This information is updated quarterly. Below represents the latest quarter for which information is available.
Pittsburgh Legacy Fund
First Quarter, 2013 – Market Update
The first quarter of 2013 seemed a replay of the first quarters of the past few years, with markets running before the wind of global quantitative easing. The notable differences being: the absence of fear (expressing itself in the first negative quarterly return for the Barclay’s Aggregate bond index since the 4th quarter of 2010), improving economic fundamentals in the United States and the embrace of quantitative easing in Japan. The exception to the broad equity rally were found with losses in commodities (-4.56%) and emerging markets (-1.6%) driven largely by concerns that excessive lending in China was leading to a hard landing with a new leadership that is comfortable with slower growth.
Strategically, the Legacy Fund has been underweight fixed income almost since inception and we have since drawn down our allocation to an asset class that is destined to deliver on the promise to pay negative real returns. Tactically, we have funded positions in lower volatility hedge funds by eliminating our exposure to high yield fixed income and reducing holdings in US Treasuries to policy minimums in an attempt to limit the “return free risk” on offer. In domestic equities we are adding two active value managers, replacing a high quality index, in an effort to navigate a market that appears to be reaching ahead of fundamentals. Lastly, we are maintaining our rebalancing discipline, by adding to positions in emerging markets and real assets.
The Intermediate Fund’s albeit small allocation to emerging markets proved to be a drag on performance as the portfolio’s fixed income allocation provided less than a 1% return for the quarter. Allocations to equity were left in place at quarter end after cash holdings were reduced. We continue to search for liquid fixed income options that will diversify the holdings of the portfolio and we will remain underweight duration as bonds begin to deliver on the promise of low to negative real returns.