The endowment’s capital has risen from $27.5m (initial allocation) to $29.5m at the end of 2022, while $19.8m have been distributed in grants over the same period[1], achieving all three of the endowment’s goals.

The Investment Policy of the Fund was revised in Q1-2023, three years after the previous revision. The desired investment objective is a long-term rate of return on assets of 4.5% net, measured in USD and using a total return approach (income as well as capital gains). By long-term, we mean beyond a full business cycle, therefore approximately 8-10 years. When defining the appropriate performance goal, the Board has taken into account a risk tolerance of a 15% loss over a one-year period. The risk measure used is an Expected Shortfall with a 95% confidence interval. Put simply, it means that if we envisage twenty possible scenarios, the worst one should not lead to more than an average 15% loss.

Since inception, the annualised net performance of the endowment has been +4.80% (MW), slightly above the current target. Over the last three years, it has been +5.03% (MW), above the current 4.5% target and slightly above the previous 5% one.

At the end of the year, the endowment was managed through discretionary mandates by Goldman Sachs and Banque Pictet, complemented by investments in PGIM, Blackstone and Aurum Millenium funds.

Since July 2015, Perennium SA is the independent financial advisor of the Fund. Perennium assists with establishing and reviewing investment policy, objectives and guidelines; defining strategic asset allocations; selecting investment options and managers; reviewing such options and managers over time; measuring and evaluating investment performance; and producing consolidated financial reports.

Additional distributions to the benefit of species conservation were made outside of the endowment (directly from donations), to the tune of $4.2m, bringing the total to $24m.

The Future: 2022 and Beyond

The Investment Policy Statement has been revised during the course of 2022 and will be revised again with the usual three-year frequency.

We have experienced a historical change of regime, after 35-40 years of falling interest rates and tamed inflation (the “Great Moderation”). The massive fiscal stimulus and near‑zero interest rates seen during the pandemic have given way to tighter monetary policies and sharply higher bond yields.

While in 2023 the U.S. Federal Reserve and other major central banks have made progress against inflation and policy rates appear close to their peaks, rate cuts may not happen soon. Heading into 2024, inflation risks are skewed to the upside. Energy prices are a concern amid supply‑side pressures.

Monetary policy effects typically are felt with a lag, so global economic growth remains at risk. The eurozone already is in recession, and China’s post‑pandemic recovery has been disappointing. However, the U.S. economic outlook is more encouraging, as corporations and consumers both have proven less sensitive to higher rates compared with other major global economies. Fiscal stimulus has added further support.

We are not, however, changing our strategic asset allocation purely on the basis of market forecasts, and the investment philosophy of the Fund remains rooted in its three core tenets:

• The understanding that investing is about dealing with uncertainty. Trying to predict short-term market movements is a futile exercise. On the contrary, one must prepare for all eventualities.
• The focus on portfolio resilience, using components having the right level of true diversification (i.e., different behaviours). Portfolio construction is the key element of the investing value chain.
• The choice of a (very) long-term view. A long investment horizon also allows the use of a wider range of financial assets and a better connection with the real economy.