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fication by style and strategy is very important within this group. Citadel, Satellite, and Oak Tree are examples of managers in the absolute return segment. UNC has a 10 percent strategic allocation target for absolute return and a 10 percent strategic target for opportunistic equity. No strategic target exists for long/short managers as they are added to the U.S. and international equity portfolios to provide hedged exposure and access to superior investment management talent.

Yusko says UNC is constantly adding and deleting managers over time. It is a fluid environment. "We don't do searches in the traditional mode. We are always doing searches." To manage the steady stream of manager meetings, Yusko has assembled an investment team over the past two years including six investment professionals, two operations professionals, and two support staff. UNC uses Cambridge Associates as a sounding board on manager issues; however, the consultant is just one of a number of resources utilized to find, evaluate, and select the best of breed managers for the portfolio. The investment staff does most of the analytical and due diligence work internally. Yusko and his group then make recommendations to the investment fund board, which has ultimate decision-making authority for portfolio changes.

Performance Is a Symptom

Yusko feels that performance alone is not a reason to hire or fire a manager. Performance is a symptom of something else, perhaps the need for a change in the organization or a change in strategy.

So when does a manager get terminated? Usually when he or she does things differently than expected, or perhaps when they are more aggressive or more leveraged than they said they would be.

Yusko acknowledges that managers will go through tough periods. If the manager is doing what he or she is supposed to be doing, UNC will keep the manager and look to the next portion of the investment cycle when that strategy will be in favor. The team will allow a manager to continue to be a part of the portfolio team until the strategy doesn't make sense or there are significant organizational changes.

UNC's rebalancing philosophy is to sell on strength and buy on weakness. While all the managers are evaluated quarterly, rebalancing does not necessarily occur quarterly, but rather when compelling opportunities arise.