A subdued growth outlook and increased volatility for many asset classes mean investors should be cautious in 2015 We continue to have concerns about the Australian macro environment and expect muted growth and inflation in Australia. China’s rebalancing economy is a top concern for Australia, combined with uncertainties in the domestic economy. Fair valuations and…
New Zealand’s economy is well positioned compared to other major economies, and especially relative to Australia, but external factors will likely impact the local economy and markets New Zealand equities are within our fair value range, though they are getting more expensive. Investors should maintain neutral allocations and, in their foreign equity exposure, overweight European…
This year we’ve added new exhibits on asset-class level performance and outperformance versus policy benchmarks. We also closely analyzed “net flow rates,” a measure of endowment health, which incorporate investment performance, endowment spending, and inflows that come in as gifts, and other funds designated for long-term investment. As with the past year, this report also…
Talks between Greece and its Eurozone creditors to extend its bailout may again break down and thus trigger more volatility for local assets, but the potential for contagion to other asset markets is contained for several reasons. All involved parties have strong incentives to eventually reach an agreement. Even if they can’t, the fact that…
We maintain our neutral positioning for municipal bonds Though yields have moved below the 2% level that we previously viewed as a threshold for underweighting munis, other factors have changed the equation. Treasury yields have plunged as well, and ten-year Treasuries currently yield less than ten-year munis. Muni issuance remains quiescent, with new issuance at…
Enterprise Analysis and Endowment Performance The portfolio’s enterprise risk is the potential effect of portfolio volatility on the bottom line of your organization. For a given institution, the risk may be lower than Trustees think it is—or it may be higher. How does one measure this risk? How should it be dealt with when constructing…
A number of companies have blamed the strengthening dollar for disappointing fourth quarter and 2015 earnings guidance. With about 65% of S&P 500 companies having reported, headlines that around 75% of firms are beating expectations obscure the reality of forecasts that have steadily been marked lower. Growth for the quarter (year-over-year) is expected to be…
Better earnings growth and attractive relative valuations support a slight overweight to Japanese equities versus US equivalents The multi-faceted nature of the Japanese earnings recovery has made Japanese equities more attractive. Further, structural reforms in Japan have been more successful than many thought would be the case early last year, and prospects for further success…
The European Central Bank’s (ECB’s) recently announced QE package—wherein the bank will buy €60 billion of public and private securities a month through at least September 2016—was widely anticipated, and as such much of the impact on markets had transpired long before Thursday. While the announcement does represent a watershed moment given the ECB is…
The current decline in oil prices may offer long-term return opportunities for patient investors that can tolerate volatility Current oil prices appear sufficiently low as to encourage production declines over time as drilling activity wanes, even absent shutting-in of existing wells. The time required to move from production growth to production decline may be shorter…