Hear from FEG consultants Jeff Davis and Jeff Weisker as they reveal financial and enterprise trends from across the community foundation field. They also address key themes and considerations for your organization from the FEG 2020 Community Foundation Survey.
- Spending Policy
- Asset Allocation
- Responsive Investing (SRI/ESG, MRI, PRI)
- Externally Managed Funds
- Investment Committee Structure
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This was prepared by Fund Evaluation Group, LLC (FEG), a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing non-discretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Fund Evaluation Group, LLC, Form ADV Part 2A & 2B can be obtained by written request directed to: Fund Evaluation Group, LLC, 201 East Fifth Street, Suite 1600, Cincinnati, OH 45202 Attention: Compliance Department.
The data is obtained from the proprietary FEG 2020 Community Foundation Survey. The study includes a survey of 90 U.S. Community Foundations. The survey was open for responses online from March 4 – May 22, 2020. Participants also had the option to complete as a word document and email the results back to FEG. The data from this survey was grouped into between five and seven categories based on assets of the community foundation with assets ranging from less than $25 million to more than $1 billion. The information in this study is based on the responses provided by the participants and is meant for illustration and educational purposes only.
Data in this presentation is also obtained from the 2019, 2018, 2017, and 2016 proprietary FEG Community Foundation Surveys. To receive the full disclosures for these surveys, please email email@example.com.
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INVESTMENT CONSULTING MODELS
Traditional Consulting / Non-Discretionary – Traditional consulting is the use of a third party that advises the board/committee on investment decisions but does not have discretionary power. (sometimes referred to as investment advisor)
OCIO / Discretionary – OCIO is the use of a third party that manages the investment portfolio
Hybrid Consulting Model – This is a model that combines traditional consulting and OCIO. The consultant (third party advisor) advises the board/committee on investment decisions but might have some discretionary power
Investment Manager – A mutual fund manager (ex. Morgan Stanley)
SPENDING POLICY METHODOLOGIES
Moving Average – Spend a fixed percentage of the average market value over a set time period
Constant Growth – Increase spending each year by a constant growth rate or inflation
Constant Growth with Bands – Spending is contained within a range +/- a percentage of previous year’s market value
Geometric – Weight given to inflation adjusted spending and target spending of market value
Hybrid – Custom combination of spending rules to meet the specific needs of an institution
DONOR ADVISED FUNDS / EXTERNALLY MANAGED FUNDS
Donor advised funds are those where the donor has influence/input over granting.
Externally managed funds are those that are managed by an outside advisor or broker.
Agency Funds are established by specific non-profit organizations to provide a source of income for years to come.
Donor Advised Fund (DAF) is a separately identified fund or account comprised of contributions made by individual donors that is maintained and operated by a Community Foundation.1 They are used by donors who want to personally recommend grant awards from a fund they set up with the Community Foundation.
Unrestricted Endowed Funds are set up to let the community foundation make regular withdrawals used for operations, community needs, specific purposes, etc.
Scholarship Fund is a donation that is set up where the grant making dollars are utilized to provide scholarships to students, and is managed completely by the Community Foundation.
Supporting Organization are special types of charitable organizations that, based upon their relationship with the Community Foundation, are themselves classified as public charities. Supporting organizations provide the flexibility desired by donors to meet their objectives.2
RESPONSIVE INVESTING TERMS
Responsive Investing – Any investment made by an organization that seeks to gain both financial and social benefit.
Program-Related Investment (PRI) – Mission aligned investments by an organization that act as a component to their grant-making. A PRI may produce at market, above market, or below market returns. The investment is eligible to count against the five percent payout that foundations are required to make each year to retain their tax-exempt status. [Adapted from the Internal Revenue Service]
Mission-Related Investment (MRI) – MRIs are market-rate investments that support the mission of the foundation by generating a positive social or environmental impact. These investments are made from the foundation’s endowment corpus. MRI opportunities exist across asset classes in cash, fixed income, public equity, private equity and venture capital, and real estate. [Adapted from Mission Investors Exchange]
Socially Responsible Investment (SRI) – Considered socially responsible because of the nature of the business the company conducts. This could include negative exclusionary criteria (ex. Exclusion of “sin stocks”) [Adapted from Investopedia]
Environmental, Social, Governance (ESG) – ESG is a holistic view of all aspects that can impact security value. ESG factors are a subset of non-financial performance indicators which include sustainable, ethical and corporate governance issues (ex. human rights issues or renewable energy) [Adapted from Financial Times Lexicon]