Solid guidance for managers and trustees to better position their nonprofits now and in the future
The Great Recession has left a paradigm shift for nonprofit leadership and their board members as fiduciaries. It has changed how boards make, evaluate and document investment decisions, the risks they are willing to take and the way these details are communicated to donors. Nonprofit Investment and Development Solutions + Website will provide solid guidance for nonprofit leadership, staff and volunteers to better position their nonprofits to thrive now and in the future.
This guide will provide:
Sophisticated investment and development principles that are easily understandable and adaptable
Specific steps to take in order to avoid unnecessary investment risk and secure financial stability
Solutions and techniques for capitalizing on opportunities created by funding shifts and evolving donor expectations
Principles and practices of fiduciary responsibility, behavioral finance, socially responsible investing, strategic development planning and charity efficiency
In addition, Nonprofit Investment and Development Solutions + Website offers a web site resource with a variety of online tools and templates to help readers implement key concepts discussed in this book.
ROGER M. MATLOFF, CFM, CIMA (R), CAP (R), CRPC (R), is a senior vice president and institutional consultant at a major financial institution. Working with the team he founded in 1983, Roger creates sustainable strategic solutions for nonprofit organizations around the country. In his current role, he oversees the analytical, investment, and management programs that the team's foundation and endowment clients utilize. In his capacity as a consulting and investment expert, Roger has appeared on national television news programs and been cited in such national publications as the Wall Street Journal and Research magazine as well as numerous international publi-cations focused on serving the nonprofit market. JOY HUNTER CHAILLOU is a Senior Vice President and Senior Nonprofit Advisor for a major financial institution. In her current role, she serves as an advisor working with nonprofit organizations of all sizes to increase their organizational capacity and help them reach their goals by offering in-depth strategies and tailored solutions, providing them with the knowledge and resources needed to address the challenges they face as they pursue their mission and impact goals. Joy's advice and consultation focus is in the areas of governance, development strategies, staff training, and board education.
Preface: Here We Are ix Background: Where We Have Been x Multiple Factors x This Book s Setup xiii Acknowledgments xv CHAPTER 1 Philanthropy History and Statistics 1 American Philanthropy 1 Examining the Statistics 3 Summary 5 CHAPTER 2 Fiduciary Responsibility 7 What Is a Fiduciary? 7 What Are the Duties of the Fiduciary? 8 Pressure on Fiduciaries from Increased Volatility 9 Protecting the Assets The Prudent Investor 10 Training and Education of Fiduciaries 12 Increasing Government Regulation 14 Protecting the Mission 15 Effective Use of Professional Consultants 17 Valuable Resources 17 Summary 19 CHAPTER 3 New Roles for the New Reality 21 The Investment Consultant 22 The Investment Committee 24 Fundraising and Finance 24 Investment Policy Statement 28 Summary 30 CHAPTER 4 Behavioral Finance 31 The Psychology of Investing 32 Behavioral Factors and Investing 33 Psychology and Decision Making 34 The Psychology of Group Decisions 39 Behavioral Finance and Investment Consulting 41 Summary 44 CHAPTER 5 Understanding Risk 45 The Individual and Risk 45 Biases 46 Investment Committee Psychology 46 Risk and the Fiduciary 47 Group Dynamics and the Nonprofit 48 The Theory of Groupthink 49 The Blind Risk Model 52 Understanding Individuals Gathering Information 53 Assessing the Power on the Investment Committee 54 Completing the Process 55 Summary 57 CHAPTER 6 Asset Allocation 59 Asset Allocation Analysis 59 Types of Risk in Asset Allocation 60 Risk and Portfolio Performance 62 Preparing for Asset Allocation Analysis 64 Summary 68 CHAPTER 7 The Investment Policy Statement 71 The Elements of an Investment Policy Statement 71 The IPS Provides Essential Discipline 73 UMIFA and UPMIFA 75 IPS and Investments 78 The IPS and Asset Allocation 79 The IPS and Risk, Return, and Money Manager Retention 80 The IPS and Major Donors 81 Summary 82 CHAPTER 8 Money Manager Selection 83 The Goal 83 Outlining the Process 84 Step 1: The Search 85 Step 2: The Evaluation 86 Step 3: The Analysis 87 Step 4: Selection 93 Summary 94 CHAPTER 9 Dynamic Portfolio Optimization 95 Before Modern Portfolio Theory (MPT) 95 Modern Portfolio Theory 96 The Efficient Portfolio 99 The Mean-Variance Model 99 Dynamic Asset Allocation and Market Timing 100 Summary 101 CHAPTER 10 Investment Program Analysis 103 Monitoring Accounts 103 The Procedure 104 Assessing Money Managers 106 The Evaluation 109 Summary 110 CHAPTER 11 Socially Responsible Investing 111 The Roots of Socially Responsible Investing 111 What Exactly Is Socially Responsible Investing? 113 How Do We Accomplish Socially Responsible Investing? 115 The Risks of Socially Responsible Investing 116 Additional Means of Accomplishing SRI 118 Why Does a Nonprofit Implement an SRI Portfolio? 119 Summary 120 CHAPTER 12 The Changing Landscape for Fundraising 121 Our New Reality 121 Donor Motivations 122 Communication Strategies 124 Revenue Source Diversification 125 The Strategic Development Plan 127 Understanding Donors 128 Effective Communication Tools 130 The Case for Support 131 Measuring Programmatic Impact 133 The Strategic Development Planning Process 134 The Importance of Planned Giving As a Strategic Development Tool: Building Endowment with Planned Gifts 136 Donor Values That Affect Their Legacy Giving 138 Summary 140 CHAPTER 13 The Evolution of Donors Trends and Truths 143 The Modern Donor 143 Transformations in Giving Patterns 146 Growing the Donor Pool 151 Summary 159 CHAPTER 14 Growing Expectations 161 Resources 162 Two Key Measures of Financial Health 165 Financial Ratios 171 Integrity and Credibility 173 Summary 174 Conclusion 175 About the Companion Website 177 About the Authors 179 Index 181