Investing for Charity
Altruistic though they may be, those managing funds for nonprofits have to keep a close eye on dollars and cents. Some of these money-minded professionals turn to nonprofit consultants for investment advice. Among those consultants who stand out from the crowd is Lori Van Dusen.
On Sept. 21, 2010, Foundation & Endowment Money Management named Van Dusen, executive director of Rockville, Md.-based Convergent Wealth Advisors, as the 2010 Nonprofit Consultant of the Year. She earned the honor for providing her clients with innovative thought leadership and strong returns. Van Dusen passes along some of her advice below.
FundRaising Success: Could you elaborate on what you and your company did for nonprofits in order to earn this award?
Lori Van Dusen: We have worked closely with our clients to help them better understand the role their investment pool plays within the larger organization. In this environment, it is important to educate clients of the linkage between organizational risk and investment risk. The recent Nonprofit Consultant of the Year award was very special to us as a significant weight was given to interviews within the industry and our client base. At the end of the day, we only succeed if our clients succeed, and that is the most gratifying honor we can receive.
FS: In providing investment advice to nonprofits, what's the main issue you've been suggesting organizations concentrate on this year?
LVD: We have worked closely with our clients this year to educate them on the importance of integrating all segments of the organization when making investment recommendations and decisions.
For example, the finance and investment committees should have periodic joint sessions to ensure that all parties understand the linkage between organizational and investment risk. The development office should keep the finance office appraised of major capital campaigns and expected inflows into the organization.
As part of our process, we work regularly and extensively with our clients to stress test the linkage between both organization and investment risk.
FS: What are some of the trends you're seeing, and what do you forecast in the coming months?
LVD: We believe that we are in a high-risk, low-reward environment that should begin to reward high-quality companies and managers that employ deep fundamental research and analysis.
By way of example, we are currently recommending clients invest with managers who have taken an overweight position to global, multinational companies that are trading at attractive valuations.
A summary of our current tactical positioning can be found on our website.
FS: What's your long-term forecast for where nonprofits should be investing their dollars?
LVD: A vast majority of nonprofits have similar goals and objectives. More specifically, most attempt to achieve spending plus inflation returns and grow their assets in perpetuity. To that end, our clients are more growth-oriented in their investment approach.
Achieving this objective in the current economic climate could prove to be particularly challenging. As such, consistency and growth are important considerations when making portfolio recommendations to clients.
For many of our clients, hedged equity is an effective strategy that we utilize to complement their long- only equity allocation. These strategies, when implemented correctly, should provide equity-like returns and reduce the overall volatility of the portfolio.
Managing volatility is important when considering annual spending formulas and portfolio withdrawals. Moreover, we have worked extensively this year with our clients to implement investments that are designed to protect the portfolio from inflationary pressures but are not dependent on inflation for a successful investment outcome. FS
