WEBINAR REPLAY: FEG 2022 Community Foundation Survey

Hear from FEG consultants Jeff Davis, Jeff Weisker, and Quincy Brown as they reveal financial and enterprise trends from across the community foundation field. During the webinar, they addressed key themes and considerations for your organization from the FEG 2022 Community Foundation Survey. Topics included: Portfolio Management, Diverse Managers, Cryptocurrency, Responsive Investing and Investment Committee Structure.





Devinne Verst (00:00):

... your time and efforts completing the survey help provide insights that allow us all to make the most impact in our local communities across the country. My name is Devinne Verst. I've met many of you at industry and regional events hosted by philanthropy groups shown on the screen here. This year, we asked a question about which peer groups you belong and many of these listed were responses. I hope to see you again at a conference or two this fall, including the annual conference of growing community foundations in October where our own Jeff Davis is hosting a workshop that will further leverage the data from this year's survey. Today I'm delighted to kick off FEG's sixth year doing this webinar presentation with my colleagues. This survey was born as a creative solution for one of our community foundation clients. So I'll hand it over to Sarah Wessling who leads FEGs marketing and client engagement efforts to share a bit more about the history of the survey and the agenda for today's presentation.

Sarah Wessling (01:06):

Thanks Devinne. As she mentioned, I've been involved with the community foundation survey since its inception in 2015. The survey started with a few questions that were focused on our clients, but we went beyond just spending policy and asset allocation. We wanted to look at questions that you were asking, focusing on enterprise considerations and trends. These change throughout the year based on your feedback. In 2017, we started adding questions on responsive investing. In 2020, we added diverse managers. This year, it was the first year that we had questions on cryptocurrency. Now, before we get into the results from the survey, I wanted to take a quick second and highlight two opportunities for you to continue, engage, and learn more education about the topics that are covered today. Later this summer, we have the FEG summer book club where we are reading The Power Law by Sebastian Mallaby.

               This will cover the evolution of private capital and we'll have a discussion of the book. If you're interested, you can click on the QR code or follow a link in the presentation we will send out following today's webinar. Also on this page, you can see our FEG Insight Bridge podcast. This is a monthly podcast that we do where we feature different managers. The one that you can see on screen here is highlighting trends within endowments and foundations. Now, let me introduce our presenters for today. You've already heard from Devinne and myself, but let me share a little bit about Quincy Brown, Jeff Davis, and Jeff Weisker. They are advisors with FEG and have been working with community foundations for more than 20 years. They have a lot of experience and have helped with crafting this survey.

               Today, they're going to share with you key themes that we saw, details on portfolio management, and enterprise considerations. At the end we have time dedicated to questions from you. However, if you think of those throughout the webinar, please use the Q&A tab that's located at the bottom of your screen and you can ask throughout the call. With that, let me hand it over to Jeff to get things started.

Key Themes from the Survey

Jeff Weisker (03:27):

All right. Well thank you, Sarah. Appreciate all of you who responded to the survey. The survey is only as good as the number of respondents and we're proud of the numbers that we've had over the last few years. So let's start looking at this year's themes. And we'll begin, there we go, with spending rates. And when you look at just spending policy rates, they have leveled off since we started the survey. When we get to the averages, you'll see, it's been roughly the same for the past couple of years. Now, it will be interesting to see if the recent volatility in bear market will impact those spending rates going forward, but as for now, those rates have leveled off. One of the differences this year was we saw a noticeable jump in those community foundations that have hired diverse managers.

               Once Quincy gets into the data, you'll see some of the challenges is just defining a diverse manager, but most of you defined it as one with more than 50% composition of women or persons of color. Allocation of responsive investing. Responsive investing including ESG, MRI, PRI, SRI. So alphabet soup of categories here continues to be popular with community foundations. Over 50% of the respondents have some type of RI in their portfolios. Now with that said, the percentages, it remains a minimal amount of the overall assets of community foundations. Consistent with previous years, there is a number of noticeable differences between small and large community foundations and we'll dive into those differences throughout the webinar. And then finally, we included questions on crypto this year based on some of the requests we got from last year's survey. So based on the data, about 20% of you currently accept crypto as a gift. Now with that said, so 20% sounds a little small, but another 37% of you are currently discussing accepting crypto as a gift.

               Now here's a chart that somewhat surprises me, when you look at the advisor relationship, the model that you have with your advisor. And that is the institutional field, there's been a lot of movement towards OCIO platforms. When we began the survey back in 2016, roughly 23% of the respondents had an OCIO set up. That has not changed. When you look over the course of the last few years, that number has maintained relative consistency. The non-traditional approach continues to be the most popular approach for community foundations. The area where we have seen quite a bit of increase is in the hybrid model. That model has increased nearly fourfold since we started the survey back in 2016.

               And finally, I know you all know this, but small staffs remains the norm for community foundations. Roughly 77% of you have one or fewer employees to administer the investment portfolio. Now with the increase in the large cohort size this year, we also saw a number of you that have more than two employees administering the investment portfolio. So now my colleague, Jeff Davis, will walk us through portfolio management in the overall asset allocation strategies for community foundations.

Portfolio Management

Jeff Davis (07:47):

Thank you, Jeff and thank you everyone for joining us today. I just want to point out that this data is collected as of September 30th, 2021. So a very different environment than we find ourselves today at the tail end of a bull market that had gone on for well over a decade outside of the one month drawdown that we had in 2022 following the pandemic. So you do see some movements and one of the primary takeaways is the fixed income allocation continues to be ratcheted down and you do see equities overall and risk assets go up. So there could be some market movement at play here, but what has historically been more of a 70, 30 approach from a strategic asset allocation, 70% equities, 30% fixed income, it's morphed more into a 75, 25. Within alternatives, you see private investments and hedge funds listed there.

               The overall allocation is the same, but there is some movement within those allocations, private and hedge funds, that we'll delve into here in the next couple slides. Jeff pointed out differences between large and small. Something that has been consistent over the years is smaller community foundations having more of a home country bias in their portfolios. So looking at the sample that was provided, those allocations are those community foundations that were less than $50 million. Nearly half of those portfolios are dedicated to US equities. So if you move to larger and those that are over 500 million, you see nearly a third of the portfolio being dedicated to domestic public equities and that's an important thing to point out because many of those larger organizations are going to have a pretty healthy private capital program where they do pick up some additional domestic equity exposure.

               So just some perspective from trailing performance and the implications for your foundation achieving its goals, particularly long term goals say over the last 10 years. US has been just the place to be from public equity standpoint. You look at a 10 year annualized basis as of 9/30 of last year. US markets is measured by the S&P 500 up 16.6%. Internationally about half of that emerging markets even less. So through the lens of relative performance, this has led smaller community foundations to be very competitive with their larger peers. Performance came in this year for large and small, those under 50 and those over 500 million, at 9.4 exactly. So both very competitive and from an absolute standpoint, if we're looking at performance, something that was very good because this led to most community foundations achieving their long-term goals of spending around four and 5% in inflation.

               Now inflation, that does pose some more near term challenges. I think we all know that, particularly when we show up to the gas pump every single day. I think we're seeing it well over $100 at times to fill up your car. So inflation is real, it's here, and we had the largest print since 1981 last week at 9.1%. So this will be a challenge as we look forward, being able to achieve that intergenerational equity to support your local communities on a going forward basis.

               I mentioned alternatives. Overall the allocation remains relatively high, but within alternatives, there has been some movement. Private equity, you look across the board. You see increase in allocations, not only to large, but also small. Again, there's some market dynamics at play here, particularly if we're thinking about venture capital marks from last year that led to some very significant write-ups in those valuations. So there is some of that, but we have observed in the past that there has been a growing desire for all community foundations to access to private markets. On the flip side of that, you see a pretty broad decrease from last year's levels for hedge funds. And that is both for large and small community foundations. Now something to point out is that we saw deteriorating sentiment for this asset class throughout the last couple of years. So it's interesting to see now dollars actually being allocated or taking away from hedge funds.

               Maybe we're seeing some of that in the survey results this year. And looking forward, asset classes, and this is one of my favorite slides, is proposed shifts in strategic allocation. So many community foundations, as I mentioned, are continuing to decrease their fixed income allocations. And that's not surprising given the inflationary environment we find ourselves in today. That asset class in particular takes it on the chin hardest when you are in the inflationary environment. Many community foundations have turned to the private markets as we've mentioned. A lot of that has to do with the public equity markets being a really lofty, I'll say, frothy evaluations, perhaps looking to gain some sort of illiquidity premium outside of the public markets to achieve that top line goal, which is getting harder and harder to achieve.

               And then we finally saw a significant jump actually in hedge funds this year, surprising, since last year the survey results came in with zero of the community foundations that we surveyed indicating an increase to this asset class. But where do we find ourselves today? Right? Market is sold off significantly. We're in a bear market. Fixed income investments aren't providing that balance they typically do in that type of environment. So investors are looking for solutions and perhaps increasing hedge fund exposure is something that's been on the docket of many of your investment committee meetings thus far this year.

               And thinking about that and looking forward, inflation has been a challenge. I pointed that out. So honing in on asset classes that do provide some sort of inflation protection, real assets. If you're looking from the results from this survey, there wasn't really an increase or a decrease signified by the respondent's answers. But we find ourselves in a prolonged stretch here, at least from we're thinking about short-term history to where inflation has been a significant problem. So wanted to see if perhaps that is an area of the portfolio where you're considering increasing your allocation to at this point. So with that, we have a flash poll question. If you could respond and select if this has been already discussed or you are considering it, please do so. And we'll let the results come in.

               All right. As we wait for those to come in…

Oh, here we go. Very good. There's about six of us in this room and we were able to figure it out between the six of us. So it looks like the majority of you haven't. So there is more of an equity centric strategic allocation within community foundation portfolios and over the long run, equities do provide a decent inflation hedge and it looks like some more are considering making an increase, but perhaps haven't done that yet. So interesting results and we thank you for your participation.

Enterprise Considerations

Jeff Weisker (15:33):

All right. Technology. It's always fun, isn't it in today's virtual world? So let's move to enterprise considerations and I am going to spend time reviewing spending and fees. So let's take a step back. This is last year's question where we asked you foresee change in your spending policy. Only 10% said yes. So what we told you last year was that we thought the spending rates were going to level off. Let's look at it another way. In the question, have you changed your spending in the last three years? You can see that number hit its height in 2018. This year, only 13% of you said, "Yes. We have changed our spending in the last three years." So let's go back a couple charts. There we go. Jeff shared his favorite chart in the webinar and here's mine. It's very busy, but if you look at the data, it's fascinating.

               Going back to when we started the survey in 2016, the most popular spending rate was 5%. Just about 40% of you then had a 5% spending rate. Now you see the most popular spending rate is 4%. 33% of the respondents carry a 4% spending rate. I want to stress, this is exclusively spending and does not include admin fees. So the average in the median are roughly 4.4 and 4.3% respectively. Additionally, if I could draw your attention to that less than 4% spending rate. So a three handle in front of your spending. That number is increased from 5% in 2016 up to 12% today. So again, going forward, we don't expect the spending levels to change. As we ask the question again this year, do you foresee changing your spending policy in the next year and just 6% of you said yes.

               Now here too we did ask the questions in the beginning of the year before the bear market decline. So it we'll be interesting to see if this changes going forward. Now transitioning to your admin fees. The overall average is 1.16%. Here too is a case where it's very different from small community foundations to large community foundations. For small the overall average is 1.47 up to the large cohort where the average fee declines down 2.97%. So again, this is admin fees and diving down to the type of funds, those labor intensive funds such as scholarship funds that carries the highest fee at 1.67% and supporting organizations and agency funds carry the lowest admin fee. In regards to investment expenses. So the expenses for your advisor, the managers, and the custodian, the overall average is 76 basis points, with OCIO carrying the highest fee at 83 basis points and traditional consulting the lowest at 75 all in.

               The difference how you get to the higher fee in OCIO is from the advisory fee. The average advisory fee in the OCIO platform is 28 basis points. You compare that to traditional consulting where the average is 15 basis points. Not too much of a difference between the managers in the OCIO in traditional consulting platforms. Perhaps in OCIO you might have a little more in index funds or your advisor is a little more aggressive in negotiating fees with managers. Again, here by size, smaller community foundations have the larger fees at 96 basis points as compared to 74 for greater than 250 million. Here too though, looking at the investment managers with the higher amount in hedge funds and private capital. For those community foundations with assets greater than 250 million, the investment manager fees come in highest at 63 basis points. So now my colleague Quincy is going to walk through diverse asset managers and some of- all in this year's survey as compared to last year's.


Diverse Asset Managers

Quincy Brown (20:50):

Thanks, Jeff. As foundations further explore aligning their missions with their investments, from a DEI perspective, we've seen increased interest in action related to diverse managers. The next several slides will depict some of those trends as well as we'll offer some of our insights through observations that we've had with working with other foundations on this topic. Each year since 2020, consideration of diverse managers has grown with nearly one third hiring managers in 2022. This figure nearly doubles the amount of what we saw in 2021. As we communicated in last year's presentation, a number of factors indicated implementation of diverse manager strategies was forthcoming.

               One of those factors has been increased interest by donors. So in the far right of your screen you'll see this year's observations from our participants at 30% saw an increase in interest from donors. Again, this is a trend from last year that's greater than 20% of interest in donors from the participants of the survey. Those that have higher diverse managers, as you can see in the middle of your screen, have averaged about 5%. Now this figure is a little bit misleading as the top or highest largest cohort of community foundations really comprises or pulls that number up. If you eliminate that largest group, only little less than three managers exist within those that have hired diverse managers within their portfolios. So there is still work to be done in this area.

               Other influential factors, perhaps most significant, include the development of targets related to diverse managers as well as language in the investment policy statement. The percentage of foundations that have targeted diversity in their portfolios has increased. As you can see in 2022, it's at 10%. This is double again the figure from 2021. Similarly on the right of the page, those that have adopted language in the policy increased from 8% in 2021 to 28% here in 2022. Setting and measuring objectives tends to be the catalyst for progress in this area. Challenges however persist. Those that have looked into and explored this area, strengthened their efforts to come across two distinct areas that largely comprise some of the challenges that we've highlighted, defining and resources inventory. Now what we've observed when working with foundations is there's been two struggles related to this area and that is the distinction internally between staff and board versus the committee.

               How are those two factions defining this area, as well as how they look at providing resources inventory to fulfill the portfolio? These will be areas that we further highlight as we continue throughout this presentation. Amongst those that have hired diverse managers or defined diverse managers, ownership and leadership are two of the top considerations, with greater than 50% largely being the pursuit threshold in these areas. Now again, there are a diverse spectrum of how many institutions have looked at these percentages, but the 50% threshold is by and far the leading factor. FEGs diverse manager approach focuses on many of those challenging areas, such as defining diversity, exploring the universe diverse managers, aiding research, and selecting those managers, and then obviously the implementation of strategies around diverse metric guidelines. These efforts are led by our diverse manager committee and we define diversity starting at a greater than 40% threshold, across ownership, leadership, and strategy management.

               This is within dimensions including female, black, indigenous, and people of color or BIPOC, LGBTQ plus individuals, veterans, and people with disabilities. Exploring DEI and diverse managers is a journey. And most foundations are still seeking education along with policy considerations. Again here, we have those two elements that come into play that often become hurdles for institutions. One is finding common ground within the organization. Again, between the board, staff, investment committee, but then all understanding that there's not an all or nothing scenario. Developing your own definition, specific to your organization and your mission, along with understanding this evolution in addressing this topic.

               Regardless of your circumstances, FEG is here to assist. Providing insight and dialogue with your board staff and committee, resources, white papers articles on, excuse me, the various topics along with videos, podcasts, and other resources, ultimately helping you set up objectives, developing strategy, implementation, and ongoing monitoring. We welcome you to explore all of FEGs resources, speak to your advisor or contact Devinne Verst who you heard at the beginning of our presentation. As much as DEI is a glamor topic at the moment and focused by many institutions, cryptocurrency has made a lot of headlines of late and Jeff Weisker will take us through some of the observations in this year's survey.


Jeff Weisker (27:05):

All right. Of course, when we added the questions, it was probably at just about an all time high across crypto. So clearly it's been a volatile area as of late, but one that I know through my conversations with clients, a lot of you are discussing. So the bulk of our questions centered around, do you accept crypto as a gift, but we also asked a couple from an asset allocation standpoint. We know we're in the early endings here with most community foundations just exploring the topic, but again, we included this section at request from you all. So first and foremost, do you accept crypto as a gift? 20% said yes, 37% of you said it's currently under discussion. Now from an asset allocation standpoint and an investing standpoint, only 9% of you right now see crypto as an investible asset class. Here's a chart that I would say somewhat surprised me and that is why do you not accept crypto?

               Most of you said, or I should say, the highest category, was no donor interest. The process being too difficult was only 13% because I know that is a conversation that I've had with many staff on the finance side is that just looking at the process, it can be a little cumbersome and requires too many resources. For those of you that do accept crypto as a gift, 65% of you have language in your gift acceptance policy regarding crypto. Once you receive the gift of crypto, 100% of you sell it immediately. And then in regards to IPS and asset allocation, only 5% of you have some type of language in your IPS around crypto.

               If you accept crypto, do you believe that donations will increase in the future? Most of you said yes. 65% said, yes, we do expect those donations to increase. Again, let's go to the challenges or community foundations that have accepted crypto. A quarter of you said we did not face challenges. So you're used to it, you've had it, and you've accepted crypto, just like any other gift. For those of you that have had challenges in front of you, most of them said it was time consuming, you were limited by the exchange, and then finding just the right party to work with. On the positive side of those of you that accept crypto, it's clearly a new way of gifting. It is attractive to that next generation, the younger generation donors, which enables you to expand your donor base and just provide better flexibility to donors.

               From the standpoint of custodian banks, one third of the surveyed respondents that use a custodian, a bank, or a third party, the giving block came up the most responded. And then outside of that, Coinbase was a close second. So again, it's an evolving area. I know you all are having the conversations. Perhaps they might dwindle a little just given crypto's current performance, but clearly an area that community foundations can expand their donor base and look for that next younger generation of donors. So Jeff Davis now will walk us through responsive investing and the strategy that continues to increase in importance for community foundations.

Responsive Investing

Jeff Davis (31:16):

Right. And as a reminder, responsive investing or RI at FEG, we typically categorize your mission related and program related investment strategies as well as ESG or those investments that pursue some sort of positive environmental impact, promote social justice, and responsible corporate behavior. Each one of these strategies is predicated on aligning your portfolio with your missions or values or achieving that double bottom line or a financial and social benefit. What we have seen over time, the interest is there. Interest and investment continued to increase and this has been a consistent trend since 2017, not only from the governance standpoint, about 60% have language in your IPS, but also those dollars that have actually been allocated to portfolios where we see, for the second year in a row, over half of the community foundation surveyed have some sort of RI investment in place.

               We did change the format a bit this year on how we asked this question. And I think this is going to be very useful as we look forward and has some predictive power if this trend is going to continue. So you see out of those that said no, there's about 24% that are interested or think it's something that they should do. So that would indicate that they're in the early innings or the discovery process of how to implement it given the proper governance in place before they actually allocate dollars. So this is a trend that we expect to continue throughout the next few years and another reason for that is the support that you've seen from the donor level. Donor interest has increased twofold since we started asking this question back in 2017 from 26 up to 54%. So the donor interest is there and that has driven investment in RI. So why has the interest been there and why have allocations increased?

               Particularly with community foundations, it's not surprising, mission alignment, social impact, those are so important and given your philanthropic nature and the importance of your foundation to your local communities, it's not surprising that those are the two primary factors that drove RI. I mentioned donor requests. Those have increased twofold since 2017 and this increased demand has led to an increase in the offerings that are out there in the institutional investment landscape. These turnkey portfolio solutions for separate pools for community foundations to allocate a donor that may have that request for the portfolio to be invested in a responsible manner that you have seen a growing number of those. FEG actually has an OCIO or a discretionary portfolio with a 10 year track record going back to June of 2012. So something we've been doing for quite some time. Factors that have been preventing investment in RI and consistently see there's a lack of interest or there's some other investments that have a higher priority.

               We've seen those in past survey results, but something that has decreased over time and something that we're going to be keeping an eye on going forward is performance concerns. That decreased from last year, but, again, we're in a very different environment from this year to last year. So think about energy currently if we're looking at the landscape right now. Energy, the sector of the Russell 3000, up around 32% where we had technology really sell off this year after a prolonged bull market and a growth regime within equities. So when you're thinking about an ESG manager, typically they're going to be a little bit lighter on energy and a little bit heavier weighted in technology. So this has been a tailwind over time. So if you have energy that's up to say around 32% year to date as of June 30 of this year and technology down around 27 and even a modest allocation for energy within the Russell 3000 of 4%, this could impact top line if you're completely divested from energy and you're heavily weighted into technology stocks by about 2.4%.

               So significant as far as tracking error this year. And we'll get back to that in a minute. But one thing that we have seen over time is that we have seen increasing interest in allocation, but this is consistent with last year's and previous surveys. Overall allocations remain relatively small and focusing on those median allocations, we're looking at your MRI or impact programs, PRI programs, anywhere between one and 2% and about 3% for SRI ESG mandates. One thing to point out here, the overall average did tick up significantly. And that is because of the inclusion of community foundations that are 100% ESG or allocated to some sort of RI turnkey solution. So you do see that number jump up pretty significantly.

               And again, there's going to be some economies of scale going on with smaller organizations and larger organizations. So most smaller community foundations implement RI via some sort of SRI or ESG turnkey solution and a commingled or a mutual fund or a fund to fund structure. We have seen increasing number of participants with RI in their portfolio from last year to this year across the board. And we also have seen an increase in those mission related and program related investments for smaller community foundations. Looking at larger organizations, you're more than likely going to be implementing some sort of MRI or PRI programs compared to smaller community foundations and a lot of that comes down to resources, right? So resources to fund these types of programs along with the staff to properly administer and ensure the appropriate governance of these strategies. Those are all something that are available to larger community foundations and you see the respondents here, over 250 million.

               And then return expectations. We do see a little bit of a divergence here depending on the type of RI program being implemented. Mission related programs, program related programs, both, most of the respondents indicated that they have less than an overall expectation for portfolio target return. If you flip over to the SRI ESG allocations, you see about the same, the expectations about the same. Reasons for that really come down to the areas of focus and how the program is implemented. So most of those MRI or PRI programs are going to have very local footprint and they take the form of a low interest loan. Most investors or community foundations look at that as a part of their fixed income portfolio. So subdued return expectations for those programs. SRI or ESG portfolios are typically those co-mingled funds.

               A lot of times that's going to be invested in equities that proactively include ESG factors into their process and up until recently, modest to no allocation to energy has been a tailwind. So again, interesting to see what's going to be as far as the results in the 2023 survey as far as the expectations from those types of strategies. And how are they being allocated or what type of strategies are being utilized to implement SRI ESG. Traditional large cap and core fixed income remain the most common, but as investor demand has increased, the number of solutions and the dollars being put at work on the institutional investment landscape has also increased. So you start to see more strategies, broader offering into international small cap emerging markets, as well as alternatives. And then finally, we continue to see more divestment in SRI ESG portfolios.

               And there's two schools of thought here and an ongoing debate from the asset management standpoint. One could be to maintain your investments in energy corporations and on the shareholder level, try to change or enact change through bringing corporate resolutions or voting proxies in a certain manner or just simply divesting. So this is the second year in a row where over half of the managers, or at least the community foundations that have been surveyed, their managers, chose to simply divest. And again, as we look forward and if the energy markets remain dislocated and oil prices remain so high, will invest your appetite really maintain that same high level for ESG and the tracking error that's out there, will that lead to any sort of weakening of investor resolve in those types of strategies or if portfolios are completely divested.

Investment Committee Structure

Jeff Weisker (40:21):

So the last topic we'll just run through quickly here, just on the investment committee structure. So over half of you have between seven and nine investment committee members. I am still amazed though that about 14% of you have 11 or more investment committee members. We all know that the more you have on the committee, it can be a little more challenging to make changes in your portfolio. 55% of you have term limits for your members. The typical length of the term is between one and three years and the number of terms are between two and three. So again, 55% of you have term limits with the length of term being one to three years and you allow your committee members to serve anywhere from two to three terms. Current trends that you all are speaking about outside of the investment portfolio with your committee is just increased community needs.

               As the number of mission related investments increase, I know my clients are talking about this a lot with their investment committee. Also just looking at donor giving attitudes, whether it's cryptocurrency or another subject. And then finally, various legislative changes either at the state or federal level. I know that is another topic being spoken about with your committees. And finally, who can make motions vote on topics? We were asked to include this question in years back, but 86% of you have where your investment committee members can make motions and vote. 11% said that only board members can make motions and vote at investment community. Well thank you for your time. We will now transition to the Q&A section of the webinar. And please, if you have questions, do that via the chat button. And Sarah, do we have any questions so far?


Sarah Wessling (42:34):

Yes. Thank you, Jeff. We did have a few questions that came in. The first one was really just a clarification of some of the terms that we used. So they were asking when we were talking about administrative fees and expenses to clarify. And when we said administrative fees, that was talking about the fees that were charged to funds and expenses was talking about fees that were charged to the community foundation itself or either the advisor, the investment manager, or the custodian. So just that was a clarification one.

Jeff Weisker (43:10):

Yes. Just to clarify, the admin fees, that is what the community foundation charges to your underlying funds. So that is where you receive the revenues. The investment expenses are the fees vault and strictly with the investment portfolio. So that's the advisor, the investment manager, and the custodian.

Sarah Wessling (43:37):

Great. Thank you. I'm glad we were able to clarify that. Another question that came in was related to diverse managers and just trends that we see in general. So is this a trend that we will see? And are there any other ideas that you could elaborate on related to that? I'll hand this over to Quincy.

Quincy Brown (43:59):

Thanks, Sarah. I think this is beyond just a trend that will go away over some course of time because most community foundation have some level of diversity based in their mission. And so with that being said, and what we've gone through over the last few years, you're seeing more and more institutions really try to align their mission with their investment portfolios. In that breadth, what we're seeing in terms of trends within diverse manager programs is understanding how they're going to pursue. Whether that's engulfing the diverse managers into their main pools, whether that's setting up a separate pool as many have done as Jeff Davis alluded to. Related to PRI or MRI investment programs, would it be a separate pool for the portfolio or some process to which they incorporate diverse managers within their investment programs? So these are some of the trends or how people are looking at diverse managers, but we definitely see that being further embedded in the process for many institutions and we expect it to be prolonged discussions for the years coming forward.

Sarah Wessling (45:13):

Great. Thank you so much for answering that. Another question that we had related to speaking about the recent bear market that we've seen and whether that has impacted any desire for rebalancing. So I'll hand that one over to Jeff Davis.

Jeff Davis (45:37):

Yeah. So this bear market was a little interesting in that we actually had fixed income fall in tandem. So if we're thinking about rebalancing that might be forced from market movements and thinking about the strategic framework of your IPS, that hasn't happened because everything has fallen in tandem. What I have seen, at least from the community foundations that I've worked with, is taking the opportunity to say within asset classes to rebalance. The growth areas of the equity portfolios have been punished here year to date. So some have taken that opportunity with those down around 30% to rebalance back towards growth after value rip at the beginning of the year. A lot of that having to do with the energy market in particular. So I would say there has been some rebalancing, portfolios aren't being turned upside down, but just some things at the margin at this point.

Sarah Wessling (46:33):

Great. Thank you. It actually looks like that was the last question that we had. If you do think of any other questions, please email those to us at either communications.feg.com or you could reach out to any of the presenters from today. I'll go ahead and hand it over to Jeff Weisker to sum everything up for us and hope that you have a great day.


Jeff Weisker (46:57):

And again, thank you to all of you who responded to the survey. We appreciate you taking the time. The survey is set up for a way for you to benchmark yourselves versus other to have those conversations with your investment committee and the board on various enterprise risk management topics that we have discussed today and will continue to in the future in the survey. So just to summarize, looking at the 2022 survey, while much of the institutional field has moved towards an OCIO model, the traditional consulting model is still the most popular used by community foundations. But there again, we have seen that increase in some type of hybrid model. The spending rates have declined since we started the survey, but those have leveled off over recent years and we'll again, see in the 2023 survey, if the recent bear market has any impact on those rates going forward.

               When you look at diverse asset managers, we saw a noticeable jump in those of you that have some type of diverse asset manager language in your policy and have also invested in diverse asset managers. And then finally, cryptocurrencies, it's been in headlines. However, only 9% of you see that as an investible asset. Another 20% of you accept crypto is a gift. And I know another good portion of you are looking at whether or not to accept it as a gift in the future. So again, thank you for your time, thank you for your participation, and we will follow-up with the details of the survey in the next coming weeks. So we appreciate your time. Enjoy the rest of the week. Thank you.



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