Updated: May 4, 2016
This presentation can be accessed anywhere at URL: http://bit.ly/EAC-001
I apologize, but I do not have final performance numbers for Q1 2016, but I am happy to say that the numbers will be "ok" (or better) given defensive positioning of the Endowment.
"Official" remarks re: EAC update for Board
Is it really possible for the Endowment to lose less than 10% if the Equity Markets are down 30%?
Yes, reducing Equity exposure to 50% (currently at 58%, reduced from 63% per March 16th meeting) and increasing U.S. Treasury bonds to 20% could reduce losses to approximately -12%.
Gold is the Wildcard. At a 10% weighting, IF Gold were to surge by 50% driven by safe-haven buying, then it would add a positive 5% return to the total portfolio - thereby reducing total losses to less than 10%.
EQUITY REVIEW
- Ticker: SPX | S&P 500
- Year-to-Date Performance: +0.06%
- Endowment is overweight U.S. Large Cap equities
- Ticker: SX5E | Euro STOXX 50 Index, priced in Euros
- Year-to-Date Performance: -11.5%
- Endowment is underweight International Developed markets
EMERGING MARKETS | Endowment holds ~8% exposure to Emerging and Developed Markets through the Matthews Pacific Tiger Fund and the Causeway Emerging Markets Fund
- Ticker: EEM | iShares MSCI Emerging Markets
- Year-To-Date Performance: +2.8%
- Ticker: MAPTX | Matthews Pacific Tiger Fund
- Year-To-Date Performance: -1%
- Ticker: CEMIX | Causeway Emerging Markets Fund
- Year-To-Date Performance: +1%
Fixed Income Review
Leveraged Loan Closed-End Funds The recent rebound in oil prices have lifted high-yield, helping these funds to close their discounts to NAV
- Ticker: BSL | BlackRock/GSO Senior Floating Rate Term Fund
- Current dividend yield is 7.6%
- Year-to-Date Performance: +3.4%
- Ticker: BGT | BlackRock Floating Rate Income Trust Fund
- Dividend Yield = 5.5%
- Year-To-Date Performance: +1.0%
- Ticker: TLI | Western Asset Corporate Loan Fund
- Dividend Yield = 9.0%
- Year-To-Date Performance: -2.3%
- Ticker: FRA | BlackRock Floating Rate Income Strategies Fund
- Dividend yield = 5.7%
- Year-To-Date Performance: Flat +0.0%
- Ticker: LQD | iShares iBoxx Investment Grade Corporate Bond ETF
- Yield = 3.6%
- Year-To-Date Performance: +4.6%
ALTERNATIVES REVIEW
Ticker: MLPI | UBS ETRACS Alerian MLP Infrastructure Index ETN. MLP sector is a 4% opportunistic trade in the Endowment. AMLP is the Alerian MLP Index and is the benchmark for this sector. The Endowment owns AMLP and MLPI.
- Ticker: MLPI | UBS ETRACS Alerian MLP Infrastructure Index ETN
- Dividend Yield = 10.8%
- Year-To-Date Performance: -12%
Gold is rebounding, with a 16% gain in Q1. Endowment holds gold exposure (1.3% position size) through the Sprott Phyisical Gold Trust, ticker PHYS
- Ticker: PHYS | Sprott Physical Gold Trust
- Year-To-Date Performance: +16%
China remains a Key Focus
The Chinese equity markets continue to struggle . . . Though not discussed in this presentation, the US Dollar - Renminbi exchange rate is a key focus point
Oil remains in Focus. New market adage: So goes Oil, so goes the Market.
Brent is trading off its recent 50% rally from $28 to $42. This rally coincided with very dovish remarks from Fed Chair Yellen. The dovish Fed has allowed the dollar to weaken (for now) which has relieved pressure on dollar-influenced markets, including Emerging Markets and commodities.
The oil bear market has triggered credit defaults in the Energy sector, which has locked up the High Yield debt ("junk bonds") market. Exacerbating this credit squeeze is the lack of Financial Capital traditionally available to Wall Street's bond trading houses. In the past, they would make markets. Now, they simply place orders. As a result there is no liquidity in fixed income markets, and junk bond illiquidity spills into higher-rated corporate bonds.
Saudi Oil Minister Al-Naimi whipsawing short term oil trading - will Saudi freeze, or not freeze?
