Investment Update
The year 2020 will surely be remembered for many reasons. It was a wild ride for capital markets as they experienced the fastest decline followed by one of the greatest and quickest recoveries. US and Global equities declined by more than 20% in Q1, before recovering most of the losses in Q2 and continuing a strong rally in Q3 and Q4 to end the calendar year with 18% and 16% gains, respectively.
Despite the tumultuous year, the blended portfolio ended up generating double-digit gains of 11% for calendar year 2020, exceeding the absolute benchmark (spending policy of 5% + inflation) by 4.7% and putting the fund’s 3 and 5-year performance return ahead of the absolute benchmark. We are pleased with all the actions taken over the last few years leading up to this moment. Being a long-term investor — and the discipline of rebalancing the portfolio to maintain the policy target allocations despite the market volatility — has really paid-off.
Following strong returns in 2020 and persistently low-interest rates, Cliffwater — the blended portfolio investment consultant — anticipates most asset classes' returns to fall below the 7% returns required to meet the spending needs. The returns for US Equities are expected to fall from 6.55% to 6.25%, while Treasuries expectations dropped from 1.9% one year ago to 0.9%. The Investment Committee has taken action by prudently constructing a diversified portfolio into higher returning assets.
After coming out ahead of the challenges of 2020, we are confident the portfolio is positioned appropriately for success in 2021 and beyond. The Investment Committee is fully engaged and working in partnership with Cliffwater and internal staff to ensure the endowment can provide permanent financial support and stability to our community. We look forward to the many exciting investment challenges and opportunities to come.
Thank you for your continued trust and support of our Jewish community.
Steven A. Wagner, Investment Committee Chair