Mon - Fri : 09:00 - 17:00

Preserving Purchasing Power

West Morgan advised a major US university endowment facing significant losses in their traditional 60/40 portfolio due to high inflation and rising interest rates. Our team designed a bespoke hedging strategy utilizing global macro funds and direct commodity exposure. We allocated 15% of the portfolio to energy and natural resources while employing a derivatives overlay to neutralize interest rate risk. By leveraging our behavioral finance approach, we prevented panic selling during market dips. While the broader market dropped 12%, the endowment remained flat nominally, delivering a +3% real return and fully preserving the institution’s purchasing power for future grants.

 

Challenge

The endowment’s traditional portfolio suffered severe drawdowns as inflation eroded bond values and equity multiples contracted. Standard hedging tools were too costly or ineffective against the unique combination of stagflationary pressures. The investment committee faced pressure to maintain grant levels despite shrinking real assets. Without a sophisticated, non-correlated strategy, the institution risked failing its fiduciary duty, forcing cuts to critical academic programs and research funding due to liquidity constraints and capital loss.

Solution

West Morgan implemented a multi-layered defense strategy, combining long-only commodity positions with a tactical global macro fund allocation. We structured a derivatives overlay to specifically hedge duration risk without sacrificing upside potential in equities. Our team conducted weekly behavioral audits to ensure the committee stuck to the plan during periods of extreme volatility. This disciplined approach stabilized the portfolio’s value, generating consistent income from resource holdings while protecting the core equity base. The result was a resilient portfolio that outperformed peers by 15% on a risk-adjusted basis, securing the university’s financial future.
 

Drive Growth With Global Experts

Let’s Work Together