First Quarter 2018 – “Spending Time on Spending”
During the past 17 years, managers of endowment and foundation investment assets have experienced more than their share of events impacting their ability to achieve their investment goals. The dotcom bubble saw the NASDAQ rise 580% between 1995 and 2000 before declining by 87% over the next two years, triggering a bear market in which the S&P 500 declined 49% from its peak. This was followed in 2008-09 by the worst financial crisis since the great depression of the 1930s, with the S&P declining almost 57%. Since then, we’ve been seeing better days, as global central banks have sustained a policy of quantitative easing that has kept global interest rates near (or in some cases, below) zero, giving investors who hoped to earn a positive real return little choice but to own higher quantities of risk assets. This dynamic has lifted major indices to all-time highs, and helped endowments and foundations better support their spending needs – typically 5% net of inflation – without compromising the endowments’ principals.