As we look back at the 2024 fiscal year, we at Verger are grateful for the many opportunities to reflect on our non-profit roots, the founding of our firm 10 years ago, and the exciting journey since. The founding team members and I remember how much hard work and determination it took to get things off the ground – and we are humbled by the ways that Verger has grown out of our mission, mantra, and core values.
That founding mantra – Protect, Perform, Provide – still embodies our investment process and remains perpetually important, through all the ups and downs of market cycles and (sometimes quickly) rotating market trends. Looking back over Verger’s longer-term results, we are pleased to see that our diversified, all-weather portfolio has a solid track record of participating when markets are performing well while protecting capital when markets are experiencing a downturn.
Reflecting on the last year
Participating on the upside while protecting on the downside can be a difficult balance to strike – and we continually monitor and, as needed, adjust allocations with the aim of striking the appropriate balance. With our long-term focus and all-weather framing, we often find ourselves wondering at the myopic focus of other investors and their insistence on making portfolio changes based on short-term forecasts or popular market trends.
For instance, in our 2023 Q3 Market Outlook, we called on the plot of the cult classic film, The Princess Bride, to illustrate the idea that many of the so-called “inconceivable!” events sparking the market volatility of the time were, in our view, well within the range of expected possibilities. We highlighted our creative approach to portfolio diversification and its role in protecting the Verger portfolio from what others may continue to consider “inconceivable!” events, such as politics getting in the way of effective fiscal policy or the abrupt ending of a narrow market rally.
On the theme of portfolio diversification, in 2023 we published our thoughts about Office Property & Commercial Real Estate opportunities within certain geographies or sub-markets with limited supply, and about the deal environment for Venture Capital potentially creating a more favorable market for investors to deploy capital. In our 2023 Q4 Market Outlook, we noted that we didn’t need a crystal ball or overly optimistic New Year’s resolutions to look forward to what 2024 had in store. “No matter what happens, we feel ready.” This confidence remains today, and it stems from our experienced and nuanced approach to diversification – based on underlying portfolio exposures, rather than asset class labels.
As we moved into the second half of the fiscal year, and market volatility generally subsided, a new theme emerged — looking beyond the increasingly narrow rally to find niche opportunities with potentially better risk adjusted returns. Whether it was the 2024 Q1 Market Outlook idea of looking beyond the popular March Madness tournament to glean lessons from the lesser-known National Invitation Tournament, or the 2024 Q2 Market Outlook description of looking beyond the headline events at this summer’s Olympic Games to find gems such as table tennis – we highlighted that worthy champions exist outside the spotlight. This lesson remains relevant as a handful of technology names continue to drive market performance and diversified, long-term investors like Verger must lean on our training, our process, and discipline (not unlike Olympic athletes) to focus on the long-term finish line and the future races to follow.
Reflecting on milestones, and bringing our “why” to work
At Verger we make a point of marking occasions and milestones with celebrations – and the 2024 Investor Conference and 10-year anniversary celebration was certainly the highlight of the year. It was a privilege to host clients, investment managers, board members, industry peers, and community members for exciting conversations, many of which highlighted Verger’s core value of challenge the status quo and the importance of coming together to collaborate and encourage continued learning. It was also a pleasure to recognize colleagues who have shaped Verger’s success, including Taylor Jackson, Investment Director, who received the “MVP” award for his contributions to our investment team, and Jim Dunn, our CEO, who received special acknowledgement for his founding and stewardship of the Verger Internship Program.
Another highlight of the conference was the keynote address by Gary Sernovitz, the author of the acclaimed 2023 book, The Counting House, which explores the world of investing through the eyes of a (fictional) six-billion-dollar endowment CIO. I’ve reflected on the book since meeting Gary and hearing him speak. His discussion of the importance of endowment management – specifically, providing stable and growing distributions to support non-profit missions – is a strong connection to Verger’s core value of bringing our “why” to work. In addition, the CIO’s insightful and witty dialogues do a terrific job of highlighting some of the absurdities, complexities, and even skepticism involved in modern investing.
In the face of these complexities, it remains my belief that, as an investment team, we need to cultivate conviction in our ideas and our investment process without being arrogant or driven by hubris. We need to continue to strike the appropriate balance between confidence and humility. Throughout the year, whether we’re traveling for due diligence meetings, industry events, or speaking engagements, or simply reading a new book at home, we each pick up new pieces of knowledge that we bring back to the office and share. This ongoing openness to new information can help us avoid becoming too set in our ways.
As I look forward to another fiscal year, I’m proud of Verger’s long-term results and strongly believe we are well positioned for the next 10 years. I speak for the full investment team when I say thank you for your continued partnership.
With best wishes for a great remainder of your summer,
Craig Thomas, Chief Investment Officer