment Officer
The Robert Wood Johnson Foundation’s mission is to improve the health and health care of all Americans. In working to achieve this goal, we recognize, as part of our Guiding Principles, that as a private foundation, “We are stewards of private resources that must be used in the public’s interest.”
The Foundation was established as a national philanthropy in 1972 with a generous bequest of shares of Johnson & Johnson (J&J) from its chief executive, General Robert Wood Johnson. For most of our history, the Foundation’s investments were held mainly in the form of shares in that company but, in recent years, we have substantially diversified our investment portfolio.
Because we focus our philanthropy on meeting many of our nation’s most critical health challenges, our long-standing policy has been not to invest in companies whose products may conflict with our health and health care mission, namely those whose business is predominantly related to the manufacture or sale of tobacco, alcohol or firearms.
And because achieving comprehensive and meaningful change in health and health care will require sustained attention over many years to come, our Board of Trustees has established long-term guidelines for investment return and spending to spread risk and promote a steady, stable flow of support for our grantees.
As part of its actions to implement these policies, over the past several years the Foundation has further diversified its investment portfolio through a planned program of reduced holdings of J&J stock. Our current target asset allocation policy calls for:
- Between 60 percent and 70 percent in equity investments. Equity investments include J&J stock and other publicly traded securities, as well as investments in private equity limited partnerships. Our equity investments are in both U.S.-based and international companies.
- Between 22 percent and 32 percent in “alternative” asset classes. These asset classes include investments in below investment grade credit instruments, absolute return hedge funds, hedged long/short equity funds, real estate and a variety of commodity oriented investments, primarily in energy and related fields.
- Between 5 percent and 10 percent in investment grade bonds and short-term securities.
During 2006, the value of the Foundation's investment portfolio increased from $9.4 billion to $10.1 billion, reflecting an investment return of 14 percent.
The oversight, review and implementation of the investment policy are the responsibility of the Board of Trustees and its Investment Subcommittee. This subcommittee works closely with the Foundation’s investment team to review investment activity and results and to consider modifications to the target asset allocation. The investment team retains outside investment organizations to manage the Foundation’s assets, other than its holdings in J&J; those are overseen by the investment staff, except for a small managed sales program handled externally. As the Foundation’s portfolio has become more diversified, we have added investment professionals to our staff to select and monitor the performance of these outside investment organizations. The Investment Subcommittee receives periodic reports from the investment team on the status of the portfolio.
Brian S. O’Neil
Chief Investment Officer
October 2007