This year has ushered in a combination of interconnected challenges for investors, from geopolitical strife to high inflation, supply chain issues to financial market volatility. Inflation in some developed countries has exceeded 10%, levels not seen in decades. In response, central banks have steadily – and rapidly – raised interest rates to their highest levels in several years. Meanwhile, Russia’s invasion of Ukraine has rattled stock markets, with global indices falling as much as 25% in 2022 as investors took a “no risk” approach. Economic sanctions as well as energy and food supply problems have heightened investor concerns, particularly in Europe.
According to Mercer’s survey of endowments and foundations, half of respondents cited rising inflation as one of their top two investing challenges over the next three years. This was hot on the heels of concerns about low expected investment returns. Additionally, 39% said they were unsure or did not believe their portfolios were prepared for a market downturn. If your portfolio has suffered investment losses, it’s easy to be pessimistic and focus on the worst outcomes. While it’s prudent to prepare for worst-case scenarios and ensure that these short-term headwinds don’t affect your organization’s overall mission and spending plans, it’s also important not to be caught in the dark. unprepared and rather ensure that you are well placed to capitalize on interesting opportunities.
To do this, you’ll need information – and plenty of it. Without a clear path over the months and years ahead, it’s best to explore different scenarios and how they may affect your portfolio, its liquidity, and the ability of your investments to support your organization’s mission and goals. We have identified four important strategic issues currently facing E&Fs. In this article, we present approaches to navigate them to achieve long-term success, while managing short-term disruption.