10 Key Takeaways from Commonfund Forum 2022

Commonfund recently hosted its 24th annual Commonfund Forum in Orlando, Florida. The event brought together 200+ institutional investors from the U.S., the Virgin Islands, and Canada in a 2.5 day conference. Sessions explored the global economy, investment trends and, importantly, strategies to help institutions support their missions. More than 50 experts from investment firms, academia, public policy think tanks and major institutions convened in general sessions, major addresses and breakout sessions. 

Here are 10 key takeaways from Commonfund Forum 2022. 

1. Rough Road Ahead – In the opinion of many panelists – as well as Forum attendees completing a brief survey – the global economy and capital markets face several daunting challenges in the forms of inflation, rising interest rates, supply chain challenges and geopolitical instability – in Ukraine and beyond.  Ian Bremmer cited the end of the “peace dividend”, the risks to globalization and uncertainty in the world order.  Given these challenges, expectations for U.S. and global growth are muted with commensurate lowered expectations for capital markets in the short to medium term. 
    
2. Getting Serious About Diversity – Dr. David Thomas and Professor Robin Ely made the case that effective leaders will embrace diversity regardless of the ability to specifically measure business impacts.  It is self-evident that adding diverse perspectives and inclusive practices in the workplace will bring benefits so don’t let the burdens of measurement keep your organization from embracing them and implementing creative solutions.
   
   
3. The Power of Private Investing – Commonfund research has shown that institutions with higher allocations to private investments perform better over the long term. No surprise then, that even though Forum attendees’ overall expectations for investment returns are muted, they believe that private strategies will deliver the best risk-adjusted returns over the next 12 months. Private equity, private real assets and venture capital garnered the three top spots in our attendee survey this year.
   
   
4. So Much to Do, So Little Time – Over the last 25 years, first quartile endowments have outperformed third quartile institutions by 160 basis points.  What’s the secret sauce and how should Investment Committees spend their time?   Data tells us that good governance, asset allocation that is aligned with goals, and the liquidity premium associated with private investments should be the focus of IC’s. But that’s half of the equation. Challenging the status quo when it comes to spending policy can measurably reduce the volatility of endowment distributions – and in so doing, better support nonprofit missions. 
   
   
5. Industries are Evolving – The COVID-19 pandemic accelerated the pace of change across many sectors of the global economy – revealing potential winners and losers going forward. We heard about the wide dispersion across sectors and new opportunities created in commercial real estate. Similarly, venture capital’s ability to foster and benefit from transformative change in health care, blockchain and other technologies may be more exciting than ever. 
   
   
6. Sustainable Investing is Becoming Mainstream – ESG principles are embedded in the investment practices of many managers nowadays and are becoming a basic requirement that most investors expect in how their investment portfolios are constructed and managed. Further, speaker Mariana Mazzucato told us that addressing the most profound challenges facing humanity (climate change, equality, etc.) will require re-imagining how the public and private sectors engage and work together to solve problems.
   
   
7. The Value of Diversity – Institutions would be serving their own interests (in pursuit of better investment returns) by looking more closely at diverse investment managers in both public and private markets. Firms that are minority- and/or women-owned and operated are building solid track records while contributing to the diversity of investment portfolios.
   
   
8. Earning the Liquidity Premium – Speakers acknowledged the incredible pace of fundraising and enormous growth of the private capital industry and the potential impact on valuations and future returns. Consensus approach: search out smaller managers and smaller funds with operational expertise and the ability to find and create value and have multiple exit opportunities. 
   
   
9. There is No Magic Bullet – Our panel of distinguished CIOs talked about adhering to the basic tenets of the endowment model and using institutions’ inherent advantages – in the form of perpetual time horizons and codified investment policies – to achieve the goals of their organizations.  The consensus was one of cautious optimism in the ability to achieve long-term goals – but also agreement that the next 10 years will look very different than the last decade.
   
   
10. Take a Moment to Think – Jack Uldrich, global futurist, emphasized the incredible pace of change in the world today in almost every aspect of life. He reminded us that benefitting from those changes requires that we occasionally take time to pause our day-to-day activities to think beyond today and imagine what’s next. 

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