Topic: Investment Approach

Last year, we advised members on how to take advantage of rising short-term rates and harvest yield on cash holdings. Now, as this period of rapid and frequent rate hikes may be ending, we offer our guidance on how to navigate a phase of stable and possibly declining interest rates. Specifically, we share views on:

• Adding duration to lock in yield
• Mitigating the duration risk that comes with longer-term rates

We also review the four categories we use to group cash, determined by timing of expected need.

• Reserve funds provide the greatest opportunity to extend duration and lock in yield

We recommend a strategy to take advantage of the current rate environment using Reserve funds – even as we caution that members must have some degree of confidence that those funds will not need to be accessed prior to maturity of the recommended investments.

Cash is an unglamorous – but critical – element of portfolio management. For the past couple of years yields on cash-like instruments were negligible, leading endowments to hold cash in bank accounts bearing little to no interest. This year’s increases in short-term interest rates have changed this calculus. Non-profits are now able to explore more active approaches to cash management which have the potential to realize some additional return in a market environment that has been challenging for all asset classes. TIFF explores how organizations can define cash needs and help identify what strategy may be appropriate for them.

Endowments using time-tested principles can attain excess returns and long-term results above what the global economy and indices offer, according to recently released research.

TIFF Investment Management’s Higher Education Endowment Results: Reflections on Recent Returns and Outlook for the Future whitepaper finds that institutions will attain alpha if they use equities as the cornerstone of their portfolios, alternative investments in a research-driven, intelligent way and pick public market managers using a set of key characteristics.

Read the full article, Financial Investment News: Endowments Can Obtain Alpha By Using Time-Tested Elements: Study