In 2023, the EEF was up 17%, the third best year in our history.
Good morning, Bishop San, clergy, delegates and honored guests. It is a pleasure to be with you today and share the results of the Easton Episcopal Fund.
Investing is a journey, not a destination. Short term returns are seldom as good as they seem, nor as bad. This time last year I was about to stand in front of you and report that 2022 was a very bad year. We were down more than 15%, the worst year in our history. Fortunately, at last year’s convention, time ran out, and I did not have to face the music.
This year, the news is much better. Today, I can tell you that we were up 17% in 2023, the third best year in our history. However, the volatility in both years supports my belief that investment success is a journey, not a destination.
Rather than looking at just annual performance, the Board of Managers looks at rolling time periods, believing that over time, rolling returns will give a more accurate report on performance. We look at rolling three-, five- and ten-year returns with the goal of generating returns higher than our recommended draw rate.
We are pleased to report that more than 90% of the time, we not only earned more than the draw rate, which has averaged 5% annually, our annualized return since our 2010 inception was 7.8%. And, we did better that 75% of comparable funds, which put us in the top 25% of 600 of comparable funds.
Today, more than 65% of our portfolio is invested in stocks, with most of that allocated to the U.S. markets. Our Fixed Income portfolio is heavily weighted to the shorter end of the maturity spectrum, but we are currently extending our maturities with the hope that we will lock in high rates. We are optimistic on the U.S. stock market and believe that we are appropriately positioned. So far it seems to be working.
We are a small fund by industry standards. We started with $12 million in 2010. Over time, shareholders invested more than $15 million. Over that time, we paid out almost $14 million to our parish shareholders for their ministries and still ended up with $37 million in the Fund.
Every shareholder, every parish, every account has its own number. All distributions are made solely by individuals authorized by the Vestries of the particular parishes.
The Diocese holds about 25% of the shares of the Fund; individual parishes hold the rest. As a risk control feature, distributions from each shareholder account can only go to the address of record and no place else. If any money is withdrawn from a parish’s account, it can go only to that parish’s official address, and then the authorized parish members will direct the withdrawal to be applied where it is needed.
The cost of operating the Easton Episcopal Fund is minimal. Our portfolio is managed by the volunteer Board of Managers with some outside support from our advisor, Axia Advisors. The total direct cost of a $100,000 investment in the Fund is only $279 per year. Even when you throw in the indirect cost of the mutual funds we hold, the all-in cost per $100,000 is $300 per year, lower than 85% of comparable balanced funds.
We are able to contain costs at this low level by using low-cost index funds, and by keeping the portfolio simple. We currently hold only seven funds and do very little trading. Last year we had brokerage costs of only $600, or 1/10 of a cent per share traded.
Our strategy and the implementation of that strategy allowed us to report results for the most recent one-, three-, five-, and ten-year time periods that were in the top third of all comparable balanced mutual funds tracked by Morningstar.
The availability of the Easton Episcopal Fund is a wonderful service provided to parishes and diocesan entities by the Diocese. It enables parishes to invest with confidence in a very low-cost option with a highly competitive performance history that also enables parishes easy access to information about the Fund. And of course, your investment can be returned to you on very short notice with no questions asked.
Recently one parish increased their investment in the Fund. In helping them move money from a big-name brokerage, we also discovered all of the hidden costs that had been placed on their investments by that brokerage. We would be happy to review your portfolio and analyze cost and performance; no strings attached.
We have a very good product and are happy to share our experiences with you.
Of course, people make the difference. We would not have achieved this outstanding performance without the goodwill and hard work of our board and advisors.
As of convention, Ray Munsch will have completed his second three-year stint on the Board. Fortunately, we were able to convince Ray to stay on as a member of our Investment Advisory Board, which is so critical in our investment decision-making process. Thank you, Ray. Nancy Robson who has been with the board in one capacity or another over the past twelve years is rejoining the Board as a voting member. In addition to serving as a Board member, Nancy has agreed to serve as Secretary of the Board. Thank you, Nancy.
Our elected Board consists of four of us who either owned or worked for Registered Investment Advisors, or who served in senior roles at major financial organizations (Bill Shettle, Ray Munsch, Diane Robinson and me). Debra Dragone serves as an elected member of the Board and also wears the Fund Administrator’s hat. Deb’s paying job is as a faculty member of the University of Delaware where she teaches accounting principles. Charlie Bohn and Fred Welsh are steeped in finance, and in addition to serving on the Board of Managers they also serve the Diocese by being Treasurer and Chair of Finance respectively. Tom Mendenhall, Ron Geesey, and Emeritus Al Smith bring years of smart thinking to the Board. Thank you all.
Chris Maxwell, Vice Chair Board of Managers
Easton Episcopal Fund