The total value of the Foundation portfolio holdings as of Q2 2021 is $1,698,000.00.
Portfolio Objective & Strategy
The investment strategy is intended to maximize income and long-term appreciation, while seeking a reasonable rate of return and the preservation and enhancement of principal. The Foundation’s Investment Committee will allocate to equities, fixed income, cash and other strategies designed to meet the needs and goals of the Library. The long-term strategic allocation of the portfolio is 60% equity, 30% fixed income and 10% cash. More recently, as of June 30, 2021, the allocation was 61% equity, 26% fixed income and 13% cash. The portfolio also includes 5% in commodity exposures, primarily as an inflation hedge, as well as for potential appreciation. On a year to date basis, the portfolio return is 7.2% with a total market value of $1.9 million (as of March 31, 2022).
The broad-based advance in equities, commodities and riskier fixed income asset classes since earlier this year accelerated during the quarter. Developed-market equities outpaced emerging markets for the second quarter. U.S. shares gained the most among major markets, followed by Europe, the U.K., Hong Kong and mainland China. Japanese equities were modestly negative. One can’t rule out a choppier and more lackluster performance for U.S. equities in the months ahead given their strong performance since March 2009 and elevated stock-market valuations relative to much of the rest of the world. Hence, the portfolio is diversified in various equity markets globally.
Equity markets have long anticipated the economic improvement we now are watching unfold. There is increasing concern, however, that equity prices have risen so much that there is little appreciation potential left, even if the global economy continues to forge ahead into 2022. On a positive front, the combination of (1) above-average economic growth, (2) significantly higher inflation than seen in the past decade, (3) a fiscal policy that expands the size of federal government spending, and (4) extreme monetary ease aimed at suppressing interest rates is the perfect backdrop for risk assets—and for the creation of speculative bubbles.
U.S. Treasury and U.K. gilt rates declined across most maturities for the first two months of the quarter; short-term rates bounced in June to finish higher for the quarter as intermediate-to-long-term rates continued to drop—resulting in flatter yield curves. Conversely, Eurozone government-bond rates climbed throughout April and May before falling in June, but generally ended up higher compared to the beginning of the quarter. Emerging-market debt was the best-performing fixed-income asset class. U.S. corporate bonds followed—with investment grade outpacing high yield, and inflation-protected securities also performed notably well.
Non-traditional investments in energy provided a boost for the portfolio. Commodities again delivered large gains on the anticipated transition back to normal life as the West Texas Intermediate crude oil price increased by 24.20% during the quarter. Vaccination rates have slowed in developed regions, leaving more shots available to the rest of the world. Therefore it is possible to expect a rolling reopening of the global economy that will extend well into 2022; this should resemble an extended up-cycle that keeps the pressure on supply chains and leads to continued shortages of goods and labor.