2022 Q1 Endowment Committee Updates

Financial Markets: Financial markets have become more volatile as they adjust to an environment of significantly higher inflation. Inflation pressures have increased steadily in recent years as trade disputes have been followed by pandemic-induced supply disruption and resurgent demand, and now higher commodity prices following Russia’s invasion of Ukraine. While inflation has generated higher interest rates and negatively impacted both stock and bond markets, the portfolio remains well-diversified and contains a minimum allocation to fixed income and a meaningful allocation to inflation hedges such as real estate, commodities, and other real assets. Despite these tactical adjustments, the portfolio declined by 5.3% in the first quarter of 2022.

While the Cathedral’s Investment Policy Statement provides flexibility to adapt to changes in financial markets, it also serves to anchor those adjustments around a longer-term strategy with a reasonable risk profile that has historically generated returns that can compensate for inflation and support ongoing spending over time. While inflation pressures and associated portfolio volatility could persist for some time, the cathedral’s Investment Policy has been designed with the assumption that these difficult periods will occur periodically, just as it is also designed to ensure participation in the unusually favorable markets of recent years. Update provided by Steven Violin from FLPutnam and Sam Spencer.

Howard Fund Update: To make it easier to review and manage the Endowment Accounts at FLPutnam, at their April meetings, the Finance Committee recommended and the Vestry approved consolidating the Howard Fund with the main Endowment Fund. We were facing the possibility of not having enough cash in the Howard Fund to pay for the completion of the labyrinth, which would have forced the equity and bond allocation in the Howard Fund to be different from the rest of the Endowment. By consolidating the 2 funds, there is more than enough cash on hand currently to maintain our monthly draw and also pay for the completion of the labyrinth project without changing the current equity/bond allocation. We will show an estimated amount of the Howard fund in the monthly balance sheet as we do the other portions of the endowment. Update Provided by Tim Wilkins.

We will hold these donations in the restricted checking account and then periodically transfer the total amount to the Endowment Account with FLPutnam (Transfers will happen at least annually.)