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Observations on Recent Market Volatility

TIFF Members and Friends,

Long-time TIFF Members know that we have historically been pretty reluctant to dash off notes quickly assessing the latest current event that causes a bout of market volatility. In our experience, those notes often do at least as much harm as good because they suggest to readers that one should be trading around these events rather than maintaining the long-term focus that we believe is essential to investment success, especially for non-profit organizations with very long, if not perpetual, time horizons.

That said, we do believe quite strongly in keeping our Members informed as to important matters regarding their portfolios. And, we just spent two days in New York City with our Boards (this was our regularly scheduled quarterly meeting with the major university and foundation CIOs who sit on our Board) discussing many matters including the recent spike in market volatility that seems to have primarily been caused by coronavirus fears and perhaps also a bit of “what if Bernie Sanders actually becomes president” anxiety.1

With our Board meeting discussions fresh in our minds, we want to share with you a few takeaways from those discussions:

  • Our Board members agree that it is almost impossible to forecast the trajectory of the coronavirus, how consumers and businesses might respond, the economic impact of those responses, and, of course, what the market has already discounted.
  • News flow is likely to worsen before it gets universally better, as test availability improves in the US we will likely see case numbers rise.
  • Market volatility is likely to remain high for the foreseeable future.
  • There is a non-trivial likelihood that the impact of coronavirus could trigger a global recession notwithstanding central bank easing and/or other governmental policy responses to the outbreak.
  • We should be cautious about viewing the recent drop in equity prices as a clear buying opportunity as prices may yet go lower.
  • We should keep monitoring developments and accept the reality that we’ll likely have to adapt our portfolio thinking often as the economic implications of the disease continue to evolve.

Importantly, prior to the Board meetings and during the few days since, we have kept TIFF’s core portfolios close to their strategic benchmark weights of 65% in equities, 20% in diversifying strategies including hedge funds, and 15% in low duration fixed income.

And, we intend to proceed from here just as our Boards suggested: we will continue to carefully monitor ongoing events, we will regularly and patiently re-assess our portfolios as matters evolve, we will stay in touch with our managers and our Boards, and we will make decisions that we think are most likely to produce investment excellence over the long-term. You might prefer that we offer some more concrete and definitive action plan than the one we just described. But, our long experience in dealing with episodes such as the present one tells us that remaining vigilant and not overreacting in either direction in the short run is the best path forward.

We thank you for your continued confidence in TIFF and we stand ready to answer any individual questions you may have. Please reach out to your TIFF Outreach Director or call us at any time on 610.684.8200.

1 We mention the Sanders anxiety, which temporarily dissipated as Super Tuesday election results came in and Bloomberg endorsed Biden, ONLY because we think it did increase market volatility, NOT to express any view whatsoever on the merits of any candidate.

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The information provided here is for general informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security or a guarantee of future results. This article also does not constitute an offer to sell or a solicitation of an offer to buy interests in any particular security, including interests in any TIFF investment vehicle. This article may include “forward-looking statements,” such as information about possible or assumed investment returns or general economic conditions. Actual results may differ materially from the information included in this article and no information in this article will be updated to reflect actual results or changes in expectations.

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