Financials
Financial Summary
2020 was a rollercoaster year for the stock market with the longest eleven-year-old U.S. bull market ending in mid-March due to the COVID-19 global pandemic. Following a short-lived bear market, global markets had a strong rebound and continued their upward trajectory through the end of the year. Equities led the market rally, both domestically and internationally, while bond markets generated positive results for the year. Aggressive monetary and fiscal policy responses from governments and central banks around the world and positive vaccine news toward year-end were the driving force behind the bull market.
Despite the market sell-off in March, the Foundation’s endowment ended in 2020 at approximately $632 million, representing a net increase of $30 million after disbursement for grants, administrative expenses and taxes totaling $27.5 million during the year. The portfolio delivered a return of 10.2 percent after fees in 2020, surpassing the inflation plus spending rate of 6.0 percent.
Favorable markets, especially equities, propelled the Foundation’s portfolio to a decade-long solid performance; the portfolio value has appreciated by $144 million after total spending of $257 million between 2011 and 2020. The portfolio posted an average return of 7.5 percent per annum in the last decade, ahead of its Reference Benchmark (60 percent MSCI All Country World/40 percent Barclays Aggregate Bond) with a gross return of 7.3 percent and inflation plus spending rate of 6.5 percent during the same timeframe.
2020 underscored the importance of remaining committed to disciplined rebalancing and diversification. Over the course of 2020, the Foundation had periodically rebalanced its investments to its long-term target allocation while maintaining a moderate-plus-risk, well-diversified and liquid portfolio. At the end of the year, the portfolio’s asset mix, which remained virtually the same as that of the end of 2019, was 54 percent long-only equities, 16 percent fixed-income, 3 percent cash, 16 percent hedge funds and a total of 11 percent in private assets.
As we entered 2021, stocks continued rallying to record highs, further lifting their valuations levels closer to or above historical standards. Good progress in vaccinations, expectations for more fiscal stimulus and solid corporate earnings have been the key drivers of the recent market rally. However, a worsening of the COVID-19 pandemic, a deterioration in U.S.-China trade relations and an increase in inflation may pose threats to the economic growth and financial markets.
While market volatility is expected to remain elevated in 2021, with the assistance of our investment advisor (Goldman Sachs), the Foundation will continue to closely re-assess its strategic asset allocation, rebalance between active and passive strategies and improve the quality of the underlying managers. Given the presence of significant macro risks and elevated equity market valuations, we remain committed to our disciplined, prudent investment approach, which aims to maximize risk-adjusted returns over time, as we continue to navigate the uncharted waters of the pandemic.
The Finance Committee and the Board of Trustees meet regularly with Goldman Sachs to review asset allocation, investment strategy and the performance of the underlying investments. Northern Trust Corporation is the custodian for all the Foundation’s securities. A complete listing of investments is available for review at the Foundation’s offices. The 2020 audited financial statements will be posted on the Foundation’s website in mid-June.
Eva Cheng
Vice President, Finance
