Prudent and intelligent management can maximize the impact of non-profit and philanthropic organizations. Parkview provides a variety of advisory services that help in the establishment, operations and investment of such entities, offering our clients the means to achieve their goals across an open-ended timeframe.
While private wealth management decisions are typically made by the family or individual wealth owner, a foundation or endowment is managed by a dedicated investment committee acting in a fiduciary role.
It is thus important to ensure the original donors’ wishes are embedded into the decision-making process. The Investment Policy Statement is the key to aligning operations with ideals. This comprehensive document defines objectives, demarcates roles and responsibilities, identifies an investment strategy and provides appropriate constraints on the investment committee.
Parkview helps clients through this process and provides guidance on balancing these critical factors with investment best practices to help ensure continued success.
Managing Spending Rate
Another task of the Investment Policy Statement is to define a spending rate that allows ongoing support for the targeted cause. The requirement to distribute income in any market environment imposes two significant constraints on this number.
First, portfolio volatility and directional market exposure need to be sufficiently low to achieve the spending rate while also yielding a total excess return that preserves buying power in perpetuity.
Second, high income requirements often to lead to over-concentration in income-producing assets. Fixed income and distributing stock are typical choices, but in a low interest-rate environment, which suppresses yield, a more sophisticated approach may be required.
Parkview helps clients balance their operational constraints with current market realities. We operationalize this advice with access and diligence assessments of both traditional and alternative investment strategies.
Retention of Status
Foundations and endowments enjoy tax exemptions that considerably simplify investment management. However, losing this status has grave implications for a non-profit, making it crucial to protect the organization from transactions that could jeopardize the mission.
For example, in some jurisdictions, foundations are required to distribute a minimum amount per-annum to retain tax-free status. Others are not allowed to engage in certain taxable activities, or to participate in them through financial investments. Prior to engaging in any alternative investment strategy, and especially in private equity, a careful assessment of the prevailing jurisdiction’s legal considerations must be made.
With a global footprint and experience across geographies, Parkview helps clients meet their financial goals while remaining keenly sensitive to the local mandates that can impact an organization’s status.