Investment Strategy

INVESTMENT STRATEGY
BERT FEUSS, M.B.A., VICE PRESIDENT, INVESTMENTS

Uncertainty remains in the financial markets as pricing continues to reflect the after-effects of the 2008 financial crisis and repercussions of record government spending. Times of great change can be very confusing but provide opportunities for investors who base their decisions on strong research combined with a patient and coherent approach to investing. The community foundation seeks to allocate capital in this manner.

We remain focused on the core tenants of our investment philosophy:

• Construct a strategic asset allocation that is expected to achieve return objectives while maximizing return given a prudent level of risk.
• Conduct rigorous initial and ongoing due diligence of investment managers, only hiring best-in-class, institutional managers.
• Diversify portfolios by asset class and investment strategy to maximize the likelihood of achieving return objectives under a variety of economic and market conditions.
• Avoid the temptation to change strategy based on short-term market behavior or near-term outlook.

The community foundation’s Community Endowment and Long-Term Growth portfolios returned double digit gains for 2010, as evident in the table below. The majority of advised fund assets are in the Long-Term Growth Pool. We are particularly pleased that all pools have recovered losses from the 2008 financial crisis. Broad diversification, diligent rebalancing and strong manager performance all contributed to achieving strong results.

The Community Endowment returned 14.2% in 2010, outperforming its benchmark by 0.50% and the median return of community foundations by 1.4%. The Long-Term Growth Pool essentially matched its benchmark of 13.3%. Both portfolios outperformed the median return for community foundations across all time periods measured, and ranked in the top quartile of endowments and foundations over $100 million over the past one and three years.

We are pleased that the investment strategy implemented three years ago is achieving results. We attribute this success to staying the course when it was tempting to shift toward lower risk assets, to judicious exposure to illiquid assets and to remaining focused on the core principles of our investment philosophy summarized above.

¹ Benchmark is 80% S&P500 stock index and 20% Barclays Capital U.S. Aggregate bond index.

² Benchmark is 75% S&P500 stock index and 25% Barclays Capital U.S. Aggregate bond index.

³ Council on Foundations survey of 183 community foundations.

⁴ Russell/Mellon survey of 136 endowments and foundations over $100 million.