2019 Investment Report
For the year ended March 31, 2019, the Jewish Community Foundation of Montreal’s pooled fund had a return of 3.9 percent. The average annualized return for the last ten years has been 7.0 percent.
Fiscal year 2019 was a turbulent year. After suffering the worst quarter in 7 years in Q4 of 2018, capital markets rebounded in Q1 of 2019, with the marketable equity portfolio returning 5.0% for the year.
The Canadian equity market was a strong global performer for the fiscal year, with the S&P/TSX Composite Index returning 8.1%. This was due largely to a strong rebound in oil prices during the first quarter of 2019, along with the increasingly dovish sentiment regarding rate increases seen from many of the world’s central banks.
Despite a turbulent Q4-2018, Global equity markets bounced back strongly in Q1-2019, supported by optimism that the long-running trade dispute between the US and China may finally be reaching a progressive conclusion. In addition, the Federal Reserve softened its tone regarding the path of interest rate policy in Q1-2019, providing further comfort to investors.
Canadian bonds performed well as yields continue to decline under pressure from disappointing economic data and dovish comments from central banks. Our bond portfolio returned 4.8% for the year.
Hedge funds were down 0.79 percent for the fiscal year (USD return) a very modest performance compared to equity and bond markets, as these markets posted strong performance during the year. The under performance is not necessarily surprising given the portfolio’s risk-reducing mandate and the frothy nature of market returns, more specifically at the start of 2019. However, Hedge funds posted a notably strong relative performance in the challenging environment of
Private market investments posted strong performances during the year with large amounts of capital put to work by global investors primarily in 2018. In Q1-2019, deal volumes and fund raising decreased in the Private Equity markets, while in the Infrastructure and Real Estate markets fundraising momentum continued. In the Private Debt market fundraising activities remained in-line with the five-year average. For the fiscal year, the JCF Private market portfolio returned
8.1% in its USD currency.
Currency and Currency Hedging
The Fund uses a currency hedging policy approved by the Investment Committee with the aim of reducing the foreign currency risk and removing most of the short-term currency volatility and the resulting impact on spending generated by the portfolio. However, a portion of the USD investments is not hedged in order to provide another source of diversification to the portfolio. JCF’s hedging policy mandates the hedging of 50% of USD denominated currency exposure.
This past year the Canadian dollar depreciated 3.7% against the US greenback. The unhedged portion, representing 50% of US denominated assets, as expected provided some positive diversification to the portfolio.
The JCF has a long-term outlook and its investment policies seek to generate average returns that will support the programs funded by our donors. The Investment Committee’s responsibility is to invest for the long-term, to use a multimanager approach, to diversify the portfolio by investing in an array of asset classes, and to have an allocation to hedged investment strategies with the goal of smoothing the Fund’s return volatility over time and to set the investment policies and philosophy. The policy targets and actual exposures as of March 31, 2019 are above.