Commonfund recently hosted its 19th annual Commonfund Forum in San Antonio Texas. The event brought together about 450 institutional investors from the U.S, Puerto Rico and Canada to engage in a 3-day conference to explore cyclical trends and tactical opportunities that can help support the missions of their institutions. More than 60 experts in academia, public policy and government convened in General Sessions, Major Addresses and Breakout sessions.
Here are 10 key takeaways from Commonfund Forum 2017.
The tenets of the endowment model, an equity bias, diversification and capturing the liquidity premium, still have merit but they must be executed differently than in the past to account for how markets have evolved.
Passive and active should both play a role in portfolios today – although the likelihood of an institution achieving CPI + 5% without active management is currently low.
Diversification is harder than it seems on the surface – correlations might not tell the whole story. Portfolio construction is shifting from top-down dollar allocation to being built bottom-up based on factor analysis.
Finding value – across asset classes – requires identifying out-of-favor securities and applying disciplined risk management and portfolio construction techniques.
An important lesson to remember – all investors need liquidity to survive a crises.
The U.S. is rapidly on its way to energy independence – mostly due to the shale revolution – which has produced huge amounts of oil and natural gas, with the costs of extraction dropping continuously.
Due to demographics and constraints on productivity growth, expect economic growth in the U.S. and most developed countries to be lower than historical averages over the coming years.
In the U.S., populism, anti-globalization and anti-immigration policies could hold back growth while lower taxes and fiscal spending could support it (at the cost of larger deficits down the road).
The keys to investment success when distributions are bimodal are optionality, resilience and agility.
Longevity is an opportunity and a risk – nonprofit institutions have an opportunity to consider investments based on secular trends that may take years to play out but can also prove to be very profitable.