Investment Ideas for Not For Profit

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May 12, 2009 5:15 pm

Have a client that is a not for profit.  Have 3mm in assets.  They are risk adverse, so they say, but do take risk.  They buy CDs out of Firm.  Have big cash position with me and they are looking for ideas. 

 
Should I approach them differently then I would a natural client regarding investing, or do you think I should invest for them the same way I would anyone else?
 
Thanks.
May 12, 2009 5:50 pm

Non-profit, huh? Putnam sounds about right.

May 12, 2009 5:58 pm

Have you asked them to put together an investing mission statement. Not sure that is the right term, but something that spells out what you can and cannot invest. Most nonprofits need something like that. If I was a donor, I would want to know exactly what the nonprofit could or couldn't do.

May 12, 2009 8:00 pm

Investment Policy Statement.  Every wirehouse and most mutual fund companies will give you an example.  Help them write the IPS then offer to manage the funfd to that statement.  FYI..Never done it myself but that's how I would start!

May 12, 2009 8:02 pm

Oh yeah...and don't take the "policy" from one guy on the board.  Everyone sigsn it and you should present it's meaning to them.  Yiu don't want some bozo expert saying "i told you to buy Cocoa-Cola", etc.

May 12, 2009 8:29 pm
frumhere:

Have a client that is a not for profit.  Have 3mm in assets.  They are risk adverse, so they say, but do take risk.  They buy CDs out of Firm.  Have big cash position with me and they are looking for ideas. 

 
Should I approach them differently then I would a natural client regarding investing, or do you think I should invest for them the same way I would anyone else?
 
Thanks.
 
With tht type of account - I am surprised that they don't already have an IPS.  You need to ask.  Depending on the organization, there may be restrictions on investing in certain kinds of investments or companies (i.e. tobacco, firearms, etc.)
 
Most Non Profit IPS's (that I have been associated with) have an investment objective of principle protection with long term growth.  
 
If you don't have a copy of the IPS - then I am assuming that they did not entertain bids for fund management.  As mentioned earlier - before you begin investing - discuss and get signoff from the entire board.  And be sure that they know exactly what the pricing will be.
 
The foundations that we manage are typically priced between 60 -80 bps.
May 12, 2009 11:07 pm

Former non profit executive with non profit businesses in my book chiming in.

 
Investment policy statement as noted before and using Uniform Prudent Investment Act as guidelines are always excellent courses of action for trusts, endowments, etc.  Check and see if your state has incorporated UPIA (or made custom state specific ammendments and subsequent acts) as a guideline.
 
The most important thing is for you to understand what they are investing for and what the object is. Do they want cash flow for operations? Do they need end end sum for a capital project? Do they have grant funding issues that tighten cash flow? Are the funds restricted (were they donated for restricted purposes or for services) or are they unrestricted? (meaning the money is not limited in terms of use or tied up by the donors for a purpose)
 
Make sure you understand the board of directors cold.  Learn who has the formal and informal power on the board. You will be surprised at how quickly a board can have one person, who you least expect, has the power to undo you and throw you under a bus.
 
You are either pitching to them directly, or pitching to them through someone who can't articulate well what we do. Manage the board as a CEO would.  If there is no investment or finance committee - suggest one, and suggest a few key board relationships to be involved. (hint - flatter them)  Most of them don't understand their responsibilities, most of them don't understand our business and most of them don't understand how liable they are as fiduciaries.
 
PM me with specific questions.
 
 
May 13, 2009 10:27 am

A huge help.  Thank you everyone!

 
May 13, 2009 10:32 am
3rdyrp2:

Non-profit, huh? Putnam sounds about right.

 
Damn, I at least expected one "Ba-dum bum!"  from the peanut gallery. 
May 13, 2009 11:22 am

Just got off the 30 minute call with organization and accountant and I think I nailed the conversation with all of your help.