I Investment Mgmt
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Investment Management
Basic Training on Conservation Trust FundsCape Town, South Africa March 31 – April 2, 2009
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“The true objective of any long-term investor is maximum total real return after taxes.”
Sir John Templeton
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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
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Investment Management Strategy
diversified asset base flexible spending policyregular evaluation and modificationrebalancing of asset allocationenvironmental screening
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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%
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CTFs allocate assets by:
type – fixed income, equity, cash, and othergeography – US, domestic, and internationalcurrency – domestic , US, EU, and other
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CTF’s Investment Performance depends on:
size and period of operationsamount of invested assets and ROIasset and currency allocationROI criteriainvestment advisorsinvestment restrictionsbenchmark performance
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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
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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
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To sum up…
Best practice in investment management
Establish clear investment guidelines
Form investment committees
Hire outside professional advisors
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Questions???
How well are CTFs generally performing?
Why is a well-defined spending policy so important?