Investments Overview

1693 Partners Fund

Global equities continued to climb in FY25, supported by strong corporate earnings, a slight easing of recessionary fears and the prospects of loosening central bank policy to support economic growth. Equity market performance broadened in the fiscal year, with developed international markets outperforming U.S. markets. The U.S. dollar weakened in the latter half of the fiscal year, contributing to the strong performance of international stocks. Small cap stock performance was a notable laggard in the fiscal year but still delivered a respectable mid-single digit return. One big unknown at the conclusion of the fiscal year was the ultimate impact of tariffs levied by the U.S. on foreign countries as well as specific industries.

The introduction of broad U.S. tariffs in early April triggered a sharp market correction in financial markets and caused volatility to spike to pandemic-era levels and uncertainty to rise materially. Stability returned by late spring as tariff implementation was partially delayed and corporate earnings surpassed expectations. The technology sector and AI-related stocks specifically continue to be the biggest beneficiary of investor
capital preferences.

As noted in last year’s letter, the U.S. equity market remains concentrated within a select group of large cap technology stocks. While valuations of those stocks remain elevated, earnings and prospects for continued growth appear to justify those lofty expectations.

Global bond yields generally declined in the fiscal year. U.S. Treasury securities were a notable exception, where longer-dated bond yields rose due to potential inflationary impacts of tariffs and mounting investor concerns around the sustainability of U.S. fiscal debt levels.

Within this macro environment, the 1693 Partners Fund produced a 11.4% return for the fiscal year, essentially matching the Policy Benchmark’s return of 11.5% over the same one-year period.

As I pointed out in last year’s letter, it is not what happens in any specific one-year period that defines a successful (or unsuccessful) investment strategy; the best gauge is longer-term results. I am pleased to report that longer-term performance numbers for the Partners Fund continue to be strong and comfortably ahead of the policy benchmark. Over the last 10 and 15 years, the Partners Fund (and its predecessor fund) has generated returns of 8.08% and 8.27%, exceeding the Policy Benchmark returns by 0.74% and 0.45% per year, respectively. As of June 30, 2025, the Partners Fund had net assets of $1.2 billion.

Investments Performance

The portfolio’s investments in Global Public Equities returned a positive 14.4% for the fiscal year, compared to the MSCI All-Country World, its benchmark, which produced a positive 16.2%. As of June 30, 2025, Global Public Equities represented 49.8% of the aggregate portfolio. Developed International markets outperformed the U.S. markets in the fiscal year. The Fund added two new investment managers to the Global Equities portfolio.

The portfolio’s U.S.-focused public equity investments, with a weighting of 24.6%, returned a positive 10.6%, trailing the 15.3% return for the Russell 3000 index. As was the case last year, performance was negatively affected by a continued narrowness in market returns as previously mentioned as well as the portfolio’s exposure to small capitalization stocks.

Developed International Equities accounted for 23.4% of the portfolio and returned 19.4%, outperforming the MSCI EAFE benchmark by 171 basis points. The Emerging Markets allocation delivered solidly positive mid-teens returns, 15.2%, for the fiscal year in line with the market benchmark.

Private Equity, which includes venture capital, buyout and growth equity investments in private companies, had the second largest allocation in the portfolio at 18.5%. Private Equity results improved in the fiscal year and delivered a positive 11.2%. Venture Capital was a standout in terms of performance within the allocation. During the fiscal year, the Fund made five new commitments to private equity funds. Three commitments to existing relationships and two commitments to new relationships. The Partners Fund remains underweight in private equity with the bar set high for allocating capital.

Diversifying Strategies, which include investments in private credit, specialty finance, hedge funds and non-correlated strategies including cash flow-based royalty investments, produced a solid 8.8% return in the fiscal year, outperforming its benchmark by 166 basis points. The Partner Fund’s exposure to these types of investments totaled 12.5% of the portfolio.

Fixed Income assets within the portfolio remained modest at 2.9% of the overall portfolio. The allocation outperformed the Bloomberg Aggregate Index by 39 basis points in the fiscal year.

Finally, Real Assets, with a 10.8% weighting in the portfolio, were up 9.1% for the fiscal year, with continued strong performance from the portfolio’s investments in energy infrastructure offset by losses in commercial real estate.

Brian Hiestand
Chief Executive Officer/Chief Investment Officer
1693 Management Company