APRIL 27 - MAY 1 MIDWEEK UPDATE
April 29, 2020 - Texas has joined the growing list of states beginning to reopen their economies. Officials said Monday they will allow the current statewide stay-at-home order to expire this Thursday, enabling many businesses to start opening in phases the following day.
Our main focus continues to be the safety and well-being of our staff and clients. HighGround’s leadership team is looking to health and government officials' guidance for best practices on returning to the office. We will develop a plan that is suitable for HighGround and will not reopen the office until we have the appropriate protocols in place. In the meantime, be assured that whether we are in the office or working from home, our services remain uninterrupted.
- The Small Business Association resumed taking applications for its aid program, which was replenished with funds authorized by Congress last week.
- Several states and countries are relaxing coronavirus containment measures and reopening businesses gradually after continued reports that the outbreak is easing in global hot spots.
- Short-term U.S. oil prices continue to decline as investors remain concerned about an excess supply of crude during a time of little demand.
- The Federal Reserve (Fed) meets this week after what has been the most active and condensed period of Fed policymaking in its history.
- It’s anticipated that interest rates will remain unchanged into the foreseeable future, however, there are some other policy moves the Fed may be considering as it guides markets and the economy through the COVID-19 crisis.
Balance & Reward: Asset Allocation
Asset allocation is the primary driver of an endowment fund’s expected return, income and risk. It also provides the greatest influence on the likelihood of an endowment fund meeting its real, after inflation, distribution targets. Studies have shown that over 90% of an investment portfolio’s return variability is due to asset allocation, with less than 10% coming from security selection and other investment decisions.
To better understand our asset allocation strategy, it’s important to know what our objectives are:
- Maximizing total return with acceptable risk levels
- Providing a stable source of cash flow funding to our nonprofit clients
- And preserving purchasing power
When HighGround designs multi-asset class portfolios, we include stocks that will take full advantage of normal and upward trending market environments. From a functional perspective, we group asset classes in three buckets:
- Growth: Growth investments are composed of publicly traded stocks and investments in privately held companies. They are expected to gain in value over time but with higher levels of risk and volatility.
- Real Assets: The role of real assets is to protect against unexpected inflation. Real asset investments include private real estate, private energy, and inflation-protected US Treasury securities which are included in our fixed-income portfolio. Real asset investments can also include timber, agriculture, and infrastructure.
- Risk Reduction Investments: Finally, the role of risk reduction investments is to protect portfolios against periodic market swings. They include fixed income and cash as well as hedge funds that reduce some of the market’s risk.
At HighGround, we desire to wisely plan for tomorrow without fear. May all our planning be from a posture of trust, not worry. And as we plan for tomorrow, may we seek the first things today (Matthew 6:33).