Author: Amy Paterson

Not So Fast, My Friend

Lee Corso was born in 1935 in Cicero, Illinois, the son of immigrant parents. After a long career playing and then coaching college football, he was hired by ESPN in 1987 as an analyst for its Saturday “College Game Day” program where he has been a fixture ever since. Lee Corso may have seen more college football than any person alive. At the end of the show each week, analysts predict which team will win different games. When it’s Lee’s turn to make a pick, and he disagrees with someone ahead of him, he will often say, “Not so fast, my friend,” and then explain why the other team will win the game. He isn’t always right, but he always has good reasons and is usually worth watching and listening to.

As we observe markets today, the persistent climb through the end of August is beginning to give us that “Not so fast, my friend” sense. Make no mistake, we have been bullish for quite some time, even up to and including last quarter’s letter. What is changing for us is the level of the market versus our perception of the increasing level of uncertainty. Markets do not like uncertainty. This is why we often see them make most of their election year gains in the fourth quarter, particularly when the incumbent party wins. The uncertainty of the outcome constrains the markets. Investors are not sure if the stocks to own are the ones that would likely benefit from one party’s proposed policies. Until the outcome of the presidential race becomes more apparent, investors often sit on the sidelines. Once clarity returns, markets usually benefit. It is also worth noting that, seasonally, the October–December period is the strongest of the year.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 3rd Quarter 2024 CIO Commentary.

At TIFF, we aim to add value to our clients in two distinct ways. First, we provide advice on Strategic Asset Allocation, or “SAA.” We define SAA as the long-term portfolio weightings that, in light of an organization’s unique financial circumstances, help it accomplish its long-term goals. Second, once we agree on an SAA and an associated benchmark, we seek to achieve net-of-fee alpha above and beyond that benchmark. If we can deliver on these two value-adds, we are likely to have success in enhancing the missions of our nonprofit clients.

SAA and benchmarking are handled very differently across the outsourced chief investment officer (OCIO) industry, with firms taking a variety of approaches. The objective of this paper is to provide some detail around our framework for each. More specifically, we will address:

• Why we define SAA as the allocations to four major asset classes, rather than a more granular and detailed universe of asset classes
• Our rationale for using risk-equivalent public market composites as benchmarks, rather than other options that may not be investable or transparent in their construction

The structure of the SAA and benchmark may not seem quite as critical as other investment decisions. We would argue however, that the downstream effects of these structures can be quite impactful over the long-term.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

TIFF CIO, Jay Willoughby, believes nonprofits may be able to capitalize on AI-driven market efficiencies by focusing on companies with long-term revenue potential and treating large-cap equities as long-term investments. He emphasizes that while AI boosts productivity and market valuations, a long-term investment approach can help manage risks and capture future gains.

Read the full article

Disclaimer: To access this article, a subscription is necessary. Please note that TIFF does not possess the rights to distribute this content.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

TIFF collaborates with clients to understand their distinct goals and situations and to define their investment needs.  Additionally, TIFF seeks out those active managers that we believe to be the best from across the investment landscape to meet these needs. Less apparent is the third leg of TIFF’s investment work: the portfolio construction that allows TIFF to harness active management risk and mold it to meet our clients’ investment needs. TIFF employs a multi-layered approach involving asset-class allocation, diversification, exposure management and focused asset-class views. This process helps us tailor a portfolio’s return potential, drawdown risk and liquidity profile, bridging the gap between active managers’ capabilities and clients’ objectives.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.