Federation endowment delivers best-in-class performance

By Lewis Gaines Investment Committee Chairman

The Jewish Federation of the Lehigh Valley endowment’s June 23 YTD return of 11.5% was dramatically higher than the Moderate Allocation Index benchmark return of 6.9%.

The portfolio has outperformed for more than 10 years in both up and down markets.

Since 2019, the low-cost, S&Pfocused index strategy has generated investment gains of $13.3 million, which is $5.6 million higher than the average similar-risk fund. As of June 2023, assets totaled about $40 million, of which $17 million was invested on behalf of community agencies.

The endowment’s longterm returns not only greatly exceed the benchmark, but also are substantially above the returns of most small and large endowments. In the context of expected long-term returns of 8 to 9%, the demonstrated multiple-year return differences of 190 to 470 basis points are highly significant and have led to the $5.6 million in outperformance versus the average moderate-risk fund.

The outperformance resulted from:

• A focus on maintaining target exposure to stocks and not reacting to changes in investor mood and the always volatile economic and political news

• Heavy weighting to the S&P index as large-cap growth stocks have outperformed other equities

• A higher-than-benchmark target equity allocation (68% versus 60%), which generates higher returns in the long run

• No foreign stocks, which have significantly underperformed U.S. stocks for many years

• Periodic reallocation between stocks and bonds to take advantage of both major short-term fluctuations and long-term trends

• Israel Bonds, which limit fluctuations (both up and down) in our investmentgrade bond portfolio while paying higher interest than U.S. Treasury Bonds

• Low advisory fees and a completely indexed equity portfolio

Goldman and the endowment investment committee continue to monitor the portfolio closely. Both believe the Jewish Federation is well positioned to continue with better-thanaverage returns.