1 / 33

2018 Investment Summary Conference Call February 27, 2019 10:00 a.m. Eastern Time

Join us for a conference call discussing the investment summary for 2018. The call will cover investment performance, market trends, and strategies for the coming year. Please email your questions to Jennifer Southard.

lawrenceroberts
Download Presentation

2018 Investment Summary Conference Call February 27, 2019 10:00 a.m. Eastern Time

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 2018 Investment Summary Conference Call February 27, 2019 10:00 a.m. Eastern Time Join by phone: 800-441-0042 Pass code: 899336# Please email your questions to Jennifer Southard: jsouthard@mainecf.org

  2. Conference Call Agenda • Introduction of Presenters • Background Information on MaineCF • Investment Committee Members and Advisors • Cambridge Associates • Investment Overview • Summary

  3. Presenters • Peter Rothschild, Chief Investment Officer, Maine Community Foundation • Jim Geary, CFO and Director of Investments, Maine Community Foundation

  4. About MaineCF Mission: MaineCF’s mission is to work with donors and other partners to improve the quality of life for all Maine people. How we achieve our mission: MaineCF promotes effective and strategic giving and offers a range of giving options tailored to fit each donor’s financial means and charitable passion. We provide local expertise, personalized service, community leadership, and asset stewardship. People: MaineCF has a staff of 35 people and a volunteer network of almost 500 people.

  5. MaineCF’s Strategic Goals • Strong Start for Children: All Maine children receive a healthy start and arrive at kindergarten developmentally prepared to succeed in school and life. • Access to Education: All Maine people, including adult learners and other nontraditional students, are able to complete a degree or certificate program to maximize their potential. • Racial Equity: All people of color in Maine have access to opportunities and life outcomes that are not limited in any way by race or ethnicity. • Thriving Older Adults: All older adults in Maine are valued and able to thrive and age in their workplaces and communities with health, independence, and dignity • Entrepreneurs and Innovators: Entrepreneurship and innovation are broadly promoted and practiced in Maine.

  6. Growth of Assets From 2000-2018

  7. Major Fund Typesas of 12/31/2018

  8. Endowed v Non-Endowed

  9. Investment Committee Members and Advisors • Elizabeth R. Hilpman, Chair, Partner, Barlow Partners, New York City, and Woolwich, Maine • Forrest Berkley, retired Partner, Grantham, Mayo, VanOtterloo & Co., LLC, Concord, Massachusetts, and Northeast Harbor, Maine • Jean Deighan, Deighan Associates, Bangor, Maine • John B. Sullivan, President, Portland Global Advisors, Portland, Maine • Les Coleman, retired Executive Vice President and General Counsel of Halliburton Company • Mark Howard, CFA, Managing Director and Head of U.S. Credit, BNP Paribas • Advisors: • John Train, founded Train, Smith Investment Counsel and is chairman of Montrose Advisors, both of New York. His bestselling books on investing include The Money Masters, The New Money Master, The Craft Of Investing, The Midas Touch, and Preserving Capital and Making It Grow • Betsy Cohen, Chief Executive Officer, The Bancorp Bank. Betsy has more than 30 years of experience in banking, real estate, and financial law, and real estate lending, investing, and developing

  10. Cambridge Associates • Cambridge Associates works closely with the Investment Committee to assist in the manager selection and monitoring procedures. Cambridge Associates was established in the 1970s to conduct a comprehensive study of endowment management practices for Harvard University. Since then, the firm has become one of the nation’s preeminent investment consultants, servicing more than 900 clients, the majority of which are nonprofit institutions. • MaineCF’s primary contact at Cambridge Associates is Larry Chang, who joined the firm in 2002 and is a senior consultant. Prior to joining Cambridge Associates, Mr. Chang was a manager and engineer with General Electric. He is a graduate of the University of Michigan and received his MBA from the Yale School of Management.

  11. Investment Overview

  12. 15 Year Summary of Annualized Returns As of December 31, 2018

  13. What a Difference Large Cap U.S. Equities Make…Still(Strong performance of large-cap U.S. equities for 1, 3, 5, and 10 years)A look at annualized returns of the S&P 500 compared to all other equities around the globe for the period ending December 31, 2018

  14. Summary of ReturnsLarge Cap U.S. Equity v Non-U.S. Equityas of December 31, 2018

  15. Why Not Invest Only In U.S. Markets? • As shown on slide 12, MCF has underperformed a simple index of 60% S&P 500 and 40% Bloomberg Barclays Aggregate Bond Index for the past 10 years • Can an investor beat this simple index? • Should we only invest in U.S. Equities?

  16. 15 Year Summary of Annualized Returns As of December 31, 2017

  17. Over the Past 15 Years a Diversified Portfolio Produces a Better Return • MCF has Outperformed a simple index of 60% S&P 500 and 40% Barclays Aggregate Bond Index for the past 15 years • By 0.6% per year on average for 15 years • Even though the S&P 500 outperformed the rest of the world’s equity markets by about 6.6% per year for the past 10 years, diversification across asset classes and geography remains the better answer for a long-term investor • You would only cover about half the global market if you only invested in the U.S.

  18. We Have Seen This Before • In 1998 MCF underperformed a simple index of 60% S&P 500 / 40% Bloomberg Barclays Aggregate Bond Index (Formerly the Lehman Bond Index) • When the tech bubble burst in 2000, we had hedges and other defensive strategies in place to protect the portfolio • Those defensive positions paid dividends after the tech bubble burst

  19. Other Key Market Indices for 2018

  20. Asset Allocationas of December 31, 2018 Target v. Actual

  21. Global Equity Allocation

  22. Return Objective, Risk, Liquidity, and Time Horizon Return Objective • Succinctly, the Maine Community Foundation’s overall investment goal is to achieve the highest, risk-adjusted returns over longer periods of time. • Currently, the Primary Pool is invested with almost 40 investment managers (some managing several different strategies) covering a very broad spectrum of geographies, industry sectors, capitalizations, publicly-traded and private equities, and credit. Through our managers we own literally tens of thousands of securities. • We have chosen a mix of investments that we expect will return a little over 5% net of inflation. We know there will be periods when this return objective is virtually impossible to meet. In 2018, for example, there were almost no investments anywhere in the world that achieved this return. Hence, we need to aim to achieve this return on average over 10 years or more.

  23. Return Objective, Risk, Liquidity, and Time Horizon Risk • There are two kinds of risk we need to manage: short-term fluctuations in the value of our investments, usually referred to as “volatility”; and the longer-term risk of permanent loss of capital. • It is the risk of permanent loss of capital, that we must effectively guard against. Simply stated, the best insurance against this risk is diversification of our investments. Capital markets do not tend to act in lockstep. • By choosing to make relatively small “bets”—less than 10% of the fund in any one strategy—we limit the potential for an investment that turns “south” compromising achievement of our long-term return goal.

  24. Return Objective, Risk, Liquidity, and Time Horizon Liquidity • We do not have the luxury some endowments enjoy of making very large commitments to illiquid investments, venture capital funds for example, that may ultimately produce the most robust returns but lock up our capital for more than a decade. If we cannot consistently distribute upwards of $40 million annually, we will have failed in our mission. Once again, a balance must be found. Time Horizon • A final important component of the design of our program is how long we expect we have to achieve our objective. As we have seen recently, the returns on investments fluctuate significantly, especially over short periods of time.

  25. Return Objective, Risk, Liquidity, and Time Horizon The interaction between the 4 variables discussed might be summarized in the matrix below: • High Reward = High risk, low liquidity, long time horizon • High Risk = High reward, low liquidity, short time horizon • High Liquidity = Low reward, low risk, short time horizon • Long Time Horizon = High reward, low risk, low liquidity

  26. MaineCF v. Cambridge Associates Universe of Approximately 200 Endowments and Foundations as of December 31, 2018

  27. MaineCF Investment Performance v.Approximately 125 Community Foundations (1)as of December 31, 2018 (1) Based on survey data provided by the Council on Foundations

  28. Risk as Measured by Volatility for the Past 10 Years as of December 31, 2018

  29. Risk as Measured by Volatility for the Past 10 Years as of December 31, 2018

  30. Keeping Up with Inflation • The first statement in our investment policy is: • The long-term investment objective of the Maine Community Foundation is to preserve and enhance the real value of the assets (after inflation) of the foundation over time, in order to provide a sufficient rate of return for fulfilling the philanthropic purposes of the foundation. • In order to keep up with inflation we must earn enough to cover:

  31. Changes Made in 2018 • As of September 30, 2018 we reduced our U.S. equity allocation by $29 million, about 7% of total assets. • $19 million from large cap • $10 million from small cap • We reduced our non-U.S. equity allocation by $4 million • We added $20 million to two new defensive hedge funds • We added $13 million to cash/fixed income from the sale of equities • We added an additional $14 million to cash/fixed income from inflows into the portfolio

  32. Response to Questions Received by Email • If you would like to ask a specific question during this call, please email Jennifer Southard at jsouthard@mainecf.org. • After the call, questions can be addressed to Jim Geary at jgeary@mainecf.org

  33. To Provide Feedback • If you would like to provide feedback about today’s presentation, please contact Jennifer Southard, Vice President, Donor Services & Operations • 877-700-6800 or 207-412-0842 (direct) • email Jennifer at jsouthard@mainecf.org • Mailing address: Maine Community Foundation 245 Main Street Ellsworth, Maine 04605

More Related