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| THE MARKETS
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Stock index performance (Domestic and International)
Domestic Index Performance Year to Date:
Dow Jones Industrial Average................-3.71%
Standard & Poor's 500..........................-3.80%
Russell 2000.......................................-1.81%
International Index Performance Year to Date:
MSCI Japan (in $US).............................1.38%
MSCI Pacific xJapan (in $US).................-4.62%
MSCI Latin America (in $US).................. 17.01%
Interest Rates:
10 year US Treasuries...........................4.06%
10 year AAA rated municipal bonds..........3.67%
(figures are from most recent month end) |
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| PASSIVE vs ACTIVE MANAGEMENT
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A New Study
Kenneth French, Professor of Finance at the Tuck School of Business at Dartmouth College, recently published a new study looking at returns in both actively and passively managed stock mutual funds. The study looked at data from 1980 until 2007 and builds on arguments originally presented by others in 1973, 1991, and 2007.
French's present and previous findings suggest that over the long term a combination of low fees and low transactions equates to significant savings for individuals. The studies also show that low cost exposure to a broadly diversified class of equities is the most important factor in determining a fund's overall return. The most recent study suggests that the cost savings incurred by using low cost index funds like Vanguard and Dimensional is what enables these funds over time to beat approximately 75% of actively managed domestic mutual funds.
The fact is that indices have beaten approximately 75% of the domestic universe of actively managed funds. Some of the very lowest cost index funds in the world are not even offered by the brokerage firms- Dimensional Funds
for example. Dimensional feels that brokerage house commissions and 12b-1 fees only reduce returns, and so their funds do not contain either. Not surprisingly, the brokerage firms have no interest in offering these funds for their clients
What does this mean for Blue Haven Capital clients? As the number of index funds grows and the internal costs of the funds fall, we will be taking even greater advantage of these products to provide smarter, cheaper, and more efficient money management to our clients. For example, a cost savings of just .6% means more than $70,000 to a $1mm portfolio over 10 years. The less you spend, the more you keep.
Watch next month's newsletter for more information on fees, and how excess fees are detrimental to your portfolio.
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| LUNCHEON AT NICHE JULY 18th
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Luncheon For Nonprofit Executives and Board Members
The revocation of a 501(c)(3) organization's exempt status is a very real threat to those groups engaging in private inurement or private benefit. Conflict of interest can be a murky area for nonprofits. As a kick off to its "Learn at Lunch" series, Blue Haven Capital is proud to offer a luncheon entitled "Private Inurement, Private Benefit, and Conflicts of Interest 101" on Friday, July 18th at Niche Restaurant.
Speakers will be Peter Gaido and Scott Fintzen from the Chicago law firm of Gaido and Fintzen. Gaido & Fintzen serve as general counsel to more than 25 tax-exempt organizations, and represent numerous others with their ongoing legal needs. The firm's tax-exempt clients range from a local mothers' club with an annual budget of less than $50,000.00 to an international religious and charitable organization with over five million members and an annual budget in excess of $100 million.
The sponsor, Blue Haven Capital, is an independent, privately owned investment management firm located in Geneva. Blue Haven Capital provides cost efficient, highly experienced investment advisory services for public charities, private foundations, and individuals nationwide.
The luncheon is $25 and will take place from 12 - 1.30pm on Friday, July 18th at Niche restaurant, 14 South Third Street in Geneva.
Seating is limited and reservations are required. Come enjoy some excellent food, network with peers, and learn what can and cannot be done by those in the nonprofit world.
For reservations, please call Niche Restaurant at 630.262.1000
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CASH MANAGEMENT FOR NON PROFITS
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Better Returns
Here is another cash management idea: 3 to 6 month CDs are almost 1% higher in return than most money market funds. Have you thought about laddering short CDs to beat the money fund rates?
Blue Haven Capital has been laddering CDs for some clients, and here is how we do it. Every month one 6 month CD comes due, and if the client does not need it, that CD rolls into another 6 month CD. For a nonprofit's endowment fund, an extra .75% or 1% can mean $10,000 per $1mm every year in extra income. Liquidity is maintained because money comes due every month, yet the higher yields of 6month CDs adds cash to the bottom line. Programming choices increase, materials are easier to buy, and capital campaigns can be better marketed and advertised. Six month CD rates vary from .9% to 3.05% across the United States. An engaged and proactive investment manager will find the best rates for you so that your money is working harder for your mission.
Money is hard enough to come by these days. Make sure yours is being put to work as efficiently as possible.
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Blue Haven Capital is a registered investment advisor providing experienced, professional low cost investment management for individuals, private foundations, and public charities. If you know an individual or group who might be interested in our services, please forward this email to them!
Best Regards,
Donald Cummings Bill Moucka
Principal Principal
Blue Haven Capital LLC
630.588.3800
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