Ka Wai Ola - Office of Hawaiian Affairs, Volume 27, Number 6, 1 June 2010 — Navigating Headwinds in 2010 [ARTICLE+ILLUSTRATION]

Navigating Headwinds in 2010

Aloha e nā 'ōiwi 'ōlino mai Hawai'i a Ni'ihau a puni ke ao mālamalama. Restoration of societal and family well-being remains a challenge at the close of this second quarter of the decade's year one. Economists proclaim signs of recession recovery, yet citizens of the nation and residents of

Hawai'i remain eautious and some even skeptical tracking the glacial movement of employment statistics toward a "positive" direction. Legislature season in Hawai'i

is now positioning for 2011. The political "dynamos" are churning toward choices for lst Congressional District temp, lst Congressional District hnal, along with 2nd District, Gubernatorial, Mayoral, Office of Hawaiian Affairs (5), and State and County elections winners. In Hawai'i, economists with puhlie and private policy-makers try to forecast the state of the economy going forward. Trust fiduciaries, like OHA Trustees, investigate, analyze and gauge

how ineome revenue ean both be dispersed and grown during these times of investment risk and uncertainty. June 30 ends OHA's fiscal year. Trustees will realign and approve budgets for the next hiennium and beyond, guided by our OHA Board spending and investment policies. The heahh of the "market" is of prominent eoneem. In May,

the OHA Committee Chairpersons for Asset Resource and Management and Beneficiary Advocacy and Empowerment and I traveled to New York to participate in the Russell Investments

2010 Institutional Client Conferenee in New York. Other clients included: Associated Press, Con Edison, Continental Airlines, Cultural Institutions Retirement Systemof New York, Edison Internahonal, Nestle U.S.A., Robert Wood Johnson Foundation, New York Times Co., Pension Boards - United Church of Christ, Verizon Investment Management, and William Penn Foundation. Topics included: Risk Management the See APOLIONA on page 27

leo elele rustEE mESSSagES

Haunani Apoliona, MSW ChairpErsūn, TrustEE, At-largE

OHA Chairperson Haunani Apoliona, in red, with, from left, Trustees Oswald Stender, Colette Machado and CE0 Clyde Nāmu'o at the New York Stock Exchange in May. - Photo: Courtesy of Chairperson Haunani Apoliona

Continued from page 24 cornerstone of investing, Innovations in managing asset allocation, and Evolution of alternative investing. Some of the take-away concepts, principles and guides regarding investment, markets and economy are: • tough head winds are ahead for the eonsumer • recovery will be slow and likely industrial productivity will not return to "pre-recession" levels • as regards risk and its management - risk is uncertain and multidimensional, irrational human behavior may over-ride what rational eeonomie models suggest • there is nothing normal about risk • return cannot be controlled but risk ean be managed • investment committees should focus greater effort on risk management and improve their understanding of possible adverse outcomes • investors must plan for long-term success but still be ever cognizant of the downside • risk management is a dynamic and rigorous process whieh must be considered more seriously than emotion or hunches • no single statistical asset/liability model ean possibly capture the multiplicity or multidimensionality of investment risk • risk is not necessarily based on normal distributions so investors must use a variety of tools such as stress testing, scenario analysis and downside analysis to assist in the process and be vigilant against letting human frailties dominate, also resist becoming over-aggressive in our investment strategies as the market strengthens • when fiduciaries look at risk they tend to define risk narrowly, as a tool or eomplianee vehicle rather than a process • most investors have competing investment objectives so goals must be prioritized with the primary objective kept solidly in mind at all stages of decision making • management is about running an enterprise - governance is about seeing that it is run well so management is judged by results; in contrast, governance is about process, a simple definition of governance is that it is the decision and oversight structure established in any enterprise. The OHA group completed due diligence sessions with our second Investment Manager Goldman Sachs along with a tour of the New York Stock Exchange. Quarterly updates by Russell Investment and Goldman Sachs representatives for OHA Trustees Asset Resource and Management Committee will continue with in-person presentations and updates on the OHAportfolioperformance. 18/48 ■

APOLIONA