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. The questions in Part (A) of the case direct the students to analyze the risk inherent in both one particular asset and the entire ACCF portfolio. For this analysis the students need to calculate daily VaR and monthly VaR values and interpret these figures in the context of ACCF's risk management. In Part (B) the foundation receives a major donation. As a result, the risk inherent in its portfolio changes considerably. The students are asked to evaluate the risk of the fund's new portfolio and to perform a portfolio rebalancing analysis.

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. The questions in Part (A) of the case direct the students to analyze the risk inherent in both one particular asset and the entire ACCF portfolio. For this analysis the students need to calculate daily VaR and monthly VaR values and interpret these figures in the context of ACCF's risk management. In Part (B) the foundation receives a major donation. As a result, the risk inherent in its portfolio changes considerably. The students are asked to evaluate the risk of the fund's new portfolio and to perform a portfolio rebalancing analysis.

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.