Guide to Choosing a Christian Financial Advisor
With the abundance of information and services available, it can be daunting when searching for a Christian financial advisor who meets your criteria. If achieving long-term financial wealth is an obj
Does your organization need an investment policy statement? Our brief answer is an indisputable ‘yes.’
An investment policy statement defines the purpose, objectives, risk tolerance, investment strategy, governance, spending policy, and fund monitoring process.
These are some goals to keep in mind for the funds a non-profit chooses to invest:
The day-to-day management of investments typically falls to the portfolio manager. However, the board of directors of any non-profit has a fiduciary responsibility to oversee the organization’s assets—authorizing asset allocation and risk profiles based on regularly evaluated investment goals and performance.
We believe all these moving parts need to be organized in a well-structured policy statement.
The investment policy statement is a unique document that should include these key components customized to the needs of the organization.
The first section of an investment policy statement summarizes the body of the document.
It broadly states the:
Investment programs have many moving parts and require clear and detailed guidelines on the roles and responsibilities of all the parties involved.
The investment statement should set down the investment objectives based on the non-profit’s goals and constraints vis-à-vis the realities of the investment market. Elements mentioned in the objectives section include:
Our goal behind asset allocation is to have a nimble portfolio that meets all the objectives.
The investment committee develops approved ranges for each target asset allocation to allow for strategic shifts in response to opportunities in the market in addition to natural shifts due purely to market behavior. These will depend on the risk tolerance of the non-profit.
Here’s an example of the parameters set within an investment policy statement
Asset Class | Lower Limit | Target | Upper Limit |
Equities | 30% | 50%% | 60% |
Fixed Income | 30% | 40% | 70% |
Alternatives | 0% | 10% | 20% |
We believe rebalancing the portfolio is key to keeping asset allocations on target. The rebalancing policy gives guidelines on:
The spending rate policy may provide a relatively predictable revenue stream to meet the goals of the non-profit while preserving and growing the value of assets. There are various ways that the spending rate can be determined. The spending rate is subject to periodic review to curb volatility.
We believe objectives and guidelines are only as good as their implementation. Therefore, it’s crucial for an IPS to include monitoring and review processes. The monitoring mechanism may set out the frequency of :
We at Stonecrop believe a well-defined investment policy statement is the blueprint for non-profit organizations to meet their objectives and minimize portfolio risk.
Stonecrop works with your board of trustees of your non-profit to create an investment committee. We then work with the committee to draft an IPS that fits the DNA of the organization and that will guide them in fulfilling their fiduciary responsibilities.
To embark on the road to investment success, get in touch with Stonecrop today.
AUTHOR
Doug MacGray
DATE
February 9, 2022
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We’d love to hear about your organization and discuss how our extensive experience advising institutional clients on non-profit investment strategy can help support your mission and objectives.
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