MMBB CEO Louis Barbarin Addresses Brexit Concerns and Market Volatility

For Immediate Release

Contact: Yvette Vanterpool
212.870.8087
MMBB Financial Services

June 29, 2016

As has been widely reported since last week, the British people voted in a referendum to terminate their membership in the European Union (EU). As EU membership entails many agreements relating to commercial trade, the vote created an extreme level of uncertainty in the stock markets, both in the UK and in Europe. That uncertainty, in turn, translated into negative price changes. Because so much of commerce is global, that uncertainty reverberated around the world, causing markets in Asia and the United States to also decline for a couple of days. As of this writing, stock markets are again rising, producing a pattern of returns referred to as volatility. MMBB members are probably wondering whether they ought to be worried about their MMBB retirement savings and/or annuities. Here is what we can tell you:

• In over 100 years MMBB has never missed an annuity payment and we plan never to miss any payments for the next 100 years.

• MMBB as an organization is very well managed and financially sound.

• MMBB’s Balanced Fund, New Horizons Fund and Annuity Fund are all very well diversified, meaning that even when some investments that those funds hold are declining, there are usually others that are benefitting.

• MMBB’s investment strategies are very long-term and designed to have a high probability of providing our retired members with a strong, if variable, stream of annuity payments and a high probability of preparing our pre-retired members for retirement, not reacting to short-term market movements.

• MMBB’s investment approach is highly disciplined, adhering to our policy asset allocations (published on our website, www.mmbb.org) and not making reactionary changes. Should a market decline cause our investments to veer too far from our policy allocations, we will actually become buyers at lower prices to bring us back into line with our policy allocations. The age-old adage of “buy low, sell high” is still valid.

• The table below highlights 1) the value of having MMBB’s range of options for pre-retired and retired-with-balance members, 2) and the diversification benefits of the Balanced, New Horizons and Annuity Funds mentioned above, and 3) the smoothing benefit of a longer-term timeframe than just one day’s action; the table below measures returns to members since the September 30 of last year:

Note that the Annuity and New Horizons Funds are both registering positive returns, however modest. Retired members might rightly ask whether this means they can expect an increase in their 2017 annuity payout. While we are very pleased that the investment portfolio is in positive territory despite such a dramatic world event, a payout increase is an optimistic scenario at this point. This is because we still have to earn back the 4% advance earnings assumption (built into every retiree’s number of units), plus the plan design increment built into last year’s payout, plus any adverse actuarial experience which may be determined after September 30, 2016.

Other insights can be gleaned from the data above:
• The US Bond Fund has actually benefitted from the market volatility, earning more than 4% over the last nine months and far outpacing inflation.

• As might be expected, with most of the market uncertainty centered in Europe, the International Blended Equity Fund has performed accordingly, declining the most of any of the nine investment options from which pre-retired members can choose.

• The Stable Value option is performing exactly as expected during this low interest rate environment by providing a steady rate of return.

How long will Brexit-related volatility last? Nobody knows for sure. But if you have any concerns about your MMBB investments, do not hesitate to call one of MMBB’s Certified Financial Planners™ (CFPs). One benefit of your MMBB membership is complimentary access to our qualified team of CFP®s. They are able to discuss your objectives, risk tolerance and total financial picture with you and help you decide on a personalized investment strategy that will let you sleep well at night.

Sincerely,

Louis P. Barbarin, CPA
Chief Executive Officer

PS: If you or someone you know is in financial crisis, MMBB may be able to help through our emergency assistance program. Please contact Rev. Dr. Sara Day at sara.day@mmbb.org.

MMBB Financial Services (The Ministers and Missionaries Benefit Board) offers flexible and affordable benefits packages to faith-based employers and their staff throughout the U.S. and Puerto Rico. MMBB carries forward the 100-year tradition of The Ministers and Missionaries Benefit Board—pioneers in providing employee benefits. With $2.5 billion in assets, MMBB offers churches, church-related employers and those who work for them the consultative services they need to succeed. Real planning, real solutions. That’s our calling.

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