Wespath Fund Performance1Quarter-to-date net-of-fees performance, through March 31, 2018, is now available:
Fund Performance
The one-year, gross-of-fees performance of MAF ranked among the top eight percent of BNY Mellon’s “Foundations and Endowments – Total Funds” universe (data as of February 28, 2018, the most current available).2
Investment performance commentary is available in the March 2018 Monthly Investment Report.
Continued Growth in Assets Under ManagementDuring the first quarter of 2018, Wespath received over $70 million in new investments which puts it on track for an eighth consecutive year of positive net inflows from institutional investors.
Quarterly WebinarWespath will host its Quarterly Webinar on Wednesday, April 25 at 1:30 p.m. Central U.S. Time. The webinar will provide an update on Wespath, global markets and fund performance. To register, please click on the button below.
Register Now
New Hire and Promotion AnnouncementsDuring the first quarter, Wespath welcomed the following new team members:
Susan Chung, CFA, joined as the new Managing Director, Investment Management.
Theresa Goldberg joined as the new Managing Director, Institutional Investment Services.
In addition, several members of Wespath’s Investments team were recognized with promotions:
Anita Green was promoted to Director, Sustainable Investment Strategies.
Hsiu-Feng Huang was promoted to Senior Investment Analyst.
Juan Lois was promoted to Manager, Sustainable Investment Strategies.
Karen Manczko was promoted to Director, Institutional Relationships.
New White Paper: Investing for Endowments and Foundations
Dave Zellner, Wespath’s Chief Investment Officer, has written a thought leadership paper describing Wespath’s ability to execute a strategy customized to meet the unique needs of foundations and endowments.
Investing for Endowments and Foundations Wespath Investment Management (Wespath) understands the unique needs of endowments and foundations affiliated with The United Methodist Church (UMC), and has a strong history of managing assets on behalf of these entities. Dave Zellner Chief Investment Officer Dave has been with Wespath since 1997 and is responsible for the entire Investments Division, comprised of Investment Management, Investment Services and Sustainable Investment Strategies. Former employers include Shell Oil Company, where he managed equity portfolios for Shell’s retirement plans and Investment Research Company (an investment management firm) where he was a portfolio manager and responsible for managing the firm’s investment operations. As CIO, Dave is responsible for executing and administering Wespath’s investment program as directed by its Investment Strategy Statement and Statement of Administrative Investment Policy. Dave received a bachelor’s degree in Finance from Louisiana State University and his MBA from the University of Houston. Wespath understands that prudent investing for endowments and foundations is different from prudent investing for retirement plans, and it has the flexibility to execute a strategy customized to meet the unique needs of each client. Investing in diverse asset classes Wespath works with each endowment and foundation client to understand its funding objectives and tolerance for risk. We believe that the risk/return profile for the investments selected by Wespath’s clients generally aligns with the risk/return profile of most endowment and foundation portfolios. For example, many of our clients have chosen to invest in Wespath’s Multiple Asset Fund (MAF), our flagship fund, which represents our model balanced investment fund. It allocates assets to four of Wespath’s funds: U.S. Equity Fund 35% International Equity Fund 30% Fixed Income Fund 25% Inflation Protection Fund 10% Each of MAF’s component funds contains strategic biases— overweights and underweights to certain asset classes— which aim to add value that recognizes Wespath’s long-term investment worldview regarding global growth and markets. For example, one of Wespath’s long-term investment theses is that the world will continue to see modest and sustainable growth driven by the emerging economies of Asia, Latin America, Africa and Eastern Europe. We therefore implemented a meaningful strategic allocation to emerging market stocks within our International Equity Fund, and a similar allocation to emerging market debt within our Fixed Income Fund. We also overweight small- and mid-cap stocks within our U.S. and international equity funds compared to other institutional investors. We believe the return potential associated with the active management of small- and mid-cap stocks is greater over the long-term than what can be achieved through active management in the large-cap sector. Also within our equity funds, we include modest allocations to private equity and private real estate. Although we believe in limiting the use of illiquid alternative assets (for reasons outlined below), we believe the strategic use of these asset classes within certain funds has the potential to add value and reduce risk through diversification. 2 Investing for Endowments and Foundations(continued) “The strategic use of (illiquid alternative) asset classes within certain funds has the potential to add value and reduce risk through diversification.” Overweights: Small-/Mid-cap Emerging Markets Private Equity Real Estate Underweights: Large-cap Developed Markets Strategic Biases—Stocks Overweights: Emerging Markets Credit, Including High-Yield Affordable Housing Loans Non-U.S. Underweights: U.S. Treasury Government (Agency) Non-U.S. TIPS Strategic Biases—Bonds Wespath's performance assumption estimates an average 7% long-term rate of return for MAF1 , which aligns with a typical spending policy of 4-5% and a long-term inflation forecast of 2-3%. Limiting investments in less-liquid alternatives While Wespath invests a portion of its assets in less-liquid alternative investments, we do so sparingly and will invest in an alternative investment strategy only after we have conducted comprehensive due diligence on the investment and its sponsor. Our reasons for limiting investing in less liquid alternative investments include: • High fees: Most managers of alternative investment strategies charge a fee that ranges from 1% to 2% of the funds invested, and many begin charging fees at the time the investor has made the commitment (meaning that the investor will pay fees before the capital is actually deployed). In addition, most managers of alternative investment strategies will share the gains earned from the strategy. Typically, the manager will keep 20% of the gains, though many will do so only after the investor has achieved a minimum rate of return, usually 8%. • Limited access to the best opportunities: The best managers of alternative investments will typically only accept capital from clients that have a long history of investing with the manager. • Complex legal structures: Investors must navigate complex legal documentation before committing capital to alternative investments. This includes a comprehensive private placement memorandum, a subscription agreement and “side-letter” agreements (i.e., documents prepared by each investor that specifies the unique requirements of the investor). In addition, tax-exempt (non-profit) investors may confront potential tax implications and need to use so-called “offshore structures” to avoid a taxable event. This adds another layer of complexity to the investment. • Unpredictability for return of capital: Many alternative investment structures inherently preclude access to capital when the investor may require it. Some structures do not return all capital until 15-20 years after the investor’s commitment. Investors with high allocations to illiquid alternative investments (such as private equity, private real estate, infrastructure, etc.) often believe that doing so significantly increases future investment return potential while reducing the volatility of their overall investment mix. However, this perceived benefit can be a mirage due to the accounting vagaries associated with fair market valuations for many alternative investments. Estimates of fair value typically trail the performance of public markets during bull markets, but also trail the performance of public markets during bear markets. Notable is what many observed during the Great Recession. Many investors with high allocations to alternative investments were challenged by insufficient liquidity when they recognized significant declines in the value of their public securities. Attempting to raise cash to fund their operations, distribute funds to beneficiaries, and fulfill capital calls resulting from their alternative investment commitments, asset reallocation, etc., investors sought to sell their alternative investment interests through a private secondary market transaction. However, many discovered that secondary market buyers were only willing to purchase their interests at substantial discounts (as high as 50%) to the investment’s net asset value. Were these investors required to mark the value of their alternative investments based on what the secondary market was willing to pay, they would have clearly discovered that the underlying value of their assets would have suffered consistent with investors with a predominantly publiclytraded investment portfolio. 3 1 Wespath’s Investment Fund Return Assumptions are developed by Wespath’s Chief Investment Officer and updated on a calendar quarter basis. They represent Wespath’s expected compounded rates of return for its funds and are developed for long-term forecasting purposes (30 years and greater). The forecasted return for each fund is based on the projected return of the fund’s designated benchmark, which Wespath believes to be generally representative of each underlying fund’s investments. The return assumptions also include Wespath’s expected value added from active strategies including, as applicable, alternative investment strategies. In addition, the projected returns reflect the expected impact of management, administrative and custodial fees, transaction costs and other relevant expenses. Wespath does not forecast changes in interest rates, nor does it predict near-term market returns for its funds. Wespath fully expects that the near-term performance of its funds will significantly differ, either positively or negatively, from its long-term assumptions. There are numerous investment-specific assumptions that factor into the long-term investment fund return assumptions that may not be consistent with future market conditions and that may be significantly different than the actual investment results achieved by the funds. The return assumptions for the investment funds set forth above are not a prediction or projection of actual investment results and there can be no assurance that any will be achieved, or that losses, lower yields or higher risk levels will be avoided. The assumptions contained herein do not constitute investment recommendations and are not a promise of future performance. Liquid alternative investment strategies typically include so-called “absolute return” and hedge fund strategies. These strategies aim to produce positive long-term investment returns under all markets. Wespath intentionally and successfully avoids hedge fund investing for the reasons cited in the Wespath paper: “Wespath’s Hedge Fund Strategy—The Path Not Followed” available here: wespath.org/HedgeFundStrategy. Clearly, as illustrated in Table 1 above, hedge funds delivered outstanding results during the five years ending December 31, 2002. The few institutional investors with hedge fund allocations reported enviable absolute and relative returns. The success of hedge funds, along with a belief that they would continue to deliver meaningful diversified returns, fueled the rapid growth of hedge fund investments from roughly $500 million at the end of 2002 to over $3 trillion in 2017. However, hedge fund performance subsequent to 2002 has been lackluster. As illustrated in Table 2 above, the average hedge fund actually produced an average compounded return of slightly less than 2% for the past nearly 15 years. While Wespath does not offer a prediction of future performance of hedge funds compared to the broad bond and stock indexes, we remain skeptical that hedge funds will ever be able to deliver the results that many hedge fund investors expect. Implementing sustainable investment strategies Endowments and foundations—including those affiliated with the UMC—often seek to align their investments with their missions. Wespath seeks to invest in a way that upholds the values of the UMC. Wespath invests in a sustainable and responsible manner, creating long-term value for its retirement plan participants and institutional clients while honoring UMC values. This means we incorporate the consideration of environmental, social and governance (ESG) factors into investments across asset classes and in the selection of external asset managers. We do this because we believe these efforts support long-term value creation while having a positive impact on the environment and society. 4 Investing for Endowments and Foundations(continued) 2 Source: Hedge Fund Research—The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus. Hedge Funds Massively Outperformed Stocks— 5 Years Ending 12/31/02 Asset Class Returns Risk Bonds 7.5% 3.3% Stocks -0.6% 18.8% Hedge Funds 13.2% 7.1% Hedge Funds Have Trailed Badly Since— 1/1/03 to 9/30/17 Asset Class Returns Risk Bonds 4.2% 3.4% Stocks 9.6% 13.3% Hedge Funds 1.7% 5.3% Table 1 Table 2 Source (Tables 1 and 2): Hedge Fund Research2 , Wilshire Compass, Wespath Bonds Bloomberg Barclays U.S. Aggregate Bond Index Stocks S&P 500 Index Hedge Funds HFRX Global Hedge Fund Index Returns Compounded annual returns Risk Annualized standard deviation of monthly returns It is our duty as fiduciaries to help promote sustainable practices and policies—88% of global sustainability studies demonstrate that companies with solid ESG practices achieve stronger operational performance; 80% of studies show good sustainability practices positively influence stock price3 . The UMC also instructs us to “make a conscious effort to invest in institutions, companies, corporations, or funds with policies and practices that are socially responsible, consistent with the goals outlined in the Social Principles.” (The Book of Discipline of The United Methodist Church 2016, ¶717) Wespath’s wideranging sustainable investment activities are described as Avoid—Engage—Invest (see box below). 5 Conclusion Wespath understands that its endowment and foundation clients have unique goals and concerns compared to other institutional investors. We closely consult with our clients to develop an asset allocation strategy that addresses these unique requirements. While Wespath prefers to allocate fewer assets to alternative investment strategies compared to some endowments and foundations, its investment strategy—with a focus on diversification, limiting less liquid alternatives, and sustainable investing, aligned with UMC values—has stood the test of time. Avoid Engage Invest • Avoid—Based on long-standing United Methodist social concerns, Wespath avoids investing in companies that relate to the ethical exclusions set by the United Methodist Church, or because of the sustainability-related financial risk they pose to the funds we manage. • Engage—Wespath engages dozens of companies on issues linked to corporate performance and value, such as climate change, human rights and board diversity. Most engagement efforts occur behind the scenes through in-person meetings (or conference calls) with company executives. Other efforts are more public, like letters to public policymakers or filing shareholder resolutions, on which investors vote at companies’ annual general meetings. Engagement is our opportunity to enter into constructive, and persuasive, dialogue with companies and policymakers, expressing concerns, offering suggestions and working together to encourage sustainable policies and practices. • Invest—We seek to invest in companies that will generate a market-rate return and demonstrable social and environmental impact. 3 “From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Performance” (March 2015); University of Oxford and Arabesque Partners About Wespath Investment Management Wespath Investment Management (Wespath) is a division of Wespath Benefits and Investments, a general agency of The United Methodist Church. Wespath provides investment solutions for the endowment and retirement plan (defined contribution and defined benefit) portfolios of United Methodist-affiliated institutional investors, including foundations, higher education institutions, health care organizations and churches through a broadly diversified family of daily-priced funds. Wespath’s investment process proactively incorporates the consideration of environmental, social and governance (ESG) factors into investments across asset classes and in the selection of external asset managers. Wespath's activities promoting sustainability include proxy voting, corporate and public policy engagement, and positive impact investing. As of September 30, 2017, total assets under management were approximately $23 billion.
Investing for Endowments and Foundations Wespath Investment Management (Wespath) understands the unique needs of endowments and foundations affiliated with The United Methodist Church (UMC), and has a strong history of managing assets on behalf of these entities. Dave Zellner Chief Investment Officer Dave has been with Wespath since 1997 and is responsible for the entire Investments Division, comprised of Investment Management, Investment Services and Sustainable Investment Strategies. Former employers include Shell Oil Company, where he managed equity portfolios for Shell’s retirement plans and Investment Research Company (an investment management firm) where he was a portfolio manager and responsible for managing the firm’s investment operations. As CIO, Dave is responsible for executing and administering Wespath’s investment program as directed by its Investment Strategy Statement and Statement of Administrative Investment Policy. Dave received a bachelor’s degree in Finance from Louisiana State University and his MBA from the University of Houston. Wespath understands that prudent investing for endowments and foundations is different from prudent investing for retirement plans, and it has the flexibility to execute a strategy customized to meet the unique needs of each client. Investing in diverse asset classes Wespath works with each endowment and foundation client to understand its funding objectives and tolerance for risk. We believe that the risk/return profile for the investments selected by Wespath’s clients generally aligns with the risk/return profile of most endowment and foundation portfolios. For example, many of our clients have chosen to invest in Wespath’s Multiple Asset Fund (MAF), our flagship fund, which represents our model balanced investment fund. It allocates assets to four of Wespath’s funds: U.S. Equity Fund 35% International Equity Fund 30% Fixed Income Fund 25% Inflation Protection Fund 10% Each of MAF’s component funds contains strategic biases— overweights and underweights to certain asset classes— which aim to add value that recognizes Wespath’s long-term investment worldview regarding global growth and markets. For example, one of Wespath’s long-term investment theses is that the world will continue to see modest and sustainable growth driven by the emerging economies of Asia, Latin America, Africa and Eastern Europe. We therefore implemented a meaningful strategic allocation to emerging market stocks within our International Equity Fund, and a similar allocation to emerging market debt within our Fixed Income Fund. We also overweight small- and mid-cap stocks within our U.S. and international equity funds compared to other institutional investors. We believe the return potential associated with the active management of small- and mid-cap stocks is greater over the long-term than what can be achieved through active management in the large-cap sector. Also within our equity funds, we include modest allocations to private equity and private real estate. Although we believe in limiting the use of illiquid alternative assets (for reasons outlined below), we believe the strategic use of these asset classes within certain funds has the potential to add value and reduce risk through diversification. 2 Investing for Endowments and Foundations(continued) “The strategic use of (illiquid alternative) asset classes within certain funds has the potential to add value and reduce risk through diversification.” Overweights: Small-/Mid-cap Emerging Markets Private Equity Real Estate Underweights: Large-cap Developed Markets Strategic Biases—Stocks Overweights: Emerging Markets Credit, Including High-Yield Affordable Housing Loans Non-U.S. Underweights: U.S. Treasury Government (Agency) Non-U.S. TIPS Strategic Biases—Bonds Wespath's performance assumption estimates an average 7% long-term rate of return for MAF1 , which aligns with a typical spending policy of 4-5% and a long-term inflation forecast of 2-3%. Limiting investments in less-liquid alternatives While Wespath invests a portion of its assets in less-liquid alternative investments, we do so sparingly and will invest in an alternative investment strategy only after we have conducted comprehensive due diligence on the investment and its sponsor. Our reasons for limiting investing in less liquid alternative investments include: • High fees: Most managers of alternative investment strategies charge a fee that ranges from 1% to 2% of the funds invested, and many begin charging fees at the time the investor has made the commitment (meaning that the investor will pay fees before the capital is actually deployed). In addition, most managers of alternative investment strategies will share the gains earned from the strategy. Typically, the manager will keep 20% of the gains, though many will do so only after the investor has achieved a minimum rate of return, usually 8%. • Limited access to the best opportunities: The best managers of alternative investments will typically only accept capital from clients that have a long history of investing with the manager. • Complex legal structures: Investors must navigate complex legal documentation before committing capital to alternative investments. This includes a comprehensive private placement memorandum, a subscription agreement and “side-letter” agreements (i.e., documents prepared by each investor that specifies the unique requirements of the investor). In addition, tax-exempt (non-profit) investors may confront potential tax implications and need to use so-called “offshore structures” to avoid a taxable event. This adds another layer of complexity to the investment. • Unpredictability for return of capital: Many alternative investment structures inherently preclude access to capital when the investor may require it. Some structures do not return all capital until 15-20 years after the investor’s commitment. Investors with high allocations to illiquid alternative investments (such as private equity, private real estate, infrastructure, etc.) often believe that doing so significantly increases future investment return potential while reducing the volatility of their overall investment mix. However, this perceived benefit can be a mirage due to the accounting vagaries associated with fair market valuations for many alternative investments. Estimates of fair value typically trail the performance of public markets during bull markets, but also trail the performance of public markets during bear markets. Notable is what many observed during the Great Recession. Many investors with high allocations to alternative investments were challenged by insufficient liquidity when they recognized significant declines in the value of their public securities. Attempting to raise cash to fund their operations, distribute funds to beneficiaries, and fulfill capital calls resulting from their alternative investment commitments, asset reallocation, etc., investors sought to sell their alternative investment interests through a private secondary market transaction. However, many discovered that secondary market buyers were only willing to purchase their interests at substantial discounts (as high as 50%) to the investment’s net asset value. Were these investors required to mark the value of their alternative investments based on what the secondary market was willing to pay, they would have clearly discovered that the underlying value of their assets would have suffered consistent with investors with a predominantly publiclytraded investment portfolio. 3 1 Wespath’s Investment Fund Return Assumptions are developed by Wespath’s Chief Investment Officer and updated on a calendar quarter basis. They represent Wespath’s expected compounded rates of return for its funds and are developed for long-term forecasting purposes (30 years and greater). The forecasted return for each fund is based on the projected return of the fund’s designated benchmark, which Wespath believes to be generally representative of each underlying fund’s investments. The return assumptions also include Wespath’s expected value added from active strategies including, as applicable, alternative investment strategies. In addition, the projected returns reflect the expected impact of management, administrative and custodial fees, transaction costs and other relevant expenses. Wespath does not forecast changes in interest rates, nor does it predict near-term market returns for its funds. Wespath fully expects that the near-term performance of its funds will significantly differ, either positively or negatively, from its long-term assumptions. There are numerous investment-specific assumptions that factor into the long-term investment fund return assumptions that may not be consistent with future market conditions and that may be significantly different than the actual investment results achieved by the funds. The return assumptions for the investment funds set forth above are not a prediction or projection of actual investment results and there can be no assurance that any will be achieved, or that losses, lower yields or higher risk levels will be avoided. The assumptions contained herein do not constitute investment recommendations and are not a promise of future performance. Liquid alternative investment strategies typically include so-called “absolute return” and hedge fund strategies. These strategies aim to produce positive long-term investment returns under all markets. Wespath intentionally and successfully avoids hedge fund investing for the reasons cited in the Wespath paper: “Wespath’s Hedge Fund Strategy—The Path Not Followed” available here: wespath.org/HedgeFundStrategy. Clearly, as illustrated in Table 1 above, hedge funds delivered outstanding results during the five years ending December 31, 2002. The few institutional investors with hedge fund allocations reported enviable absolute and relative returns. The success of hedge funds, along with a belief that they would continue to deliver meaningful diversified returns, fueled the rapid growth of hedge fund investments from roughly $500 million at the end of 2002 to over $3 trillion in 2017. However, hedge fund performance subsequent to 2002 has been lackluster. As illustrated in Table 2 above, the average hedge fund actually produced an average compounded return of slightly less than 2% for the past nearly 15 years. While Wespath does not offer a prediction of future performance of hedge funds compared to the broad bond and stock indexes, we remain skeptical that hedge funds will ever be able to deliver the results that many hedge fund investors expect. Implementing sustainable investment strategies Endowments and foundations—including those affiliated with the UMC—often seek to align their investments with their missions. Wespath seeks to invest in a way that upholds the values of the UMC. Wespath invests in a sustainable and responsible manner, creating long-term value for its retirement plan participants and institutional clients while honoring UMC values. This means we incorporate the consideration of environmental, social and governance (ESG) factors into investments across asset classes and in the selection of external asset managers. We do this because we believe these efforts support long-term value creation while having a positive impact on the environment and society. 4 Investing for Endowments and Foundations(continued) 2 Source: Hedge Fund Research—The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus. Hedge Funds Massively Outperformed Stocks— 5 Years Ending 12/31/02 Asset Class Returns Risk Bonds 7.5% 3.3% Stocks -0.6% 18.8% Hedge Funds 13.2% 7.1% Hedge Funds Have Trailed Badly Since— 1/1/03 to 9/30/17 Asset Class Returns Risk Bonds 4.2% 3.4% Stocks 9.6% 13.3% Hedge Funds 1.7% 5.3% Table 1 Table 2 Source (Tables 1 and 2): Hedge Fund Research2 , Wilshire Compass, Wespath Bonds Bloomberg Barclays U.S. Aggregate Bond Index Stocks S&P 500 Index Hedge Funds HFRX Global Hedge Fund Index Returns Compounded annual returns Risk Annualized standard deviation of monthly returns It is our duty as fiduciaries to help promote sustainable practices and policies—88% of global sustainability studies demonstrate that companies with solid ESG practices achieve stronger operational performance; 80% of studies show good sustainability practices positively influence stock price3 . The UMC also instructs us to “make a conscious effort to invest in institutions, companies, corporations, or funds with policies and practices that are socially responsible, consistent with the goals outlined in the Social Principles.” (The Book of Discipline of The United Methodist Church 2016, ¶717) Wespath’s wideranging sustainable investment activities are described as Avoid—Engage—Invest (see box below). 5 Conclusion Wespath understands that its endowment and foundation clients have unique goals and concerns compared to other institutional investors. We closely consult with our clients to develop an asset allocation strategy that addresses these unique requirements. While Wespath prefers to allocate fewer assets to alternative investment strategies compared to some endowments and foundations, its investment strategy—with a focus on diversification, limiting less liquid alternatives, and sustainable investing, aligned with UMC values—has stood the test of time. Avoid Engage Invest • Avoid—Based on long-standing United Methodist social concerns, Wespath avoids investing in companies that relate to the ethical exclusions set by the United Methodist Church, or because of the sustainability-related financial risk they pose to the funds we manage. • Engage—Wespath engages dozens of companies on issues linked to corporate performance and value, such as climate change, human rights and board diversity. Most engagement efforts occur behind the scenes through in-person meetings (or conference calls) with company executives. Other efforts are more public, like letters to public policymakers or filing shareholder resolutions, on which investors vote at companies’ annual general meetings. Engagement is our opportunity to enter into constructive, and persuasive, dialogue with companies and policymakers, expressing concerns, offering suggestions and working together to encourage sustainable policies and practices. • Invest—We seek to invest in companies that will generate a market-rate return and demonstrable social and environmental impact. 3 “From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Performance” (March 2015); University of Oxford and Arabesque Partners About Wespath Investment Management Wespath Investment Management (Wespath) is a division of Wespath Benefits and Investments, a general agency of The United Methodist Church. Wespath provides investment solutions for the endowment and retirement plan (defined contribution and defined benefit) portfolios of United Methodist-affiliated institutional investors, including foundations, higher education institutions, health care organizations and churches through a broadly diversified family of daily-priced funds. Wespath’s investment process proactively incorporates the consideration of environmental, social and governance (ESG) factors into investments across asset classes and in the selection of external asset managers. Wespath's activities promoting sustainability include proxy voting, corporate and public policy engagement, and positive impact investing. As of September 30, 2017, total assets under management were approximately $23 billion.
Sustainable Investment Strategies HighlightsWespath Recognized for Its Contribution to Sustainable Investment
SRI Connect, a U.K.-based organization well-known among sustainable and responsible investors around the world, ranked Wespath 6th in the U.S. and 29th globally among asset owners contributing most to the broader sustainable and responsible investing debate. In addition, three members of the Wespath Investments team were individually recognized.
Wespath Ranks 6th in the U.S. for Contributing to Sustainable Investment
Wespath Investment Management (Wespath) was ranked 6th in the United States and 29th globally, among asset owners contributing most to the broader sustainable and responsible investment (SRI) debate, according to a recent survey by SRI Connect.
In addition, three members of Wespath’s investments team were named among the top 50 individuals within asset owner organizations worldwide most contributing to sustainable and responsible investment.
- Anita Green, Director, Sustainable Investment Strategies, ranked #13
- Kirsty Jenkinson, Managing Director, Sustainable Investment Strategies, ranked #17
- Juan Lois, Manager, Sustainable Investment Strategies, ranked #49
- SRI Connect, a U.K.-based organization well-known among sustainable and responsible investors around the world, released the results of its 2017 Independent Research in Responsible Investment (IRRI) Survey this week.
Wespath’s comprehensive approach to sustainable investment supports our role as prudent fiduciaries and our aspiration to have a positive impact on the environment and society.
Last year, Wespath made strides in promoting greater transparency among U.S. oil and gas companies regarding their preparedness for a transition to a low-carbon economy. Our efforts resulted in Chevron and Occidental Petroleum releasing climate risk reports. Wespath also released two thought leadership pieces about environmental, social and governance (ESG) integration: Evaluating and Monitoring External Asset Management Performance and ESG Integration in External Asset Manager Selection.
The IRRI survey included responses from 1,136 asset managers, independent research providers and investment consultant across 43 countries. It ranks firms and individuals on their contributions to sustainable investments, and provides insights on global sustainable investment trends.
Read more.
Major Oil and Gas Companies Respond to Wespath Shareholder Resolutions
Chevron and Occidental Petroleum have responded to shareholder resolutions filed by Wespath asking the companies for analysis on the extent to which they are positioned for the transition to a low-carbon economy. Wespath welcomed the latest analysis and will continue working with global peers to encourage greater transparency regarding company resilience to a low-carbon transition. Read more.
Major Oil and Gas Companies Respond to Wespath Shareholder Resolutions
Chevron and Occidental Petroleum have responded to shareholder resolutions filed by Wespath asking the companies for analysis on the extent to which they are positioned for the transition to a low-carbon economy. Wespath welcomed the latest analysis and will continue working with global peers to encourage greater transparency regarding company resilience to a low-carbon transition. Read more.
2018 Investment Funds DescriptionThe 2018 Investment Funds Description is now available in an enhanced, reader-friendly format. This document describes each of the Wespath funds including information on investment strategies, performance objectives and investment risks. Summary Prospectuses can now also be accessed for each individual fund.
Fund Name ChangeOn April 7, 2018, the name of the Equity Social Values Plus Fund changed to the Social Values Choice Equity Fund, to align with the naming convention adopted for the “Social Values Choice” suite of funds.
Resources AvailableWespath offers educational pieces written by our Investments team on their respective areas of expertise. We have recently published the following papers:
ESG Integration in External Manager Selection, written by Nick Abel, Sustainable Investment Specialist, and Juan Lois, Manager, Sustainable Investment Strategies
The Benefits of International Investing, written by Mark Warren, CFA, CIMA, Manager, Public Equities
1 Historical returns are not indicative of future results. The investment funds are neither insured nor guaranteed by the government. For more information about the funds, please see the Investment Funds Description.
2 BNY Mellon provides a fund-level tracking service used to compare Wespath's actual gross-of-fees performance for its diversified investment strategy to the performance of similar asset pools of endowments and foundations. Performance data is preliminary.
Copyright © 2018 Wespath Investment Management, a division of Wespath Benefits and Investments, a general agency of The United Methodist Church.
Wespath is located at 1901 Chestnut Avenue, Glenview, Illinois 60025, United States.
Please click here to provide feedback on the scope and nature of the material, and suggestions for future topics. If you have any questions about our investment funds or the wide range of services provided by Wespath, please contact Bill Stewart at bstewart@wespath.org or Karen Manczko at kmanczko@wespath.org or call (847)866-4100.
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