2017 Peer Group Endowment Performance Study

I would like to begin by thanking Paul McLaughlin for his countless contributions to Moravian Ministries Foundation and for his time and attention to this year’s peer review study.  Paul has been a true champion for MMFA and a valuable resource for me as I lead the organization forward.  I am proud to say that my first report marks the fifth year Moravian Ministries Foundation’s returns have given us cause for celebration. Our returns placed us #1 in aggregate performance in the final rankings of the attached report.  Our long-term performance over 5 and 10 years drives our ranking and reflects greatly on our focus toward relative performance over time. While our current ranking is reason for feeling upbeat, our focus is not solely on our current success. Our focus is on meeting long-term goals for best managing the assets with which we have been entrusted and maximizing our support of the ministries we serve. We want our funds to effectively serve those in our churches, communities, ministries and missions around the world.  Basically, our returns are a result of our asset allocation and in some cases, lower fees.  Our peers combine outside investment manager and internal fees and those combined fees range from one percent to one-and-a-half percent.  Our fees remain solid at .69% or 69 basis points.  Of note, the one-year numbers show us underperforming slightly and that is driven primarily because our portfolios are tilted toward value stocks. Ironically, that same tilt plays into the outperformance we have experienced in the longer term.  We have remained committed to deliver the best returns we can for the resources entrusted to us on your behalf, and we always strive to promote growth for more ministry.

 

Purpose

The Annual Peer Group Study of the investment performance of faith-based and community foundations continues to be a way for the Moravian Ministries Foundation to measure and evaluate the efficacy of the Moravian Common Fund.  This study, along with other tools, helps us determine if we are doing the best we can to serve the needs of the Church in the area of investment management.  This also helps us measure the success of our goal to deliver a quality investment return for a low cost.

This study is not perfect.  The “peer” organizations are not all alike.  They have different cultures, purposes, theologies, and practices that are often reflected in their portfolio designs.  Some of the peer groups do investment screening for socially responsible assets, while others may hold more of certain asset classes rather than our core allocations.  Some have different fee structures that impact their total returns.  As a reminder, we all invest for the purpose of furthering the collective common good.  Moravian Ministries Foundation has generally the same allocations as our peers but we do not have alternative investments in our portfolio.  We do not invest in hedge funds, commodities, venture capital, etc., like many of our peers primarily because the performance of these products often does not justify the cost.

This study is meant to aid our investment committee, trustees, and staff as we look at the performance of the Common Fund relative to peers.  This report is primarily an educational tool for all of its readers and we will continue to use it to drive our philosophy of delivering quality investment returns at a low cost. 

 

Methodology

The data is taken from the published reports on the peer websites and for the period ending, June 30, 2017.  The methodology relies on published investment returns and fee schedules.  When fees were not deducted from performance reports, we reduced the peer’s gross return accordingly.  This approach may be imperfect, but to compare net versus gross returns, the exercise must be done.

To be included in the portfolio, the peer performance numbers had to be for at least two full-year reporting periods.  The portfolios also have asset allocations of 70/30, 65/35, or 75/25 of stocks vs. fixed income.  The Common Fund numbers reflect our Growth Portfolio, which is composed of 71% equities and 29% fixed income.  All Common Fund Assets are in mutual funds.  Among our peer group, some invest in a variety of assets.

The data was compiled for each reporting period and ranked from 1 to 12, with #1 being the top performer.  The data was then assigned a weight, with the longer-term return given greater significance than shorter-term.  The lower the weighted score, the higher the overall ranking.  The assumptions are:

  • We look at each period to see what was occurring within and in relation to each portfolio
  • Since we are all long-term investors, the weighting provides a way to judge overall performance

Please click here to see the complete data. Please click here if you'd like to download this report in its entirety.

Results

For the fifth year in a row, the Moravian Growth Portfolio ranked #1 in the five and 10-year time periods.  The competition was indeed tight this year with many time periods only showing a mere tenth of a percent difference between the top performer and the second ranked peer.  The widest range is on the one-year performance where we see a top performance of 15.7% and a twelfth ranked performance of 8.7%. This is not unusual as shorter time frames tend to point to tactical moves that money managers make in an attempt to chase trends or vary a bit from their strategic or long-term asset allocations.  You also see current political influence and headline news play more significantly in the short-term market rather than markets the steady hand of time.

We will continue to work hard for you and your investment returns.  The Investment Committee will meet in October to discuss our performance and review our relationship with TIAA-CREF/Kaspick.  We will consider any needed changes to the portfolios or our respective policies.  As the Fiduciary of the Common Fund, our Committee and the Foundation’s Board of Trustees take the obligation seriously to maintain your confidence and our duty to be wise stewards.  We want to express our sincere appreciation for the confidence you have placed in Moravian Ministries Foundation and thank you for letting us serve you.  If you have any questions, please call me at 888-722-7923 or email me at cspaugh@mmfa.info. Until next time, may God richly bless you!

Tags: