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Fund Overview: Objective, Strategy and Holdings

  • The Inflation Protection Fund seeks to provide investors with current income and protect principal from loss of purchasing power due to inflation.
  • The Fund holds a combination of U.S. and foreign fixed income securities. The Fund also invests in commodity futures contracts and holds senior secured loans.
  • The Fund generally does not invest in companies that derive more than 10% of their revenue from gambling or from the manufacture, sale or distribution of alcoholic beverages, tobacco-related products, adult entertainment, weapons, or the management or operation of prison facilities.

Fund Managers

The following individuals are responsible for the selection and monitoring of external asset managers:

Frank Holsteen Image

Frank Holsteen

Managing Director, Investment Management

  • With Wespath since 2012
  • B.A. from Lake Forest College
Connie Christian portrait

Connie Christian, CFA

Manager, Fixed Income

  • With Wespath since 2023
  • B.S. in finance from Xavier University
  • MBA from Xavier University

Management

The Inflation Protection Fund (IPF) invests with eight external investment firms that invest in assets that are expected to provide returns in excess of inflation over time. The Fund has 35% of its assets allocated to an enhanced U.S. TIPS strategy. The remainder is invested mostly in active strategies that hold inflation-linked bonds from both developed and developing countries. The Fund also attempts to modestly improve investment returns by investing up to 10% of its assets in commodity futures contracts, up to 10% in senior secured loans, and up to 10% in real assets and alternative investments.

External Asset Managers

* Signatory to the United Nations Principles for Responsible Investment

 

Please refer to the Investment Funds Description – P Series for a detailed description of the investment strategies used in managing the Fund.

IPF Benchmark


The Inflation Protection Fund performance benchmark is 90% Bloomberg U.S. Treasury Inflation-Linked Bond Index and 10% Bloomberg Commodity Index, effective February 1, 2023. The Bloomberg U.S. Treasury Inflation-Linked Bond Index measures the investment performance of the U.S. Treasury Inflation Protected Securities (TIPS) market. The Bloomberg Commodity Index measures the investment performance of a broadly diversified portfolio of futures contracts on physical commodities. From January 1, 2016 to January 31, 2023, the benchmark was 80% Bloomberg World Government Inflation Linked Bond Index (Hedged), 10% Bloomberg Emerging Market Tradeable Inflation Linked Bond Index (Unhedged) and 10% Bloomberg Commodity Index. Prior to January 1, 2016, the benchmark was the Bloomberg U.S. Government Inflation Linked Bond (Series B) Index.

Fund Performance 1,2,3, Net-of-Fees (as of 12/31/2023)

  3 mo YTD 1 yr 3 yr 5 yr 10 yr
Inflation Protection Fund 3.98% 4.76% 4.76% 1.69% 3.90% 2.65%
IPF Benchmark 3.76% 3.28% 3.28% -1.12% 2.60% 2.86%

Universe Comparison

Inflation Protection Fund vs. Peer Group Universe

Peer Group Performance Comparison

Peer group performance comparison

Annualized Performance (Net-of-Fees)

  1 Year 3 Year 5 Year 10 Year
Inflation Protection Fund 4.8% 1.7% 3.9% 2.7%
Median 3.7% -1.1% 3.0% 1.9%
Rank (%) in Universe 16th 18th 8th 5th
# of Observations 205 192 184 128

Peer Group Performance Comparison and Annualized Performance (Net-of-Fees) data as of December 31, 2023.

Source: Lipper. Lipper Inflation Protection Funds Universe is a group of mutual funds comparable to IPF. The Lipper Universe used for this comparison was Inflation Protected Bonds.


Footnotes

Wespath Benefits and Investments (“Wespath”) is a general agency of The United Methodist Church, a 501(c)(3) tax-exempt organization. Wespath administers benefit plans and together with its subsidiaries, UMC Benefit Board, Inc. (“UMCBB”) and Wespath Institutional Investments LLC (“WII”) invests (or provides back-office services for) assets on behalf of benefit plan participants and beneficiaries, plan sponsors and other institutions controlled by, affiliated with or related to The United Methodist Church (the “Church”). For GIPS compliance purposes, the Firm referenced herein is defined to include Wespath, UMCBB and WII (“Firm”).

Wespath claims compliance with the Global Investment Performance Standards (GIPS®). GIPS is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To obtain a copy of Wespath’s GIPS Report, please call us at 1-847-866-4100 or e-mail us at [email protected].

1 The performance shown is for the stated time period only, is computed in U.S. Dollars (USD) and reflects time‐weighted returns. Historical returns are not indicative of future performance. Investment performance is presented net-of-fees. See Risks and Disclosures for more information regarding fees, including how fees are reflected in performance. The investments of the Fund may vary substantially from those in the applicable benchmark. Benchmarks are based on broad-based securities market indices, which are unmanaged, cannot be invested in and are not subject to fees and expenses typically associated with investment funds. Investments cannot be made directly in an index. The bar chart and tables were produced using data from sources believed to be accurate. The bar chart and tables assume reinvestment of dividends, interest and other distributions. This information is for informational purposes only and is not an offer to purchase securities.

2 Please refer to the Investment Funds Description – P Series for more information about the Fund. The investment funds are neither insured nor guaranteed by the government.

3 Benchmark descriptions can be found here.

Allocations

Holdings-Based Sector Allocations as of December 31, 2023
Sector IPF Actual (%) IPF Benchmark (%) Difference (%)
TIPS 57.7% 90.0% -32.3%
Global Inflation-Linked Bonds (Developed) 8.8% 0.0% +8.8%
Senior Secured Loans (Floating Rate) 9.9% 0.0% +9.9%
Emerging Market Inflation-Linked Bonds 9.1% 0.0% +9.1%
Commodities 9.4% 10.0% -0.6%
Real Assets and Alternative Investments 3.7% 0.0% +3.7%
Commercial Mortgage Backed Securities 0.2% 0.0% 0.2%
Mortgage Backed Securities 0.0% 0.0% 0.0%
Cash 1.2% 0.0% +1.2%

 

Characteristics

Characteristics as of December 31, 2023
  IPF IPF Benchmark
Effective Duration 6.89 6.93
Effective Convexity 0.60 0.01
Real Yeld to Worst* 2.09% 1.92%
Effective Maturity 8.11 7.42
Average Quality AA- AA+

Does not reflect the deduction of fees.


Credit Quality Distribution as of December 31, 2023
  IPF IPF Benchmark
AAA 3.6% 0.0%
AA 66.9% 100.0%
A 4.1% 0.0%
BBB 8.3% 0.0%
BB 8.1% 0.0%
B 6.5% 0.0%
< B 0.2% 0.0%
NR 0.0% 0.0%
Cash 2.3% 0.0%

Risks & Disclosures

All investments carry some degree of risk that will affect the value of the Fund’s holdings, its investment performance and the price of its units. As a result, loss of money is a risk of investing in the fund. IPF is subject to the following principal investment risks: market risk, investment style risk, security-specific risk, credit risk, country risk, currency risk, derivatives risk, interest rate risk, deflation risk, liquidity risk and prepayment risk.

Because U.S. Treasury Inflation Protected Securities (TIPS) are debt obligations issued and backed by the full faith and credit of the U.S. Government, they are considered to have low credit or default risk. Inflation Protected Securities issued by foreign governments, particularly governments of emerging countries, risk the possibility of loss due to credit risk.

The performance shown is for the stated time period only and computed in U.S. Dollars (USD). Historical returns are not indicative of future performance. For further discussion of the Fund’s investments strategies and risks, please refer to the Investment Funds Description – P Series. This is not an offer to purchase securities.

Lending of Portfolio Securities

The Fund seeks to earn additional income by lending a portion of its portfolio securities to brokers, dealers and other financial institutions. The loans are secured at all times by cash and liquid high-grade debt obligations. As with any extension of credit, there are risks of delay in recovery and in some cases even loss of rights in the collateral should the borrower fail financially. In addition, losses could result from the reinvestment of the cash collateral received on loaned securities.


Expense Ratio

The expense ratio is a measure of the annual fund operating expenses paid by the Fund expressed as a percentage of the average fair value of the Fund’s assets for the applicable year. The annual fund operating expenses consist of fees paid to subadvisor(s), and the Fund’s pro rata portion of custody fees and administrative and overhead expenses incurred by the overall Wespath Benefits and Investments organization in connection with providing investment, operating and administrative support to the Fund and the other funds available through Wespath Benefits and Investments, and for non-Fund related activities and operations.

The Fund’s actual annual fund operating expenses and the related expense ratio can differ from year to year. Actual annual fund operating expenses may vary depending on, among other things, market events, Fund size, transaction costs, timing of Fund inflows and outflows, and applicable internal costs and third-party fees. 2023 Expense Ratios reflect a recent change to the fee calculation methodology. The methodology for calculating the funds’ Administrative and Overhead Expenses—one component of overall Expense Ratios—was changed (effective July 1, 2023) to better align with the level of resources required by Wespath to administer each P Series fund. This methodology is applicable for the entire year beginning January 1, 2024.

The Fund may also pay transaction costs, performance fees, interest expenses, taxes and fees on uninvested cash held in sweep accounts, which are in addition to the annual fund operating expenses. The annual fund operating expenses and these additional expenses are reflected in the Fund’s unit price and reduce the Fund’s rate of return. For further information about the Fund’s fees and expenses, including the fee calculation methodology change, please refer to the Investment Funds Description – P Series.