INVESTMENT MANAGEMENT? THAT’S NOT MY JOB! · That’s Not My Job! Managed account program –...

INVESTMENT MANAGEMENT?THAT’S NOT MY JOB!

Prepared for CVFM 201 -The OperaBons of Fundraising

Today’sobjecBves

InvestmentManagement?That’sNotMyJob!

• Whydoesinvestmentmanagementma0ertoafundraiser?

• Rolesforinvestmentcommi0ee,Board,staffre:investmentmanagement

• Whatdocumentsdoesyourorgneed?• Abitabouttheinvestmentindustry

Whyshouldyoucare?

Thismaybeyourorganiza@on’sbiggestsourceofdiscre@onaryincome– Doyouknowitiswellcaredfor?

Whyshouldyoucare?

Stewardship:– FundraisersareoHenfirstpointofcontactfor

largepoolsofcapital–youwanttobeabletotalkaboutittodonors

– Donorsareincreasinglysophis@cated• Canyouintelligentlydiscussyourorganiza@on’s

porKolio?

• Canyoudemonstrateyourorganiza@onisprac@cingduediligence?

Whyshouldyoucare?

Stewardship– Morescru@nythaneverbefore

• Howdoyouexplaingainsorlosses?

• Doyoucommunicateyourrateofreturn??

• Shouldyoucommunicateyourrateofreturn?

Whyshouldyoucare?

CrossCulturalCommunicaBon

English/French/Other Investment‐ese Legal‐ese

Charitablesector‐ese

Transla@ngiseasierthemoreyouknow.

Board&InvestmentManagement

Boardhasakeyfiduciaryresponsibility

Fiduciary=theobliga@ontoactinthebestinterestsofthecorpora@on.Itisatitscoreanobliga@onofloyalty,honestyandgoodfaith.(PrimerforDirectorsofNFPCorpora@ons)

FiduciaryChecklist GovernanceStructureandFramework

– Isitconsistentinitsimplementa@on?

TermsofReference– Arerolesandresponsibili@esclearlyunderstood– Isthereafeedbacklooptoensuredu@esarebeing

fulfilled?

Sugges@on:HaveaboardmemberresponsibleforthisporKolio– Leadsinvestmentcommi0ee

– GuidesBoardre:itsresponsibility

InvestmentCommiRee&InvestmentManagement

Investmentcommi0ee’sresponsibili@es:– Ac@vely“manage”themoneyor“managethe

managers”?

Investmentcommi0ee’sresponsibili@es(outlinedinTermsofReference):

– Est.theInvestmentPolicyStatement

– keyischoosingassetalloca@on(howmuchinbondsvs.equi@esvs.cash–i.e.howmuchriskistheorg’nwillingtoassume?

– Shouldyouhaveashorttermaccountforannualdisbursements?

– Choosemanager‐ormanagers(ifapplicable)

Investmentcommi0ee’sresponsibili@es:– Evaluatemanagerperformanceonregularbasis

(atleastannually)(EvaluaBonForm)

– Evaluateoverallinvestmentmanagementprogramonperiodicbasis

– Makerecommenda@onre:disbursementlevels(DisbursementPolicy)

– DeterminehowgiHsofsecuri@eswillbetreated(inIPS)

Investmentcommi0ee’sresponsibili@es:– Reviewincorpora@ngdocumentstorespectany

investmentrestric@onsthatmaybeimposedupontheorganiza@onbasedonhowitwascons@tuted.

WhoshouldbeontheInvestmentCommi0ee?– ABoardmember(toactasliaisonbetween

commi0eeandBoard)

– OtherBoardmemberswithinterestandexper@se,ifavailable

WhoshouldbeontheInvestmentCommi0ee?– Members“external”totheorganiza@onwith

investmentexper@setoprovideobjec@veperspec@ve

– Fundraisingstaff

– Financestaffand/ororganiza@on’streasurer

WhoshouldbeontheInvestmentCommi0ee?– Mosteffec@vecommi0eesarerecruitedasjoint

effortbetweenstaffandchair(SkillsAssessmentChart)

StaffandInvestmentManagement

Whoshouldberesponsible?– Usuallyfallstofinancestaff(b/cit’sdealingwith

numbers.)

– Funddevelopmentstaffshouldbeinvolved.Stewardshipiskeytofundraiser’sjob–wemustunderstandsowecancommunicatewithcons@tuents.

– CEO/EDshouldalsounderstandtocommunicatewithcons@tuents

StaffandInvestmentManagement

Whoshouldberesponsible?– Itwilldependonskills,personali@es,sizeof

organiza@on,sizeofporKolio.

AboutInvestmentIndustry

For$1millionormore,youareconsideredabigpotofmoney

For$5millionormore,veryimportantclient

For$10millionormore??

Charitableorg’n’sassetshaveleverage:– Investmentmanager’sfirmbecomesknownby

severalpeopleoncommi0eeandBoard–expandedreach

Yourorganiza@onmaygiveinvestmentmanagerbraggingrights(addscredibilitytofirm)

Consequently,youmayaskforandreceiveservicesofa$15millionclient:– Quarterlymee@ngs

– Presenta@ontoBoardoratAGM– Takeinvestmentmanagertobigdonors,if

necessary

StructureofIndustry

Threethingstoconsider:– Fiduciarydutyofcare– Feestructure

– Rela@onships

FiduciaryDutyofCare

Fiduciarydutyofcarevs.contractualdutyofcare

Discre@onaryrela@onshipvs.advisoryrela@onship

Strongestpredic@veelementforfuturereturnsisfees(includingallcosts–execu@oncosts,transac@oncosts,bondspreads,etc.)‐notpastreturns

Wholesalervs.retailer

InvestmentCounselPorKolioManager(ICPM)– Rangeoffees

– Startat1%forporKoliosof$1millionanddeclinefromthere

– OHenapolicyofdiscoun@ngfeesordona@ngbackapor@on

– Allfeesandcostsaretransparentandfullydisclosed

– FiduciaryDutyofCare

Managedaccountprogram– Accountabilityisfromdistributor,notmanager(e.g.you

canhireafirm(A)thatwillinvestdirectlyonyourbehalf,oryoucanhireafirm(B)thatbuysinvestmentsfromfirm(A).

– Rangeoffees:usuallydoneonannualfeebasisbeginningat2%+ofinvestableassets.

– Lookatindividualproposalstoseefees.

– Execu@onandtradingcostsaredifficulttoiden@fy.

Mutualfunds– Rangeoffees:annualfee+trailereachyear– MER’stypically2.5%+– Trailerfeeprovidedtosalespersonbyfund

company

– MayalsobeLoads(salescharges)providingcommissiontosalesperson

Importanttounderstand:– Howpeoplearegeingpaid– Howfeesarebeingcharged

– Allcosts(annualfees,commissions,markuporcombina@onofall)

Sowhenyou’remakingcomparisons,you’recomparingapplestoapples

Strongestpredic@veelementforfuturereturnsisfees(includingallcosts–execu@oncosts,transac@oncosts,bondspreadsetc.)‐notpastreturns

RelaBonships

Conflictofinterestpolicyisimportant–itcanprovideframeworkandmechanismtodealwithprospec@veconflictofinterest

MiBgaBngFactors

Thefurtherawayfromalargeurbancentreyouare,thefewerpoten@alsuppliersyoumaybeabletoiden@fy

Remember:IfyourporKolioisbigenough,firmswilltraveltogetyourbusiness.

“Bigenough”canbeaslowas$500,000

MiBgaBngFactors

IfyourporKolioisnotbigenoughtoa0ractsuppliersfromaway‐oryouarehappywithyoursupplier:– besuretohavefeestructureclarifiedsoyou

knowthetruecosts

– Ensureallpre‐exis@ngrela@onshipsandpoten@alconflictsaredeclared

– Asksuppliertosignanagreementacknowledgingafiduciaryrela@onship.

Investonownoruse3rdparty?

Op@ons:– CommunityFounda@ons(165inCanada)

– TidesCanadaFounda@on– Privatesectorop@ons

Generally,youmustagreetotheirinvestmentpolicy.

– Noabilitytochooseassetalloca@on,makedecisionsre:ethicalissues,etc.

– MayberequiredtoadopttheirDisbursementPolicy

2ques@onstoask(inaddi@ontoknowinganswerstoissuesre:fiduciary,fees,rela@onships,men@onedalready):

– Whatisvalueadded?• youdon’thavetomanagemoney,whichmaynotbeyour

business• simplifiedrepor@ng

• Mayputyourorganiza@oninfrontofsophis@cateddonors

2ques@onstoask(inaddi@ontoknowinganswerstoissuesre:fiduciary,fees,rela@onships,men@onedalready):

– Isthereexpertoversight?• WhoisontheirCommi0ee?

• Howknowledgeablearethey?

• HowexperiencedinFounda@oninves@ngarethey?

• Dotheyunderstandtheneedtofundannually(differencebetweeninves@ngphilanthropic$vs.individuals)?

You’vedecidedtoinvestonyourown‐howtofinda$manager

Iden@fylistofprospec@vesuppliers

DevelopRequestforProposal(RFP)–sendsameques@onstoeveryone

WhenRFPisreturned,– Selectlong‐listbasedon?– Selectshort‐listbasedon?– The5P’s–People,Philosophy,Process,Price&Performance

– Interviewshortlistcandidates– Evaluatebasedonpre‐determinedpriori@es– Makedecision– GetBoardtoapprovedecision

Thingstoconsider:– Dostaffandinvestmentcommi0eehavethe

technicalexper@seand

– toreviewallresponses,selectlongandshortlist,interviewandinterpretanswers?

Willusinganexternalconsultantaddvalue?

QuesBonstoaskExternalConsultants

Whatisyourpaymentbasedupon?

Whataretheirothersourcesofrevenue(e.g.dotheysellinvestmentproducts,too?Ifso,arethereconflictsyouneedtobeawareof?)

Remember:therearenoregulatoryrulesonwhocancallthemselvesaconsultant.

QuesBonstoaskExternalConsultants

Whatistheirexperiencerecrui@ng?

Whatistheirexperiencewiththecharitablesector?

Whatistheirexperiencewithorganiza@onswithsimilarassetsize?

Whatistheirexperiencewithorganiza@onswithsimilarincome?

THANKYOU!

cathy@cathymann.cawww.cathymann.ca

INVESTMENT MANAGEMENT? THAT’S NOT MY JOB! · That’s Not My Job! Managed account program –...

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