In an uncertain and deeply troubling era, we take great comfort in the fact that time, with great consistency, marches on. While somewhat artificial, December 31 tends to carry outsized significance as we bid farewell or good riddance to the year just passed. With the misery of 2008 in mind, 2011 will be remembered as a difficult but not disastrous year and one where the pervasive nature of the financial crisis became universally apparent.
Naturally, this revelation, accompanied by exceptional market volatility, has driven investors to consider their portfolios within the confines of the world we have now been living in for nearly five years. Yet, we continue to believe that the seemingly endless nature of our current problems and the resultant pessimism has created opportunities for those who can look past the perceived certainties of today. This view is both the product of a natural proclivity towards contrarian thinking along with an underlying sense of optimism regarding the very long-term prospects for the world at large.
We must also acknowledge that the stress of the last few years and the prospect of more difficult days ahead is quite disturbing. Worse still,more than a decade of anemic returns from most high risk assets has created a more serious problem as many endowments have failed, over this period, to generate the returns necessary to preserve their purchasing power1.
Failure is a powerful word as it implies that which is both final and irreversible. Fortunately, a perpetual time horizon, while daunting in terms of the amount of return that must be earned, is also useful in that neither success nor failure necessarily reflect a permanent condition. As such, the term failure is inappropriate in most cases. Nevertheless, even interim shortfalls are undesirable and we must ask ourselves what they say about the ways in which charitable capital has been invested and about how those who serve as fiduciaries will be perceived...
