INVESTMENT MANAGEMENT? THAT’S NOT MY JOB! · That’s Not My Job! Managed account program –...
Transcript of 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?
InvestmentManagement?That’sNotMyJob!
Thismaybeyourorganiza@on’sbiggestsourceofdiscre@onaryincome– Doyouknowitiswellcaredfor?
Whyshouldyoucare?
Stewardship:– FundraisersareoHenfirstpointofcontactfor
largepoolsofcapital–youwanttobeabletotalkaboutittodonors
– Donorsareincreasinglysophis@cated• Canyouintelligentlydiscussyourorganiza@on’s
porKolio?
• Canyoudemonstrateyourorganiza@onisprac@cingduediligence?
InvestmentManagement?That’sNotMyJob!
Whyshouldyoucare?
InvestmentManagement?That’sNotMyJob!
Stewardship– Morescru@nythaneverbefore
• Howdoyouexplaingainsorlosses?
• Doyoucommunicateyourrateofreturn??
• Shouldyoucommunicateyourrateofreturn?
Whyshouldyoucare?
InvestmentManagement?That’sNotMyJob!
CrossCulturalCommunicaBon
English/French/Other Investment‐ese Legal‐ese
Charitablesector‐ese
Transla@ngiseasierthemoreyouknow.
Board&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
Boardhasakeyfiduciaryresponsibility
Fiduciary=theobliga@[email protected]@onofloyalty,honestyandgoodfaith.(PrimerforDirectorsofNFPCorpora@ons)
InvestmentManagement?That’sNotMyJob!
FiduciaryChecklist GovernanceStructureandFramework
– Isitconsistentinitsimplementa@on?
TermsofReference– Arerolesandresponsibili@esclearlyunderstood– Isthereafeedbacklooptoensuredu@esarebeing
fulfilled?
Board&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
Board&InvestmentManagement
Sugges@on:HaveaboardmemberresponsibleforthisporKolio– Leadsinvestmentcommi0ee
– GuidesBoardre:itsresponsibility
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
Investmentcommi0ee’sresponsibili@es:– Ac@vely“manage”themoneyor“managethe
managers”?
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
Investmentcommi0ee’sresponsibili@es(outlinedinTermsofReference):
– Est.theInvestmentPolicyStatement
– keyischoosingassetalloca@on([email protected]–i.e.howmuchriskistheorg’nwillingtoassume?
– Shouldyouhaveashorttermaccountforannualdisbursements?
– Choosemanager‐ormanagers(ifapplicable)
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
Investmentcommi0ee’sresponsibili@es:– Evaluatemanagerperformanceonregularbasis
(atleastannually)(EvaluaBonForm)
– Evaluateoverallinvestmentmanagementprogramonperiodicbasis
– Makerecommenda@onre:disbursementlevels(DisbursementPolicy)
– DeterminehowgiHsofsecuri@eswillbetreated(inIPS)
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
Investmentcommi0ee’sresponsibili@es:– Reviewincorpora@ngdocumentstorespectany
investmentrestric@onsthatmaybeimposedupontheorganiza@onbasedonhowitwascons@tuted.
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
WhoshouldbeontheInvestmentCommi0ee?– ABoardmember(toactasliaisonbetween
commi0eeandBoard)
– OtherBoardmemberswithinterestandexper@se,ifavailable
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
WhoshouldbeontheInvestmentCommi0ee?– Members“external”totheorganiza@onwith
investmentexper@setoprovideobjec@veperspec@ve
– Fundraisingstaff
– Financestaffand/ororganiza@on’streasurer
InvestmentCommiRee&InvestmentManagement
InvestmentManagement?That’sNotMyJob!
WhoshouldbeontheInvestmentCommi0ee?– Mosteffec@vecommi0eesarerecruitedasjoint
effortbetweenstaffandchair(SkillsAssessmentChart)
StaffandInvestmentManagement
InvestmentManagement?That’sNotMyJob!
Whoshouldberesponsible?– Usuallyfallstofinancestaff(b/cit’sdealingwith
numbers.)
– Funddevelopmentstaffshouldbeinvolved.Stewardshipiskeytofundraiser’sjob–wemustunderstandsowecancommunicatewithcons@tuents.
– CEO/EDshouldalsounderstandtocommunicatewithcons@tuents
StaffandInvestmentManagement
InvestmentManagement?That’sNotMyJob!
Whoshouldberesponsible?– Itwilldependonskills,personali@es,sizeof
organiza@on,sizeofporKolio.
AboutInvestmentIndustry
InvestmentManagement?That’sNotMyJob!
For$1millionormore,youareconsideredabigpotofmoney
For$5millionormore,veryimportantclient
For$10millionormore??
AboutInvestmentIndustry
InvestmentManagement?That’sNotMyJob!
Charitableorg’n’sassetshaveleverage:– Investmentmanager’sfirmbecomesknownby
severalpeopleoncommi0eeandBoard–expandedreach
Yourorganiza@onmaygiveinvestmentmanagerbraggingrights(addscredibilitytofirm)
AboutInvestmentIndustry
InvestmentManagement?That’sNotMyJob!
Consequently,youmayaskforandreceiveservicesofa$15millionclient:– Quarterlymee@ngs
– Presenta@ontoBoardoratAGM– Takeinvestmentmanagertobigdonors,if
necessary
StructureofIndustry
InvestmentManagement?That’sNotMyJob!
Threethingstoconsider:– Fiduciarydutyofcare– Feestructure
– Rela@onships
FiduciaryDutyofCare
InvestmentManagement?That’sNotMyJob!
Fiduciarydutyofcarevs.contractualdutyofcare
Discre@[email protected]@onship
Fees
InvestmentManagement?That’sNotMyJob!
Strongestpredic@veelementforfuturereturnsisfees(includingallcosts–execu@oncosts,transac@oncosts,bondspreads,etc.)‐notpastreturns
Wholesalervs.retailer
Fees
InvestmentManagement?That’sNotMyJob!
InvestmentCounselPorKolioManager(ICPM)– Rangeoffees
– Startat1%forporKoliosof$1millionanddeclinefromthere
– OHenapolicyofdiscoun@ngfeesordona@ngbackapor@on
– Allfeesandcostsaretransparentandfullydisclosed
– FiduciaryDutyofCare
Fees
InvestmentManagement?That’sNotMyJob!
Managedaccountprogram– Accountabilityisfromdistributor,notmanager(e.g.you
canhireafirm(A)thatwillinvestdirectlyonyourbehalf,oryoucanhireafirm(B)thatbuysinvestmentsfromfirm(A).
– Rangeoffees:usuallydoneonannualfeebasisbeginningat2%+ofinvestableassets.
– Lookatindividualproposalstoseefees.
– Execu@onandtradingcostsaredifficulttoiden@fy.
Fees
InvestmentManagement?That’sNotMyJob!
Mutualfunds– Rangeoffees:annualfee+trailereachyear– MER’stypically2.5%+– Trailerfeeprovidedtosalespersonbyfund
company
– MayalsobeLoads(salescharges)providingcommissiontosalesperson
Fees
InvestmentManagement?That’sNotMyJob!
Importanttounderstand:– Howpeoplearegeingpaid– Howfeesarebeingcharged
– Allcosts(annualfees,commissions,markuporcombina@onofall)
Sowhenyou’remakingcomparisons,you’recomparingapplestoapples
Fees
InvestmentManagement?That’sNotMyJob!
Strongestpredic@veelementforfuturereturnsisfees(includingallcosts–execu@oncosts,transac@oncosts,bondspreadsetc.)‐notpastreturns
RelaBonships
InvestmentManagement?That’sNotMyJob!
Conflictofinterestpolicyisimportant–itcanprovideframeworkandmechanismtodealwithprospec@veconflictofinterest
MiBgaBngFactors
InvestmentManagement?That’sNotMyJob!
Thefurtherawayfromalargeurbancentreyouare,thefewerpoten@alsuppliersyoumaybeabletoiden@fy
Remember:IfyourporKolioisbigenough,firmswilltraveltogetyourbusiness.
“Bigenough”canbeaslowas$500,000
MiBgaBngFactors
InvestmentManagement?That’sNotMyJob!
IfyourporKolioisnotbigenoughtoa0ractsuppliersfromaway‐oryouarehappywithyoursupplier:– besuretohavefeestructureclarifiedsoyou
knowthetruecosts
– Ensureallpre‐exis@ngrela@onshipsandpoten@alconflictsaredeclared
– Asksuppliertosignanagreementacknowledgingafiduciaryrela@onship.
Investonownoruse3rdparty?
InvestmentManagement?That’sNotMyJob!
Op@ons:– CommunityFounda@ons(165inCanada)
– TidesCanadaFounda@on– Privatesectorop@ons
Generally,youmustagreetotheirinvestmentpolicy.
– Noabilitytochooseassetalloca@on,makedecisionsre:ethicalissues,etc.
– MayberequiredtoadopttheirDisbursementPolicy
Investonownoruse3rdparty?
InvestmentManagement?That’sNotMyJob!
2ques@onstoask(inaddi@ontoknowinganswerstoissuesre:fiduciary,fees,rela@onships,men@onedalready):
– Whatisvalueadded?• youdon’thavetomanagemoney,whichmaynotbeyour
business• simplifiedrepor@ng
• Mayputyourorganiza@oninfrontofsophis@cateddonors
Investonownoruse3rdparty?
InvestmentManagement?That’sNotMyJob!
2ques@onstoask(inaddi@ontoknowinganswerstoissuesre:fiduciary,fees,rela@onships,men@onedalready):
– Isthereexpertoversight?• WhoisontheirCommi0ee?
• Howknowledgeablearethey?
• HowexperiencedinFounda@oninves@ngarethey?
• Dotheyunderstandtheneedtofundannually(differencebetweeninves@ngphilanthropic$vs.individuals)?
You’vedecidedtoinvestonyourown‐howtofinda$manager
InvestmentManagement?That’sNotMyJob!
Iden@fylistofprospec@vesuppliers
DevelopRequestforProposal(RFP)–sendsameques@onstoeveryone
You’vedecidedtoinvestonyourown‐howtofinda$manager
InvestmentManagement?That’sNotMyJob!
WhenRFPisreturned,– Selectlong‐listbasedon?– Selectshort‐listbasedon?– The5P’s–People,Philosophy,Process,Price&Performance
– Interviewshortlistcandidates– Evaluatebasedonpre‐determinedpriori@es– Makedecision– GetBoardtoapprovedecision
You’vedecidedtoinvestonyourown‐howtofinda$manager
InvestmentManagement?That’sNotMyJob!
Thingstoconsider:– Dostaffandinvestmentcommi0eehavethe
technicalexper@seand
@me
– toreviewallresponses,selectlongandshortlist,interviewandinterpretanswers?
Willusinganexternalconsultantaddvalue?
QuesBonstoaskExternalConsultants
InvestmentManagement?That’sNotMyJob!
Whatisyourpaymentbasedupon?
Whataretheirothersourcesofrevenue(e.g.dotheysellinvestmentproducts,too?Ifso,arethereconflictsyouneedtobeawareof?)
Remember:therearenoregulatoryrulesonwhocancallthemselvesaconsultant.
QuesBonstoaskExternalConsultants
InvestmentManagement?That’sNotMyJob!
Whatistheirexperiencerecrui@ng?
Whatistheirexperiencewiththecharitablesector?
Whatistheirexperiencewithorganiza@onswithsimilarassetsize?
Whatistheirexperiencewithorganiza@onswithsimilarincome?
THANKYOU!