Investment Management

Basic Training on Conservation Trust FundsCape Town, South Africa March 31 – April 2, 2009

“The true objective of any long-term investor is maximum total real return after taxes.”

Sir John Templeton

A Successful Investor…

establishes realistic long-term goalsmanages risk through asset allocationis unemotional in the decision-making processselects investment vehicles carefullycontinuously monitors performanceensures minimal transaction costscan change managers at little to no expense

Investment Management Strategy

diversified asset base flexible spending policyregular evaluation and modificationrebalancing of asset allocationenvironmental screening

Income Spending Formula

Spending PolicyIncome/Spending Expected Annual Rate

Total Return 9%Gifts +2%Spending Rule -5%Admin Expense -1%Inflation -3%

= Real Growth +2%

CTFs allocate assets by:

type – fixed income, equity, cash, and othergeography – US, domestic, and internationalcurrency – domestic , US, EU, and other

CTF’s Investment Performance depends on:

size and period of operationsamount of invested assets and ROIasset and currency allocationROI criteriainvestment advisorsinvestment restrictionsbenchmark performance

Case Study: The Eastern Arc Mountain Fund

Steady Stream of Income Strategy“Accrual” period until end of 2008Heavier stock portfolio during accrual phaseEntered into an “income” phase in 2009Declining equity portion during income phase

Case Study: Ecuador National Environment Fund

$23 million endowment Invests in US and national marketsReviews investment portfolio regularlyFinancial crisis had no impact on PA spending

To sum up…

Best practice in investment management

Establish clear investment guidelines

Form investment committees

Hire outside professional advisors

Questions???

How well are CTFs generally performing?

Why is a well-defined spending policy so important?