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Investment Commentary

3rd Quarter 2022 - Signature Fund Performance


Commentary provided by Spider Management Company

Since our last update, Spider Management (“Spider”) has received Q2 2022 valuations for private investments.  Despite the continued volatility in the financial markets, second quarter returns outperformed the 70/30 portfolio.  We believe the portfolio is well balanced in the current market but have intentionally been underweight Public Equity and overweight Cash & Fixed Income in order to have liquidity to make opportune investments.

For the third consecutive quarter, both public equities and fixed income markets posted negative returns, with the MSCI ACWI down -6.82% and the Bloomberg US Aggregate Bond Index down -4.75%.  Inflation as measured by the CPI remained high, ending the quarter at 8.2%, which was lower than the high of 9.1% in June but not the rapid decrease the Fed had sought to achieve.  The stickier components of CPI continued to rise, and labor costs were particularly in focus given a low unemployment rate and persistently lower labor participation rates since Covid.  During the quarter, the Fed made two 75-basis point rate hikes, marking the fastest increase in rates in decades.  The inverted yield curve continues to prompt concerns of recession in the US, despite a positive annual GDP estimate of 2.6% in the third quarter and elevated corporate earnings levels.  The Signature Fund’s preliminary net return for the third quarter is -1.65%, compared to the 70/30 portfolio’s return of -6.15%.  This preliminary return holds the majority of private investments at 0% for the quarter.  Spider’s final third quarter return will likely decline from the preliminary estimate, as we expect to see write-downs in Private Equity, specifically Venture Capital.  The Signature Fund’s preliminary 1-year net return of -7.35% compares favorably to the 70/30 portfolio’s return of -18.71%.  Quarterly losses are never desired, but the team is pleased that steps it has taken since the start of 2021 such as reallocating capital from growth to value and adding lower correlation-oriented managers to the portfolio have had a positive impact on relative performance


3rd Quarter 2022 - Vanguard Pooled Funds Performance

The following graph shows the performance of the Vanguard index options as of September 30, 2022.  As expected, the index portfolios tracked in-line with the markets. Both stocks and bonds declined in the quarter, which is reflected in the similar performance across the three index blend options. 


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