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Investment Commentary

3rd Quarter 2021 - Signature Fund Performance

Commentary provided by Spider Management Company

Since our last update, Spider Management (“Spider”) has received Q2 2021 valuations for private investments.  Private investments represent a significant portion of Spider’s portfolio and were additive to final Q2 2021 returns, shown above.  Spider’s private equity portfolio benefitted from continued strength in venture capital and a global rebound in energy prices fueled strong performed in the real assets portfolio. Both Q2 final performance and Q3 preliminary performance have been allocated to all funds invested in Spider during those periods.

In contrast to the second quarter’s broad-based optimism, the third quarter brought a rise in Covid-19 cases, a sell-off in China following the government’s aggressive policy moves, and rising inflation concerns due to persistent supply chain and labor market disruptions. US stocks continued to creep higher, hitting new highs before a rocky end of September and ending the quarter with modest gains. Developed market equities were down slightly for the quarter, while volatility in China weighed on emerging markets. Commodities were up for the quarter, driven by sharply higher energy prices due to strong industrial demand and constrained production.  Inflation continued to be a closely watched macro-economic consideration, driven by a tight labor market and strained global supply chains.  The Signature Fund’s preliminary net return for the third quarter is -0.05%, bringing the calendar year-to-date net return to 13.78%. This compares favorably to a 70/30 portfolio’s returns of -0.70% and 7.22%, respectively. This preliminary return holds private investments at 0% for the quarter and we expect that private investments will be additive to final performance as of September 30, 2021. 

The main contributor to the Signature Fund’s preliminary third quarter return came from the Absolute Return asset class, which Spider’s team was pleased to see during a more volatile quarter.  The total Absolute Return portfolio, as well as its three sub-asset classes – Directional Hedge Funds, Lower Correlation, and Credit – all outperformed their respective benchmarks.  The Spider team continues to focus on increasing exposure to strategies with less correlation to public equities in order to protect the portfolio in the event of a market drawdown.  The third quarter was volatile for stock markets broadly, with Spider’s Public Equity portfolio slightly outperforming its benchmark. China was the most noteworthy market driver in the third quarter, driven by the government’s regulatory crackdown.  While Spider’s China portfolio was not immune from losses during the quarter, it outperformed the MSCI China Index by more than 6%.  Spider continues to rebalance the Public Equity portfolio by selling Venture Capital distributions, redeeming capital from some managers with significant growth exposure, and reallocating to smaller-cap US exposure.  

3rd Quarter 2021 - Vanguard Pooled Funds Performance

The following graph shows the performance of the Vanguard index options as of September 30, 2021.  As expected, the index portfolios tracked in-line with the markets and performance varied based on the selected asset allocation between equities and fixed income.