Director or Board or Trustee position on a Non-Profit Board
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Director or Board or Trustee position on a Non-Profit Board Would anyone like to start a conversation about the differences of making investment decisions when on a non-profit board and other governance issues? I realize this is not a bivio or investment club topic, so I am quite willing to take this 'offline' but I'm hoping to engage a small group of like-minded individuals who are grappling this topics such as: What is an appropriate asset allocation for an 'in perpetuity' endowment What is an appropriate asset allocation for a fund theoretically limited to disbusing 'income' only'. How does the UPMIFA impact our decisions? What are appropriate governance guidelines? How do we control costs? Especially investment related costs? I find that most investment advice is geared to 1)individuals and 2) retirement. Aren't some of the factors different for a non-profit? (And, yes, I'm well aware there are different types of non-profits.) Anyway...anyone else here find themselves invited to participate on a non-profit board? And would you care to share stories, frustrations and advice? Sorry, I hit enter and realized I needed to edit my Subject Line. I'm looking for others who are either trustees or board members on a non-profit board, specifically a non-profit organization with funds they invest. Linda Would anyone like to start a conversation about the Linda, I've been meaning to respond to this, but was on vacation for a week. My understanding of the requirements for a non-profit under UPMIFA are based on the concept that the organization should create a plan that will provide funds for current operations as well as provide sufficient growth in the corpus to be able to provide operating funds in the future. I think there are several ways to go about this. You could start by determining that you (the organization) would like to be able to draw x% annually from the fund. You could then have a portfolio advisor determine what your investment strategy would need to be in order to get that yield, plus the necessary growth, plus the advisor's fees. Set the desired percentage too high and you will need to make higher-risk investments and thereby increase the possibility that the investment strategy will fail. (That is, you will either spend down the endowment or will have to sharply reduce your draw on the funds.) Monte Carlo simulations can determine the likelihood of success or failure. During the planning stage, you can revise the various parameters (annual draw rate, investment return rate, inherent risk of portfolio choice, management fees, etc.) to reach an endpoint that is acceptable to the Board of the organization. You could also set an investment strategy you are comfortable with, determine its expected yield and growth, and then calculate what you could draw from it while still maintaining the fund's longevity. >What is an appropriate asset allocation for an 'in perpetuity' endowment There is no baseline "appropriate" asset allocation. You need to determine how much money you want to be able to draw and determine the allocation from there. >What is an appropriate asset allocation for a fund theoretically limited to disbusing 'income' only'. I believe that "income only" distributions violate the principles of UPMIFA. >How does the UPMIFA impact our decisions? That is state specific. Some states have codified the UPMIFA guidelines into laws that can be used against organizations that don't adhere strictly to the state implementation. Other states (such as NJ where I am) have adopted only a weakened version of UPMIFA which leaves the organization with the freedom to adopt less than optimal solutions. >How do we control costs? Especially investment related costs The same way you would do so on a personal level. You could negotiate a fixed advisory fee and accept proposals from multiple advisors to compare their services and charges. Here's a link to an article from PNC Bank that covers this topic nicely - https://www.pnc.com/insights/corporate-institutional/manage-nonprofit-enterprises/upmifa-spending-policy.html Ira Smilovitz Would anyone like to start a conversation about the Please remove me from this mailing list. Can't find a way to do so on Bivio, so appreciate the help.
Can you please unsubscribe me.
Thank you,
LeAnn Go Beavs!
From: club_cafe@bivio.com <club_cafe@bivio.com>
On Behalf Of ira smilovitz via bivio.com [This email originated from outside of OSU. Use caution with links and attachments.] Linda, I've been meaning to respond to this, but was on vacation for a week. My understanding of the requirements for a non-profit under UPMIFA are based on the concept that the organization should create a plan that will provide funds for current operations as well as provide sufficient growth in the corpus to be able to provide operating funds in the future. I think there are several ways to go about this. You could start by determining that you (the organization) would like to be able to draw x% annually from the fund. You could then have a portfolio advisor determine what your investment strategy would need to be in order to get that yield, plus the necessary growth, plus the advisor's fees. Set the desired percentage too high and you will need to make higher-risk investments and thereby increase the possibility that the investment strategy will fail. (That is, you will either spend down the endowment or will have to sharply reduce your draw on the funds.) Monte Carlo simulations can determine the likelihood of success or failure. During the planning stage, you can revise the various parameters (annual draw rate, investment return rate, inherent risk of portfolio choice, management fees, etc.) to reach an endpoint that is acceptable to the Board of the organization. You could also set an investment strategy you are comfortable with, determine its expected yield and growth, and then calculate what you could draw from it while still maintaining the fund's longevity. >What is an appropriate asset allocation for an 'in There is no baseline "appropriate" asset allocation. You need to determine how much money you want to be able to draw and determine the allocation from there. >What is an appropriate asset allocation for a fund I believe that "income only" distributions violate the principles of UPMIFA. >How does the UPMIFA impact our decisions? That is state specific. Some states have codified the UPMIFA guidelines into laws that can be used against organizations that don't adhere strictly to the state implementation. Other states (such as NJ where I am) have adopted only a weakened version of UPMIFA which leaves the organization with the freedom to adopt less than optimal solutions. >How do we control costs? Especially investment related costs The same way you would do so on a personal level. You could negotiate a fixed advisory fee and accept proposals from multiple advisors to compare their services and charges. Here's a link to an article from PNC Bank that covers this topic nicely - https://www.pnc.com/insights/corporate-institutional/manage-nonprofit-enterprises/upmifa-spending-policy.html Ira Smilovitz On Sun, Jul 2, 2023 at 1:07 AM Linda Glein via bivio.com <user*21345500001@bivio.com> wrote:
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