PEAKS AND VALLEYS
In the first half of 2022, the value of the Easton Episcopal Fund declined more than 18%. Our 1-year competitive ranking in that year dropped to the 82nd percentile, meaning that we were in the bottom 18% of comparable funds. Most of the decline was the result of an unusually bad second quarter. Discouraging? Yes, but only in the short term.
Financial statistical history shows that maintaining a consistent investment philosophy usually results in above average returns over the long term. While there will always be peaks and valleys in the market, performance over the long term is key to investing for a long-term enterprise. That’s why we emphasize that performance should not be judged over short time periods but rather over rolling time periods of at least three years. (Others use longer rolling periods to measure performance).
Fortunately, our rolling three-year ranking continued to be in the top 30% – even with the daunting reading for the 1-year period that ended June of last year.
We made a few minor adjustments to our portfolio, all of which paid off in the 12 months from June 2022 to June 2023; the Fund showed a gain of 12% and a considerable improvement in our ranking – from the 82nd percentile to the top 8% of comparable funds.
This out-performance is continuing. While it is comforting to see great short-term results, we continue to manage the portfolio with longer term success in mind. We are very pleased that for the 3-, 5-, and 10- year periods ended June 30, 2023 our annualized returns were between 7% and 8%, and our rankings were in the top 25% for each of these time periods. We have earned substantially more than inflation, and most shareholders have seen a real growth in their portfolios – even after deducting periodic withdrawals needed to support the missions of each investor parish.
We believe that over the next several years, inflation will drop to a level that will allow us to continue to support a Constant Rate of Return (CRR) to our shareholders of 5% annually and still show growth in principle, hopefully at a rate faster than inflation.
For 2024, the Board of Managers is recommending a CRR of 5%. Individual parishes are free to use different draw rates in order to meet their needs. The CRR is a recommendation only, but one that we believe is appropriate for most parishes.
We have seen over the last 13 years periods of strong growth and periods of prolonged stagnation or decline. This pattern will most likely continue. Investors in the Easton Episcopal Fund should neither be euphoric over short-term success, nor overly pessimistic during short-term pullbacks. We do hope that you are pleased with intermediate and long-term results. Please continue to use our website for the most up-to-date information.
Chris Maxwell , Vice Chair, Board of Managers