Document Type

Investment Portfolio

Publication Date



SunTrust (now Truist) endowed this portfolio to provide scholarships for future Crummer students and to give current students a practical, hands-on learning opportunity. This year, we are pleased to be able to disburse $55,000 to be used for scholarships. We are extremely grateful for SunTrust’s generosity and investment in higher education. We have all learned a great deal from this experience and the responsibility of managing real money. Our first challenge is to establish a portfolio position that takes advantage of economic opportunities while avoiding unnecessary risk and conforming to the Crummer SunTrust Investment Policy Statement (IPS). We are also tasked by the IPS to operate at two levels simultaneously – tactical for the near term, and strategic for the long run. Additionally, this portfolio presents some unusual portfolio management challenges by trading only once a year, in early April. Our tactical approach began with a top-down sector analysis. We established an economic forecast based on research and consultation with economists, including Professor William Seyfried of the Crummer School and Philip Rich of Seaside Bank. We based our equity and fixed income split on that forecast with a modest allocation to bonds of 10%. That forecast also drove our allocation among the eleven S&P sectors: Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Healthcare, Industrials, Information Technology, Materials, Real Estate, and Utilities. This year, we forecast moderated but strong economic growth amid inflationary pressures within the next twelve-month period and we tilted the allocation towards sectors that should do well in such a macro environment while paying attention to post-pandemic dynamics and the war in Ukraine. Our asset class allocation embodies the long-run strategy of our portfolio. The IPS sets asset class ranges from low to moderate risk to keep the portfolio from being whipsawed by transitory market cycles. Our equity allocations entail a reasonable level of risk, consistent with our view that the stock market will relatively outperform the fixed income market as the interest rates are expected to rise between now and March 2023. We maintain an allocation to a sector ETF in each sector to ensure diversification. Due to enrollment constraints, we actively manage only five sectors this year with a limit of two individual stocks in each sector. The remaining sectors are invested 100% in their sector ETF. Fixed income is our anchor sector, providing a hedge against the risk of an economic slowdown adversely impacting our equity holdings. Consistent with our upward shifting yield curve projection, we are at the low end of our IPS range for fixed income at 10%, which is the same as last year’s and slightly higher than the 9.6% market position on February 28, 2022. Furthermore, we have continued to incorporate the theme of Environmental, Social, and Governance (ESG) investing into our portfolio selection process. Whether you believe a high ESG rating signals a company’s prospects or that ESG ratings are a popularity contest, the ESG wave is sweeping the equity markets. Regardless of a security’s consistency with this theme, all recommendations must be undervalued after rigorous quantitative and qualitative analysis. In other words, our intent is not to maximize the ESG impact of our portfolio but to tilt towards this factor. Specifically, the proposed equity holdings in this year’s portfolio have a weighted average FTSE ESG score of 3.38 out of 5, while S&P 500 holdings have a cap-weighted average score of 3.19. Since the onset of the COVID-19 pandemic, we have witnessed two extraordinary and unpredictable years in many respects. Inflation levels that have not been seen in the past 40 years, supply chain problems, and the Russian-Ukrainian war all have contributed to an increased uncertainty. We do not intend to simply follow the crowd. Yet, echoing the philosophy of Warren Buffett, “our opinions and beliefs, grounded in economics and guided by all of those who have counseled us,” lead us to a strategy that is not significantly different from many investors. Even so, we accept responsibility for our investment decisions. We are investing for the long-term and we have been conservative in our forecasts and recommendations. Simultaneously, in the short term, we are mindful of the need to protect the portfolio’s commitment to scholarships.