Gary Kidwell, president of the Christian Church Foundation - our church's "trust department" in which church-related ministries invest their endowment gifts - spoke of the Foundation's focus on the long-term and not allowing short-term market volatility to deter them from their investment objectives.
Gary reports: "Our investments are broadly diversified, both among and within asset classes. Also, the addition of uncorrelated assets we've made to our portfolios helps to dampen volatility. It is not always easy to be patient and maintain a discipline through difficult market environments. But overreacting to recent events usually proves harmful. In the last two decades investors experienced the corporate accounting scandals (Enron, WorldCom, Adelphia, etc.), the sharp equity declines following the September 11 terrorist attacks, the bursting of the dot com bubble and the Asian financial crisis in 1997, the savings and loan crisis in the early 1990s, and the stock market crash in 1987. The markets recovered after all of these crises and in many instances were stronger after the excesses were reduced. Frightened investors who sold after the losses did not fully participate in the rally. We are facing a challenging market environment with unknown risks, yet there are opportunities if we simply maintain our discipline. In the face of troubling times, we are holding fast because we do not know when the markets will bottom and begin to recover."
James Hamlett, president of the Pension Fund, reports that the Pension Plan of the Christian Church was launched during the depths of the depression in 1931. From the outset, funds have been managed carefully and with thoughtful discipline. Funds are managed within policies designed to diversify risk over multiple asset classes which enable the Pension Fund to maintain investment discipline even in the face of dramatic volatility.
Jim said, "The value of such disciplined investment diversity has been proven again in 2008, during which period the Pension Fund has outperformed its performance benchmarks. While total assets have declined, reserves continue to be sufficient to fund fully all current and future pension obligations on an actuarial basis." He went on to share with me that the Pension Fund has sufficient assets to fund fully all tax deferred and after tax retirement accounts. History has shown that overreacting to extreme market volatility can result in unproductive investment decisions. As difficult as investment markets are today, the staff and directors remain confident in the value and discipline of diversification over the long term and anticipate opportunities will arise as markets return to normalcy. At the same time, we continue to take actions to assure the adequacy of liquid assets for the payment of pension benefits and for future investment as opportunities emerge. So, in unsettling markets such as we see today, we continue to focus on investment discipline.
James Powell, President of Church Extension, notes that Church Extension does not engage in sub-prime mortgage lending, one of the underlying causes of the current economic crises. "We believe we have reserves and cash flow necessary to meet the needs of investors and borrowers," Jim explained.
"Church Extension's long-term investment policies and strategies remain in place, rather than reacting to short term market dynamics and volatility. Our focus is on the long term health of congregations related to their capital needs. Most of Church Extension's invested deposits are in loans to congregations. However, we do have reserves, part of which are managed by Christian Church Foundation. We continue to have confidence in their long term strategy in managing these assets," Jim explained.
Read Sharon E. Watkins' Pastoral Letter To The Church During This Period of Economic Uncertainty