Steady And Slow at Belmont's Endowment Fund

Despite the difficult economic climate and uncertain markets, the Capital Endowment Fund Committee is pleased enough with its rate of return to leave investment strategy unchanged for the next quarter.

At their Wednesday, July 21 meeting, members of the committee unanimously voted to stay the course as recommended by advisor Craig A. Kolloff of Merrill Lynch. The town has seen reasonable success in growing its capital through moderate asset allocation and investment discipline, he said.

"Almost every year, we beat market results," said Kolloff.

"If a town looks long-term and is conservative, it can get good results."

Since its inception in 1997, the endowment fund has yielded a little more than 5 percent per year on average. It annually contributes $100,000 to the Town General Fund for technology needs.

The fund follows a "moderate model" as recommended by Town Treasurer and Tax Collector Floyd Carman that is approximately 50 percent stocks and 50 percent fixed income, such as bonds and certificates of deposit.

As of the end of June, the market value of the fund was just under $2.8 million that is where it should be, according to Kolloff. He said the fund has invested in the appropriate sectors to ensure proper diversification such as health care, financials, industrials, consumer staples and information technology.

"We've had success since we started sector analysis," Kolloff said, adding that the fund has made good use of exchange-traded funds to fill in the gaps. Even though the performance of the account – along with the overall market – has dipped this year, the fund continues to pay respectable income through dividends and interest.

As for the future, Kolloff said the market analysts at Merrill Lynch are reasonably optimistic.

"There are a lot of things in our way but we think the economy is improving a bit," he said. The federal stimulus went some way in increasing gross domestic product and keeping the country out of a depression, but now the economy needs to create some "organic growth" of its own without government help, Kolloff said.

"As we transition out of this correction (a significant drop in the stock market), we will see higher stock prices down the road," he said.

"We don't see a double dip (a second recession) happening," said Kolloff.

The committee meets every quarter and Kolloff said members will need to discuss strategic moves within six months given that a number of bonds will come due and over a half million dollars will need to be invested in the next 12 months.

"We'll have some decisions to make in about six months," he said. "We'll have a better picture of what 2011 will look like (in terms of finances)."

Members of the committee include Carman who is chairman, former town treasurer Ernie Fay, Warren Farrell, Jonathan Treat, Dalton Avery and Angelo Firenze as liaison from the Board of Selectmen. The late Walter McLaughlin was also a member of the committee.