For many NFPs, successful management of their capital – and the cashflows they generate from fundraising – are crucial to sustainable success.
Investment Policy Statements
An Investment Policy Statement defines how an NFPs investment portfolio is to be managed and how investment decisions will be made. It is a crucial element of sound financial governance. Perpetual’s Investment Policy Statement service helps NFPs develop a prudent, ‘best practice’ Investment Policy.
Linking a well thought-through Spending Policy to the overarching Investment Policy will further enhance financial governance. A Spending Policy sets out how distributions from your long term investment portfolio are paid into your operating revenue. It helps balance the NFPs short-term operational needs with the long-term sustainability of that investment portfolio. Perpetual’s Spending Policy workshop helps NFPs decide what approach is best for their organisation.
There is no one-size fits all investment strategy that will work for all NFPs. The nature of the mission, cashflows, size, liquidity needs, stakeholder relationships and, crucially, board expectations and experience will all be important influences on the strategies NFPs adopt to manage their funds. At Perpetual we work with NFPs to develop, implement and optimise investment strategies that address all these issues.
As with all investors, NFPs need to understand and manage investment risk. Act too boldly and your organisation’s activities could be affected. Invest too conservatively and you reduce your ability to fund future activities by allowing the real value of your capital to fall. Our “protect and grow” philosophy balances risk and return and is executed using sophisticated investment strategies that are tailored to NFP’s needs.
Strategic asset allocation
Having the right mix of assets is not simply a question of investment methodology. When we build portfolios for our NFP clients we take into consideration issues like cashflows, time horizons, risk profiles and more. For some clients, asset allocation decisions will be all about generating income to fund regular activities. For others it will be about maximising long-term growth. We have worked with many NFPs over the years where these questions involved a change of strategy. These strategic shifts can be as different as the organisations that need them. For example:
- moving away from property ownership towards more liquid investments.
- a strengthened focus on building up cash reserves.
- a decision not to invest to generate income but to focus on higher longer-term returns to grow the portfolio and fund a planned long-term shift in the mission.
We recognise that in a very real sense, NFPs are often managing other people’s money – whether it’s donors, governments or communities. That makes accountability, communication and reporting vital. Perpetual advisers work closely with our investment team and with NFP boards and leaders to tailor regular investment reporting and board presentations so NFP leaders always understand what’s happening with the funds they’re accountable for.
Investing for NFPs is a specialist skill and Perpetual offers NFP clients the benefit of extensive experience and real scale. Perpetual is one of Australia’s largest managers of philanthropic funds, with $2.9 billion in funds under advice for charitable trusts and endowment funds as at the end of FY20.
Perpetual’s investment philosophy is built around quality, value and risk management. We take a long-term approach to investing and believe high quality investments perform over time.
We enact this investment philosophy by diversifying across asset classes, industry sectors and individual investments and ensuring the assets in portfolios meet our stringent quality investment criteria.