Principles of Nonprofit Investment Management - Commonfund

More documents

Recommendations

Info

PRINCIPLE FOURManager SelectionThe investment committee or investment staff hires an arrayof investment managers to implement the plan presented in theinvestment policy statement. The selection of managers requiresa diligent investigation of each candidate’s entire set of qualifications,not just past performance and philosophy.- 20 -
Manager SelectionAn asset allocation plan calling fora diverse selection of investmentsrequires a diverse selection of investmentmanagers. Expertise is neededfor each type of investment.Recent Commonfund BenchmarksStudies found a wide range in thenumber of managers used by nonprofitinstitutions, with the greatest diversificationto be found among educationalinstitutions.A nonprofit’s investment policystatement might indicate the kindsof specialized managers needed, and itmight state their required qualifications.But the actual selection processusually turns out to be more than theinvestment committee or staff cancomfortably handle. Furthermore,the character of the institution mayalso dictate policies for managerselection, such as avoiding tobaccoand alcohol-related securities, focusingon socially responsible companies, orother qualitative criteria.Selecting investment managers is itselfa specialized capability. The processincludes not only selection of candidatesbut negotiating the engagement andmonitoring the managers on a continuingbasis. That is why nonprofits oftenoutsource the entire selection process.In the interest of full disclosure, wemust point out that selecting andmanaging investment managers constitutesone of the chief occupations ofCommonfund. We manage managersfor many hundreds of nonprofitinstitutions. The following discussion,while admittedly based on ourapproach to managing managers, isnot consciously intended to promoteour own services.What makes manager selection socomplicated? Start with the fact thatthere are thousands of managers tochoose from and new firms crop upregularly. Local sources, thoughconvenient for face-to-face meetings,do not necessarily provide the bestmatch. And the well-known stars arenot necessarily the best choice.Numbers of Managers UsedThe number of managers increases with fund size.Endowment SizeType of All Over $1 $500-999 $200-499 $100-199Institution Institutions Billion Million Million MillionEducation * 13 81 30 14 14Foundation ** 13 35 16 10 10Health Care *** 8 15 11 6 5Sources: * Commonfund Benchmarks Study – Education 2004**Commonfund Benchmarks Study – Foundation 2003***Commonfund Benchmarks Study – Health Care 2003- 21 -
Page 1: Principles of Nonprofit Investment
Page 4 and 5: Contents3 BasicsBeginning at the be
Page 6 and 7: PRINCIPLE ONEObjectivesThe governin
Page 8 and 9: The committee’s deliberations wil
Page 10 and 11: PRINCIPLE TWOPayout PolicyThe board
Page 12 and 13: Payout Policies for EducationalInst
Page 14 and 15: They could then calculate the payou
Page 16 and 17: PRINCIPLE THREEAsset AllocationAllo
Page 18 and 19: Since the introduction of the UMIFA
Page 20 and 21: Many such analytical tools are avai
Page 24 and 25: Selecting investment specialists ha
Page 26 and 27: PRINCIPLE FIVERisk ManagementYou sh
Page 28 and 29: PRINCIPLE SIXCostsContinually ask:
Page 30 and 31: PRINCIPLE SEVENResponsibilitiesTo p
Page 32 and 33: References andResourcesDow 36,000:
Page 34 and 35: About CommonfundCommonfund provides
Page 36: Commonfund15 Old Danbury RoadP.O. B

Principles of Nonprofit Investment Management - Commonfund

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?