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Wall Street events have light effect on community funds

By Leon Cohen
of The Chronicle staff

September 25th, 2008

The “Wall Street meltdown” is what the Associated Press called last week’s events, when investment firm Lehman Brothers filed for bankruptcy, Merrill Lynch was bought by Bank of America and the insurance giant American International Group was bailed out by the Federal Reserve.

The immediate effect has been extreme fluctuations in capital markets, prompting proposals for a federal government, taxpayer-funded bailout.

Jewish community institutions, including the Milwaukee Jewish Federation’s Jewish Community Foundation, have investments on Wall Street. Will the recent events affect Jewish community investments, the returns from which help to fund Jewish community activities?

Yes and no has been the answer from federation and foundation officials.

On the one hand, direct effects of specific events appear to be relatively minor, as the JCF does not have a portfolio with either Lehman Brothers or Merrill Lynch.

Bert Bilsky, executive director of the JCF, and Lew Perlson, chair of the JCF investment committee, explained that the JCF has business relations with Goldman Sachs and Marquette Associates.

Goldman Sachs, based in New York City, manages the MJF’s capital campaign fund. Marquette Associates, based in Chicago, provides consulting expertise with managing the JCF’s primary investment pool.

Bilsky, Perlson and Brian Leibl, MJF chief financial officer, all said that the JCF and its investment committee had a conference call with Goldman Sachs and Marquette Associates last week.

“We feel very comfortable” with Goldman Sachs “continuing to provide investment services to us,” said Bilsky.

Moreover, in the overall picture, “we not going to be losing any principal,” Bilsky said. “We’re optimistic that we will continue to be able to provide the grants and funding” that the community and its institutions have been receiving.

Perlson added that “we may have very small exposure to those types of investments” that led to the downfall of Lehman Brothers.

As it invests, the JCF anticipates downturns in the market, Perlson said. “So the portfolio of investments is so well diversified that we don’t experience the drastic downturns people see if they invest strictly in the stock market.”

“We use bonds, alternative investments that might include hedge funds, real estate, those types of things,” Perlson said. “All taken together, they really buffer the effect of a downturn in the market, like we have all experienced.”

Nevertheless, “the broad-based downturn has a negative effect on investment return,” said Leibl. And that “is impacting us like all community foundations.”

“This is a very strange and unpredictable situation,” said Bilsky.

The Helen Bader Foundation also contributes to local Jewish community institutions through return on its investments. But it also appears that recent events will have little short-term effect on its ability to do that.

“We are obviously keeping an eye on the long-term direction of the markets,” Bader Foundation communication director Robert Tobon wrote in an e-mail to The Chronicle.

“The Foundation strives for stability in its giving programs, and we will continue the same level of grant funding in the Jewish community for the next year.”