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Enabling Clients through our Global Insights and Investment Platform Spending policy analysis and emerging markets solutions to meet multifaceted objectives for a foundation

The Challenge

A U.S. foundation came to J.P. Morgan seeking our perspective on their overall portfolio.
  • The newly hired investment officer sought our insight and analytics to identify areas for improving the foundation’s investment portfolio.
  • The client provided their asset allocation, which we analyzed for its projected return and risk by employing our Long Term Capital Market Return Assumptions, and we compared their portfolio to our model portfolios.
  • Through this analysis, we found the challenge of dual objectives: the client needed to increase the portfolio’s long-term return expectations while at the same time establish a clear spending policy.
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Monica Issar
Monica Issar
Global Head of J.P. Morgan Endowments and Foundations Group

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Our Approach

We provided the foundation with access to our robust analytics platform, capital markets knowledge, and local on-the-ground investment expertise across asset classes to help address the challenge of seeking increased sources of return while managing an appropriate spending policy.
  • Increased Source of Return: The client, working with their consultant, had decided to increase its allocation to emerging markets equity and was evaluating both frontier and broader emerging markets strategies. Our Senior investment specialists met with the staff and investment committee to discuss the risk, return, and liquidity tradeoffs of their decision.

  • Spending Policy: We conducted a comprehensive scenario analysis to help the client understand the impact of different market conditions on the value of the portfolio at varying levels of spending between 4% and 6%. We also connected our client with one of our senior governance experts to help create a framework for their spending policy.

The chart below illustrates the analysis that modeled the impact of a 4% spending rate and the corresponding asset value fluctuation over 10 years.

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The Solution

Partnering closely with this foundation over the course of several years, we were able to help address multifaceted objectives:
  • Increased Source of Return: We discussed J.P. Morgan's global emerging markets strategy for its bottom-up stock selection that focuses primarily on small/mid-cap companies as well as frontier markets. After conducting a formal search with their consultant, the client selected our global emerging markets strategy to expand its emerging markets equity exposure.

  • Spending Policy: After considering the portfolio value implications of various spending rates, the client was able to determine the appropriate policy for its liquidity needs. This enabled the foundation to sustain both seamless operations and a long-term focus on return.

With our deepened relationship, we continue to serve as a trusted partner:

  • We helped the foundation analyze options for replacing an underperforming equity manager, recommending a J.P. Morgan equity strategy.
  • Most recently we engaged in a discussion of the tradeoffs between active vs. passive investment management as well as a multi-manager liquid hedge fund solution as a potential fixed income diversifier.

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