Investment Performance and Markets Commentary
Calendar year 2018 saw declines in investment markets world-wide, particularly in the fourth quarter.
In fact, the market recorded its worst month of December since 1931. In this environment, The Community Foundation for Greater New Haven's net return for calendar year 2018 was (4.9%). While our investment portfolio outperformed our market benchmark by 0.6%, it was still our first annual negative return since 2011.
For Foundation fund holders whose funds are managed by Bank of America as part of its trust portfolio, the performance for calendar year 2018 was (7.0%).
As a perpetual endowment steward, The Community Foundation is aware of both the volatility and tumult of the recent months. We also know the futility of trying to predict the occurrence or severity of such. The Foundation has built its portfolio based on a commitment to diversification, selective opportunism, and a clear focus on the perpetual nature of the endowment. We remain committed to a philosophy grounded within a long-term perspective set out in following guiding principles:
- Establish, monitor and evaluate a strategic asset allocation model and framework that is expected to achieve the endowment's long-term return objective for the prudent level of risk assumed;
- Avoid the temptation to "market-time" or strategy changes based on near-term outlook;
- Diversify the portfolio for increased probability of achieving the return expectations under different economic and market conditions; and
- Rebalance on a disciplined basis, while being opportunistic based on market existing conditions and clear market dislocations.
For 2019 The Foundation has reduced the spending rate from 5.75% to 5.625% (approximately 2.2%). Compared to our industry peers, The Foundation's spending rate has been on the high end over the last decade. However, through the work of The Foundation's investment and finance committees over the last year, we anticipate the expected returns of our model to be marginally less going forward. Therefore, we determined a slightly lower rate will help maintain the long-term value and purchasing power of our funds. The Corporation's 20-quarter trailing average computation for calculating the spending policy means that the overall impact of this rate change will have little impact on the distributions because of the increased values of the funds due to the net investment performance of the Corporation over the long-term.
We acknowledge the "moment-by-moment" turmoil and the existing elevated emotions about the markets. However, with patience, perspective, diligence, and adherence to our investment philosophy, and tempered with healthy caution and selective risk taking, we work to produce the required long-term performance for our community and, on behalf of our donors and our organization fund partners.
We are pleased to report our results for the periods ended December 31, 2018: