ETF Model Solutions’ Endowment Index, as calculated by Nasdaq OMX, declined 0.17% on a total return basis for the third quarter of 2019, compared with a global 60-40 stocks/bonds portfolio, which rose 0.33% during the same period. The index and the 60-40 portfolio have kept pace with each other so far in 2019, climbing 12.64% and 12.56% respectively year-to-date.
“The modest decline posted by the Endowment Index belied the price and news volatility that investors experienced during Q3,” said ETF Model Solutions in a release. “Fears of a global economic slowdown, the continuing US-China trade war rhetoric, a 50-year low in US unemployment, an inverted yield curve (U.S.), continued negative interest rates in many developed countries, and other headlines created a fluid news environment for markets to digest.”
During the previous quarter, the index gained 2.34%, while the 60-40 portfolio rose 3.61%.
Despite the negative quarter, 11 of the index’s 19 components posted gains during the period, although five of those were by less than 1%. The top performing asset class was domestic real estate, which surged 7.40% during the quarter, followed by gold, and international developed fixed income, which gained 5.35% and 3.00% respectively. Domestic fixed income increased 2.41%, while emerging market fixed income, and US equity were up 1.43% and 1.1% respectively.
The eight components that declined during the quarter were led by metals and mining commodities, which tumbled 11.90%, followed by oil and gas commodities, and emerging market equities, which shed 8.6% and 4.28% respectively. Timber commodities, emerging market equities – China, and commodity/div-futures dropped 3.97%, 3.31%, and 3.1% respectively, followed by international developed equity, which was down 0.94%, and hedge funds which edged 0.01% lower.
The Endowment Index uses an objective methodology based upon the portfolio allocations of over 800 educational institutions managing over $600 billion in total assets. Each of the 19 sub-indexes are investable, and contained within those sub-indexes are more than 34,000 underlying securities. The current target allocation is 52% alternatives, 36% equity, 8% fixed income, and 4% liquidity.
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