A message from Foundation investment consultant, Crewcial Partners
In the 2nd quarter of 2022, the equity markets continued to unwind the excessive valuations of recent years as inflation concerns and the war in Ukraine persisted. This unwinding has led to indiscriminate selling in certain segments of the market as investors favor near-term cashflows over expected cashflows in the future. The risks to the markets are many, particularly that of sustained high inflation, but we believe the present opportunity set to be quite appealing. As the markets adjust to the new economic environment and volatility abates, we expect investors to become more discerning which should benefit highly skilled managers who display discipline and patience.
The Sacramento Region Community Foundation’s endowment portfolio fell -11.8% on the quarter and has declined -14.5% over the past 12 months. The 1-Year, 3-Year (annualized), 5-Year (annualized), 7-Year (annualized) and 10-Year (annualized), net of fee returns are shown just below for the Endowment Portfolio (ending 6/30/22) with each period trailing the target benchmark. Results as of June 30 have been disappointing but importantly reflect a moment in time where the portfolio’s prospective out-performance is quite high. Results at other recent end dates have been ahead of the benchmark and it is our strongly held view that those results will be restored given the strength of the portfolio.
In addition to the Endowment, the Foundation manages pools that are structured to match donors’ grant-making horizon. For those donors intending to spend down their gift in a very short amount of time, we have established a Short-Term pool, which assumes little risk. For those donors looking to grant assets over a 3-7 year period, the Intermediate Pool is likely most appropriate as it assumes some risk in an effort to create gains, but not to the level a longer-term portfolio would assume. Lastly, the Foundation holds a Long-Term pool, which is designed for those donors with a very long grant-making horizon but has simply not chosen to endow their assets.
The performance (ending June 30, 2022) of each pool has been consistent with our expectations given market conditions:
For more information, please contact Jim McCallum, Chief Financial Officer, at Jim@sacregcf.org or 916.921.7723.
By focusing on the root causes of local challenges, seeking solutions with long-term results, and supporting the organizations that tend to the vital needs of the capital area, we help create the conditions for meaningful transformation in the Sacramento region.