Impacts of Covid-19 and Social Injustice on Investment Markets
"Discussion on the economic effects of the Covid-19 pandemic and social injustice on investment markets, exploring the trade-offs between health and economy, protests triggering discussions on systemic racism, and market performance insights. Includes data on market values, historical cash flows, and global market returns."
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EBD #13.4 BARC #13.4 CD #16.1 2019 2020 Virtual ACMeeting Endowment Trustee s Report at the Information Session to the ALA Executive Board, ALA Council and the Membership Patricia Wand Senior Endowment Trustee Virtual Meeting Chicago,IL Saturday June 13, 2020 Monday June 22, 2020
Exhibit#1 Event Impacting Investment Markets I Pandemic (Covid-19) The Covid-19 crisis is a grim reminder that economics is a dismal science whereby policymakers face the painful trade-off between saving lives and saving theeconomy. 1 US accounts for 30% (1.8 million) of the world s (6.2 million) infected population and 28% (105,1470) of the world s (376,077) recorded deaths* 39 million jobs lost since the beginning of theyear States phasing in stay-at-home orders earlier than healthcare professionsprefer, increasing chance of second wave ofinfections 1 Article: How much exactly have Covid-19 lockdowns affected the economy? by Rove Jacobs of the Chicago Booth Review 5-28-20. *Healthcare statistics as of 6/3/20. 3
Exhibit#2 Event Impacting Investment Markets II Racial and Social Injustice - The George Floyd Affect Triggered major peaceful protests in the US and around theworld Provided the impetus for open discussionsabout SystemicRacism Policingtechniques Major economicinequality Unheard and under-representedvoices Peaceful protests provided cover for OpportunisticCriminality Small businesses disproportionately affected, onceagain Unrest further delayed opening ofeconomy 3
Exhibit#3 Market and Book Value @5-31-20* $52,175,000 $60,000,000 $54,260,000 $52,175,000 $50,000,000 $45,010,000 $42,091,000 $39,976,000 $40,000,000 $30,000,000 $20,000,000 $15,870,000 $15,870,000 $12,696,000 $12,326,000 $11,861,000 $10,000,000 $- 2016 2017 2018 2019 2020 MarketValue BookValue *Calendar year to date (five months) through5-31-20 4
Exhibit#4 Endowment historical cash flows as of 5.29.20 * Book Value = $15.9million Investment Earnings = $34million GLOBAL INSTITUTIONAL CONSULTING Source: Merrill Lynch CRC Reporting System * Contributions/Withdrawals numbers only cover assets custodied as Merrill Lynch 5
Exhibit#5 World Market Performance Calendar Year Market Returns @2-29-20 %Return DowJones -11.5% NASDAQ -10.5% S&P500 -11.5% Dax -10.3% EuroStoxx -11.1% FTSE100 -12.8% HangShang -7.3% Nikkei225 -10.6% ShanghaiComp -5.6% ALAEndowment -4.5% ML BroadBond 8.7% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 6
Exhibit#6 World Market Performance Calendar Year Market Returns @5-31-20 %Return DowJones -11.1% NASDAQ 10.0% S&P500 -4.9% Dax -12.6% EuroStoxx -18.6% FTSE100 -19.4% HangShang -16.0% Nikkei225 -7.5% ShanghaiComp -6.5% ALAEndowment -3.6% ML BroadBond 5.5% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 7
Exhibit#7 Time Weighted Rate of Return - YTD 5-31-20 - Opening Closing ROR ROR Contributions (Withdrawals) Interest / Dividends Appreciation/ Depreciation Period Balance Balance Period Cumulative May 2020 $ 50,302,858 $ - $ 54,564 $ 1,817,753 $ 52,175,175 3.72% -3.84% April 2020 $ 46,643,258 $ - $ 106,088 $ 3,533,512 $ 50,302,858 7.85% -7.29% March 2020 $ 51,845,525 $ - $ 121,199 $ (5,323,466) $ 46,643,258 -10.03% -14.04% February 2020 $ 54,425,965 $ - $ 59,490 $ (2,639,931) $ 51,845,525 -4.74% -4.45% January 2020 $ 54,260,268 $ - $ 129,222 $ 36,475 $ 54,425,965 0.31% 0.31% -3.84% Total $ 54,260,268 $ - $ 470,563 $ (2,555,657) $ 52,175,175 NA 8
Exhibit#8 Managers, Styles, and Allocations Manager Value % Equity Income & Growth - ETF $ 4,642,250 8.9% Clearbridge ESG - Large Cap Core $ 13,494,436 25.9% Merrill Lynch Personal Advisor* - (MLPA) $ 26,872,121 51.5% The Endowment Fund/KKR/Blackstone Alternatives** $ 4,697,165 9.0% Capital Group - International $ 2,469,203 4.7% $ 52,175,175 100.0% Total *MLPA is a platform under which ALA can access different managers of various investing styles in the form of mutual funds and ETF s - 12 managers detail on next slide. **JLL (2.0%), Endowment Fund (0.9%), KKR (2.4%), /Blackstone (3.7%) & the Partners Group TBD (0.0%) 9
Exhibit#9 Manager Value 2,677,090 % 10.0% $ Principal Midcap Fund Merrill Lynch PersonalAdvisor 10.1% $ 2,712,602 Calvert Short Duration - ESG 9.5% $ 2,557,274 Doubleline Total Return 9.9% $ 2,671,335 Guggenheim Total Return 9.1% $ 2,451,812 Lord AbbettShort 3.7% $ 988,368 Domini Impact Int l - ESG Managers, Style, and Allocations 4.1% $ 1,104,752 Lazard International Strategic 5.3% $ 1,413,943 Nuveen Small Cap - ESG 4.2% $ 1,139,354 Nuveen Real Asset Income SPDR S&P 500 Fossil Fuel Reserve Free* - ESG 17.7% $ 4,755,333 3.4% $ 925,697 Oakmark International 8.5% $ 2,296,064 Pimco Income Fund $ 1,178,496 4.4% Vanguard Real Estate $ 26,872,121 100.0% Total 10 *Recently added toportfolio.
Exhibit#10 Endowment Trustee Activity Closely monitoring investment market duringpandemic Four update calls with Merrill Lynch advisors, March 18 & 26, April 21 and June 17. Receive regular investment reports. Each Trustee is monitoring an asset class, looking for trends Working closely with ALA Treasurer and ALA senior management to support a healthy financial outcome forALA Reviewing loan request to support the FY21 and FY22 operating budgets Alert to possible changes in payout for FY22 In April, added S&P 500 Fossil Fuel Reserve Free Fund, raising ESG funds to 44.4% of theportfolio Keeping alert for optimal time to rebalance portfolio asneeded Continuing to address member concerns regarding fund management fees and overall endowment coststructure Continuing to educate ourselves andmembers 11
Exhibit#11 ALA EndowmentTrustees CONTACT: patwand@american.edu Patricia A. Wand, Senior Trustee, 2015 2021 Mario Gonzalez 2017 - 2020 James G. Neal 2019 - 2022 Robert Newlen 2013 2020 Brian E. C. Schottlaender 2015 - 2021 Janice Welburn 2019-2022 Maggie Farrell,Treasurer Supported by ALA Finance Office staff and Merrill Lynch Investment Advisers Charge To hold, invest, reinvest and disburse endowment funds as directed by the Executive Board; recommend endowment operating procedures and assumptions to the Executive Board; select endowment investment managers; report endowment status to the Executive Board, Council and Membership. 12
