provided by Spider Management Company
1st Quarter 2021
Signature Fund Performance
Q4 2020 Final Returns (left) and Q1 2021 Preliminary Returns (right)
Since our last update, Spider Management (Spider) has now received Q4 2020 valuations for private investments. Private investments represent a significant portion of Spider’s portfolio and were incredibly additive to final calendar year-end returns. The Signature Fund returned 16.9% net Q4 2020 and 20.1% net for the calendar year, compared to a 70% stock/30% bond portfolio’s return of 10.4% for the quarter and 14.3% for the year. This period represents the strongest quarter and calendar year since the Community Foundation initially invested with Spider in 2008. Private equity, particularly venture capital, was the most significant contributor to performance in 2020, benefitting from exposure to several prominent IPOs. Spider also made several tactical investments amidst the pandemic-related selloff last March, which added value in credit and energy strategies.
Turning to 2021, the primary market drivers for the first quarter were increased vaccine rollouts and continued positive economic data. However, the level of economic reopening and return to normalcy differs greatly by country and sector. Some parts of the world are still deeply impacted by the COVID-19 pandemic, while others seem to be successfully transitioning into a post-pandemic phase. Given that financial markets anticipate future activity, the stock market has led the way on this road to recovery, particularly in the US. So far this year, stocks have continued their upward trajectory, albeit on a rockier path than in the second half of 2020. While equity markets broadly posted gains, rising interest rates and two distinct hedge fund deleveraging events wreaked havoc on parts of the market. Particularly vulnerable were some of the strategies that had worked well in 2020, namely growth-oriented technology stocks and certain biotech names.
Some of Spider’s public portfolio managers were directly or indirectly impacted by these market events and thematic shifts, resulting in the Community Foundation’s preliminary first quarter net return of 1.02% compared to a 70% stock/30% bond portfolio’s return of 2.15%. This preliminary return holds the approximately 45% of Spider’s portfolio that is invested in private strategies at a 0% return +/- cashflows for the first quarter, as those managers have not yet reported Q1 results. Based on conversations with some of the portfolio’s largest private managers, Spider expects a continuation of the strong private portfolio returns from 2020 to continue into the first quarter of 2021, which Spider expects to boost final first quarter returns. Due to the complexity of private valuations, performance for this portion of the portfolio will be reflected in second quarter statements.
Looking at the last year, we are pleased to see such strong returns over 35%, particularly on the heels of a once-in-a-century global pandemic. However, Spider is aware that these returns are eye-popping and not sustainable over the long-term. Accordingly, the Spider team has been busy rebalancing gains from last year, reallocating capital to more attractive forward-looking themes and previously underweight areas. Spider has added a number of new managers to the portfolio this year, many of them previously considered aspirational. These additions can be attributed to the relationships of Will McLean (who joined Spider as Chief Investment Officer in January), the strong network of the University of Richmond’s Investment Committee members, and the ongoing work of Spider’s team over the years to build relationships with top tier managers around the world.