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2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
2014-04 Study on Nonprofit Investing (SONI) Results
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2014-04 Study on Nonprofit Investing (SONI) Results

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  • 1. Thrive. Grow. Achieve. The Study on Nonprofit Investing (SONI) Survey Results Dennis Gogarty, CFP®, AIF® Chase Deters, CFP®, ChFC® Mark Murphy, CFA Copyright Raffa Wealth Management, LLC All Rights Reserved
  • 2. 2nd Annual 2014 SONI Survey Results/ Page DISCLAIMER 2 This presentation summarizes the results of an informal, non-scientific study compiled by analyzing the results of 261 surveys completed by nonprofit finance executives. This presentation is for information purposes only. Participant responses have not been verified. Data analysis was performed by Raffa Wealth Management. When stating “nonprofit” responses it should be noted that all responses are limited to the nonprofits that participated in the survey. No broader indications should be assumed.
  • 3. 2nd Annual 2014 SONI Survey Results/ Page STUDY ON NONPROFIT INVESTING 3 Nonprofits plan every fiscal move with great caution, backed up with thorough analysis. Yet when it comes time to plan their investment policies and gauge their investment performance, they operate in a vacuum, without access to information about how similar organizations manage their reserves and perform on their investments. The Study on Nonprofit Investing (SONI) is providing senior nonprofit finance executives with peer benchmarking data on investment policies and ROI. Raffa Wealth Management, LLC (RWM) has commissioned this annual study to help all nonprofits strengthen investment policies, gauge investment performance, and ultimately provide them with the tools they need to better serve their communities.
  • 4. 2nd Annual 2014 SONI Survey Results/ Page INTRODUCTION 4 In February of this year 261 nonprofit finance executives completed a survey about their organization’s investment policies and results. The survey was developed and distributed with the help of a third-party research provider (Visionary Marketing). Raffa Wealth Management has analyzed the results of the survey and is preparing the full SONI report for review. *Other Includes: Educational, Religious, Cultural, & Community Development Budget Of: Association Public Charity Private/Community Foundation Other Overall $0-5M 44 41 16 30 131 $5-25M 56 27 2 17 102 $25+M 10 9 1 8 28 Total 110 77 19 55 261 Second Annual Study On Nonprofit Investing (SONI)
  • 5. 2nd Annual 2014 SONI Survey Results/ Page AGENDA 5 Second Annual Study On Nonprofit Investing (SONI) • Budget and Reserve Balances • Portfolio Investment Policy Review • Portfolio Results & Analysis • Key Takeaways and Custom Reports
  • 6. 2nd Annual 2014 SONI Survey Results/ Page BUDGETS AND RESERVE BALANCES 6 How does the budget size and type of nonprofit impact where cash assets are held? What percentage of a nonprofit’s reserves is held in cash? • For most nonprofits, the relative size of their operating cash reserves tend to decrease as their operating budget increases. What percentage of a nonprofit’s reserves are held in a long term portfolio? • Once operational cash reserves are funded, most nonprofits focus the majority of their investable assets in long term investment portfolios Budget Of: Association Public Charity Private/Community Foundation Other Overall $0-5M 22.2% 32.8% 23.7% 39.4% 29.8% $5-25M 18.4% 16.7% 51.4% 21.0% 18.9% $25+M 8.5% 22.1% 4.9% 11.4% 13.7% Budget Of: Association Public Charity Private/Community Foundation Other Overall $0-5M 46.7% 28.2% 44.7% 21.4% 34.5% $5-25M 49.0% 59.8% 10.0% 42.5% 50.5% $25+M 53.7% 57.6% 94.1% 50.6% 55.5%
  • 7. 2nd Annual 2014 SONI Survey Results/ Page BUDGETS AND RESERVE BALANCES 7 What is the average level of investable assets with respect to budget size? What is the minimum target for reserves? • Most of nonprofits participating in the survey target 4-6 months for their minimum level of reserves. • Most of nonprofits participating in the survey held more in reserves than their minimum target. Associations Public Charity Other 45.5% 36.6% 37.5% 23.4% 31.7% 41.7% 22.1% 24.4% 12.5% 9.1% 4.9% 8.3% Operational Budget in Reserve 4 - 6 Months in Reserve 1 - 3 Months in Reserve More than 1yr in Reserve 7 - 12 Months in Reserve
  • 8. 2nd Annual 2014 SONI Survey Results/ Page BUDGETS AND RESERVE BALANCES 8 How many nonprofits maintain a line of credit for operational shortfalls? How many nonprofits use a line of credit? • Overall, 14.5% of the nonprofits who responded to the survey said they utilized a line of credit • Of those, the average interest rate on the line of credit was 3.4%, with a high of 7.0% and a low of 1.0% • Most nonprofits use their line of credit to pay expenses due to the timing of cash flows • Those nonprofits who used a line of credit, tended to maintain lower cash reserves (21.2% of total reserves) than those who did not (24.7%) Budget Of: Association Public Charity Private/Community Foundation Other Overall $0-5M 7.0% 14.6% 16.7% 19.4% 13.8% $5-25M 12.7% 7.4% 0.0% 23.5% 13.1% $25+M 10.0% 33.3% 0.0% 12.5% 29.4%
  • 9. 2nd Annual 2014 SONI Survey Results/ Page BUDGETS AND RESERVE BALANCES 9 Did more nonprofits add to, or withdrawal from their investment reserves during 2013? What percent of nonprofits had cash flows to/from their investment reserves? • Close to half added to reserves in 2013 • Few nonprofit organizations needed to withdraw money from their reserves What percent of nonprofits have formal goals to contribute to their reserves? • Most nonprofits only contributed to their reserves on an ad hoc basis, with no formal guideline Association Public Charity Private/Community Foundation Other Overall Added 47.4% 34.9% 43.8% 31.8% 40.5% Withdrew 10.3% 22.2% 18.8% 4.5% 13.2% No Change 42.3% 42.9% 37.5% 63.6% 46.4% Association Public Charity Private/Community Foundation Other Overall Guideline 34.5% 22.1% 36.8% 18.2% 27.6% Ad-Hoc 46.4% 51.9% 36.8% 56.4% 49.4%
  • 10. 2nd Annual 2014 SONI Survey Results/ Page AGENDA 10 Second Annual Study On Nonprofit Investing (SONI) • Budget and Reserve Balances • Portfolio Investment Policy Review • Portfolio Results & Analysis • Key Takeaways and Custom Reports
  • 11. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 11 How many nonprofits maintain a formal investment policy and who is given authority over investment decisions? What is the percentage of nonprofits with Investment Policy Statements? • The majority (~75%) of nonprofits maintain formal Investment Policy Statements to govern their reserves Who maintains decision-making authority over the investments in the portfolio? • Most nonprofits (53%) give their investment advisor discretionary authority to make investment changes within the guidelines of the IPS Association Public Charity Private/Community Foundation Other Overall 90 51 12 30 183 88.2% 67.1% 70.6% 62.5% 75.3% Association Public Charity Private/Community Foundation Other Overall 60.0% 51.0% 58.3% 36.7% 53.6% 38.9% 39.2% 25.0% 40.0% 38.3% 1.1% 9.8% 16.7% 23.3% 8.2% Discretionary Non-Discretionary Don't Know Inv Adv Authority
  • 12. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 12 What nonprofits maintain target asset allocations and who made changes? How many organizations had formal asset allocation targets? • The majority of associations have formal asset allocation targets, but barely half of the other nonprofit groups maintain these targets How many organizations changed their asset allocation targets? • Nearly 30% (23/79) of those Associations with formal asset allocation targets chose to make adjustments to their policy last year Association Public Charity Private/Community Foundation Other Overall Count 79 41 10 20 150 Percentage 71.8% 53.2% 52.6% 36.4% 57.5% Association Public Charity Private/Community Foundation Other Overall 23 17 3 7 50 21.7% 11.8% 33.3% 28.6% 20.0% 39.1% 23.5% 33.3% 28.6% 32.0% 26.1% 29.4% 28.6% 26.0% 8.7% 17.6% 14.3% 12.0% 8.7% 33.3% 6.0% Made a Change More Conservative More Aggressive New Category Increased Alts Decreased Alts
  • 13. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 13 How does the reserve size of a nonprofit impact the target asset allocation of their long term reserve? How do nonprofits with a $0-5M reserve structure their Long Term portfolio? How do nonprofits with a $5-25M reserve structure their Long Term portfolio? How do nonprofits with a $25+M reserve structure their Long Term portfolio? Association Public Charity Private/Community Foundation Other Overall 21 12 3 7 43 14.5% 20.0% 41.7% 19.6% 18.8% 33.0% 23.7% 9.3% 35.4% 29.1% 38.6% 37.4% 16.3% 33.6% 35.9% 5.9% 12.9% 9.0% 6.4% 8.2% 3.2% 6.0% 11.7% 0.7% 4.2% International Alternatives Reseve of $0-5M # of LT Reserves Cash Bond US Equity Association Public Charity Private/Community Foundation Other Overall 48 18 2 10 78 6.9% 4.0% 5.0% 4.5% 5.9% 35.6% 34.4% 10.0% 36.5% 34.8% 38.5% 38.6% 32.5% 41.0% 38.7% 9.2% 12.9% 52.5% 7.0% 10.9% 5.1% 4.0% 0.0% 1.0% 4.2% Reserve of $5-25M # of LT Reserves Cash Bond US Equity International Alternatives Association Public Charity Private/Community Foundation Other Overall 9 11 5 2 27 1.6% 2.3% 2.8% 0.0% 1.9% 31.9% 24.4% 21.2% 25.0% 25.4% 38.9% 32.6% 28.0% 60.0% 34.6% 15.9% 16.7% 10.2% 7.5% 14.0% 11.7% 20.3% 16.0% 7.5% 15.1% Reserve of $25+M # of LT Reserves Cash Bond US Equity International Alternatives
  • 14. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 14 How does the reserve size of a nonprofit impact the target asset allocation of their long term reserve? How do Associations structure their Long Term portfolio? • Smaller associations maintain a more conservative portfolio • Larger associations have a greater allocation to alternatives Cash/Bond US/Intl Equity Alternatives 47.5% 44.5% 3.2% 42.5% 47.7% 5.1% 33.4% 54.9% 11.7% Associations Reserve of $0-5M Reserve of $5-25M Reserve of $25M+
  • 15. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 15 What nonprofits included allocations to alternatives in their target allocations? How many organizations held alternative investments? • 45% of organizations with a target asset allocation held alternative investments • Associations were the least likely to include alternative investments in their target allocation • Those with larger reserves were more likely to include allocations to alternatives Reserve Of: Association Public Charity Private/Community Foundation Other Overall # Responses 78 41 10 20 149 $0-5M 19.0% 50.0% 33.3% 14.3% 30.2% $5-25M 47.9% 44.4% 0.0% 10.0% 41.0% $25+M 77.8% 100.0% 80.0% 33.3% 82.1% Overall 43.6% 61.0% 60.0% 15.0% 45.6%
  • 16. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 16 What kind of alternative investments are being used? What kind of alternative investments did organizations use? • Real Estate most commonly held alternative • Allocations to Private Equity/Venture Capital and Hedge Funds increase with Long Term Reserve size • Commodities and Precious metal holdings decrease as portfolio size increases • Given the 2013 return for Commodities, Hedge funds, precious metals, and REIT’s. Holding alternatives did not likely add value in 2013. Reserve Of: Commodity Hedge Fund Private Equity / Venture Capital Precious Metals Real Estate $0-5M 69.2% 15.4% 7.7% 30.8% 84.6% $5-25M 18.8% 12.5% 3.1% 12.5% 43.8% $25+M 8.7% 47.8% 30.4% 4.3% 26.1% Overall 42.6% 45.6% 23.5% 19.1% 69.1%
  • 17. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 17 Who’s responsible for ensuring that the investments comply with the IPS? Who has the responsibility to review compliance with the IPS? • Finance Committees are the most likely to have responsibility to review that the reserves are in compliance with the investment policy • Associations give responsibility to internal staff members to ensure compliance with their policy, more so than any other organization type Association Public Charity Private/Community Foundation Other Overall 33.0% 14.3% 8.3% 3.4% 20.9% 6.8% 12.2% 8.3% 31.0% 12.4% 54.5% 69.4% 75.0% 62.1% 61.6% 5.7% 4.1% 8.3% 3.4% 5.1% IPS Reviewer Staff Member(s) Board of Directors Finance Comm. Investment Advisor
  • 18. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 18 How often should your IPS be reviewed? How frequently is the Investment Policy Statement reviewed? • IPS is most commonly reviewed on an annual basis (60%-77%) • Reviewing on an as needed basis is the second most common response (10% - 20%) Association Public Charity Private/Community Foundation Other Overall 14.6% 23.5% 8.3% 17.2% 17.1% 77.5% 62.7% 75.0% 58.6% 70.2% 7.9% 11.8% 8.3% 24.1% 11.6% 2.0% 8.3% 1.1% IPS Review Date As Needed Within 1 Yr I don't know 2 Yrs or Less Often
  • 19. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO INVESTMENT POLICY 19 What do nonprofits include in their investment policy statements? In the IPS, what topics are addressed most frequently? • Additional Suggestions for IPS Categories – Performance Benchmarks - Conflict of Interest – Definition of Risk - Spending Policy – Cost of Funds/Management - Portfolio Goals & Objectives – Performance Accountability - Fiduciary Status • Permitted and prohibited investments, and the target investment allocations were the top three items addressed • Fewer than half of policies address selection/termination guidelines of investment advisors • Very few policies included SRI restrictions Percentage 87.7% 78.2% 68.2% 61.5% 60.9% 54.7% 49.2% 28.5% 21.2% Target Allocation Percentages Permitted Investments Prohibited Investments Socially Responsible Mandate Diversification Requirements Items Reviewed in Investment Policy Selection of Investment Advisors Termination of Investment Advisors Financial Advisor Discretion Internal Staff Roles/Responsibilties
  • 20. 2nd Annual 2014 SONI Survey Results/ Page AGENDA 20 Second Annual Study On Nonprofit Investing (SONI) • Budget and Reserve Balances • Portfolio Investment Policy Review • Portfolio Results & Analysis • Key Takeaways and Custom Reports
  • 21. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 21 How does the reserve size of a nonprofit impact their bottom line results? What was the reported performance of the long term reserve in 2013? • Associations with a smaller portfolio balance tended to have a lower rate of return, likely due to their more conservative asset allocation. • As Public Charities grow in size, they tend to reallocate more of their cash to alternative investments. This did not provide a significant improvement in their investment returns in 2013. Reserve Of: Association Public Charity Private/Community Foundation Other Overall $0-5M 7.9% 8.6% 11.7% 10.5% 8.7% $5-25M 13.4% 12.4% 10.0% 13.4% 13.1% $25+M 14.9% 12.0% 12.1% 12.0% 12.9% Overall 11.8% 10.8% 11.5% 12.0%
  • 22. Total United States Stock Market Russell 1000 Index: top 1000 largest US publicly traded companies Russell 2000 Index: remaining 2000 mid-sized and small US publicly traded companies S&P 500: top 500 largest US publicly traded companies Value Stocks Growth Stocks Russell 3000 Index: materially all publicly traded US companies Russell 1000 Index: Russell 2000 Index: For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 23. Total International Stock Market Large International Developed Country Stocks Stocks from Emerging Market Countries MSCI All World ExUS Index MSCI EAFE Index MSCI Emerging Markets Index For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Other: South America & Canada
  • 24. Total US Bond Market BarCap 1-5yr Gov/Credit Index: Avg Duration ~ 2.7yrs BarCap Long Term Gov/Credit Index: Avg Duration ~ 14.2yrs BarCap Aggregate Bond Market Index: Avg Duration ~ 5yrs BarCap 1-5yr Gov/Credit Index: Avg ~ 2.7yrs BarCap Long Term Gov/Credit Index: Avg ~ 14.2yrs For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. BarCap 5-10yr Gov/Credit Index: Avg ~ 6.5yrs BarCap 5-10yr Gov/Credit Index: Avg Duration ~ 6.5yrs BarCap US Credit Index: Avg Duration ~ 6.8yrs BarCap US Treas Index: Avg Duration ~ 6yrs US Government, Agency & Treasury Bonds US Corporate & Mortgage Backed Bonds
  • 25. 2nd Annual 2014 SONI Survey Results/ Page 2013 INDEX RISK AND RETURN 25 For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Risk Return Fixed income International stocks US Stocks Second Annual Study On Nonprofit Investing (SONI)
  • 26. 2nd Annual 2014 SONI Survey Results/ Page 2013 PORTFOLIO BENCHMARK INDEX RISK AND RETURN 26 For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Second Annual Study On Nonprofit Investing (SONI)
  • 27. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 27 How do the investment results compare to a blended portfolio benchmark? What was the performance of a sample blended portfolio benchmark in 2013? Representative, sample portfolio benchmarks are intended to give context to performance results. The benchmarks were selected because we believe they are the broadest index available in each broad category (US stock, Intl stock, Bond, and Cash). They may or may not be suitable benchmarks for comparison to any particular investor’s portfolio or for the average results reflected in this study. 2013 Return 30/70 40/60 50/50 60/40 70/30 33.55% 20% 29% 38% 47% 56% 15.29% 10% 11% 12% 13% 14% -2.02% 65% 55% 45% 35% 25% 0.02% 5% 5% 5% 5% 5% 8.72% 0% 0% 0% 0% 0% Traditional Market Benchmarks Blended Portfolio Sample Benchmarks Russell 3000 1Month US T-Bills HFRI Fund-of-Funds MSCI AW ExUS BarCap Agg Bond For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 28. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 28 How were the investment results relative to a blended benchmark? What was the performance of a sample blended portfolio benchmark in 2013? •On an absolute basis, performance in 2013 was very strong •Relative to a sample benchmark, performance lagged significantly as nonprofits increased exposure to equities 2013 Return 6.93% 10.30% 13.68% 17.05% 20.42% Traditional 40/60 Portfolio Benchmark Traditional 50/50 Portfolio Benchmark Traditional 60/40 Portfolio Benchmark Traditional 70/30 Portfolio Benchmark Blended Benchmark Portfolio (Stock/Bond)* Traditional 30/70 Portfolio Benchmark *Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated. Past performance is not an indication of future results and any investment can lose value. # Portfolios Avg Return +/- Index 9 8.59% 1.66% 9 10.58% 0.28% 26 11.08% -2.60% 20 12.00% -5.05% 29 13.66% -6.76% 2013 Results Growth 70/30 Portfolio (60-70% Stock) Nonprofit Investment Allocation Conservative 30/70 Portfolio (20-30% Stock) Mod Conservative 40/60 Portfolio (30-40% Stock) Balanced 50/50 Portfolio (40-50% Stock) Moderate Growth 60/40 Portfolio (50-60% Stock) For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 29. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 29 What level of under - performance is acceptable? What level of underperformance is acceptable? •Most nonprofits (45%) believe that over a 5 year time frame, advisors and managers should be expected to outperform their market benchmark net of all fees •A surprisingly large number (23%) of nonprofits “didn’t know” what level of underperformance was acceptable. 33 16% 12 6% I don't know 46 23% 45% Advisors are expected to outperform gross of their fee, but underperformance up to the amount of their fee is reasonable After considering all fees, trailing benchmarks by 0.5% - 2.0% is reasonable Performance should be measured in absolute terms (for example CPI + 5%) 10%20 Given a 5yrs, advisors are expected to outperform market benchmarks net of all fees 90 For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 30. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 30 How much do nonprofits pay their advisors and fund managers? How much do you pay your investment advisor and fund managers? •As the investment balance increases, most nonprofits tend to be able to reduce their fees How many “don’t know” how much they pay their advisors and fund managers? •The majority of responses “don’t know” their fees •As reserve balances grow, fewer associations are unaware of how much their advisors are being paid Reserves Of: Association Public Charity # Responses 46 25 $0-5M 1.45% 1.01% $5-25M 1.13% 0.82% $25+M 1.02% 0.99% Reserves Of: Association Public Charity # Responses 63 52 $0-5M 70% 81% $5-25M 50% 48% $25+M 45% 36% Overall 58% 66% For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 31. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 31 How do portfolio expenses impact bottom line portfolio results? Does knowing how much you pay impact overall portfolio performance? *t(150) = -1.96, p=0.078 •Portfolio results are significantly lower for those who do not know their investment expenses How does paying higher fees impact investment returns? •Overall, as portfolio expenses increased, average returns decreased. Average Return 12.20% 9.98% Fees are Known Fees are Not Known # Responses Average Return 35 12.54% 40 12.10% 17 11.56% Annual Fee: 0.00% - 0.75% Annual Fee: 0.76% - 1.50% Annual Fee: 1.50% +For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 32. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 32 How do portfolio expenses impact bottom line portfolio results? How does the impact of not knowing fees change as asset allocations change? •Portfolio results decline substantially when portfolio expenses are unknown Fees are Known "Don't Know" Fees Difference 11.69% 8.40% -3.29% 12.44% 10.90% -1.54% 15.36% 10.57% -4.79% Portfolio Allocation Balanced (50/50) Portfolio Mod Growth (60/40) Portfolio Growth (70/30) Portfolio For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 33. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 33 How do portfolio expenses impact bottom line portfolio results? How does giving discretion to an investment advisor impact performance? •Overall, giving discretion to your financial advisor only slightly improves bottom line results, but not significantly How does having an SRI mandate impact performance? •Approximately 21% of those who had formal investment policy guidelines also had a socially responsible mandate •Those who had a SRI mandate experienced lower returns than those without the restriction Average Return 11.51% 11.45% Discretion Non-Discretion Average Return # Responses 12.64% 142 10.14% 38 No SRI Restriction SRI Mandate For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 34. 2nd Annual 2014 SONI Survey Results/ Page PORTFOLIO RESULTS & ANALYSIS 34 How does having a formal investment policy impact portfolio results? How does having a formal invest policy impact performance? *t(148) = 4.92, p < 0.01 •Overall, organizations who have formal investment policy targets had significantly higher returns Does changing asset allocation targets impact performance? *t(121) = 2.44, p < 0.05 •Overall, organizations who stuck to their original asset allocation targets had significantly higher performance results Average Return 12.74% 6.34%No Formal Targets Have Formal Allocation Targets Average Return 13.79% 10.99%Making Change to Target No Change to Target For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 35. 2nd Annual 2014 SONI Survey Results/ Page AGENDA 35 Second Annual Study On Nonprofit Investing (SONI) • Budget and Reserve Balances • Portfolio Investment Policy Review • Portfolio Results & Analysis • Key Takeaways and Custom Reports
  • 36. 2nd Annual 2014 SONI Survey Results/ Page KEY TAKEAWAYS 36 Keeping it Simple in 2013 helped respondents perform better. 1. Great absolute returns in 2013 and more respondents added to reserves than withdrew. 2. Close to half of the nonprofits participating held close to 50% of their cash assets in long term investments. 3. Half of the respondents give discretion to advisors to operate within the guidelines of the IPS. 4. The majority of associations have formal IPS’s with asset allocation targets. Having a policy with asset allocation targets, and not making changes to them, improved ROI in 2013. 5. The larger the organization and the more aggressive the asset allocation policy, the better the performance results in 2013. For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 37. 2nd Annual 2014 SONI Survey Results/ Page KEY TAKEAWAYS 37 Keeping it Simple in 2013 helped respondents perform better. 6. Allocating to alternative assets likely detracted from performance results in 2013. 7. In relation to traditional broad market stock and bond benchmarks, participant returns trailed significantly. 8. The lower the fees, the better the results. In part because larger portfolios were more aggressively invested and less expensive. 9. Not knowing fees (more than 50% of respondents) correlated with lower results. 10. Portfolios with more US equity (particularly small cap), less emerging market and alternative investment exposure, and shorter term/corporate bonds performed best. For Illustration purposes only. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results.
  • 38. 2nd Annual 2014 SONI Survey Results/ Page CONCLUSION 38 Thank you for attending! Custom SONI reports can be created to compare your organization’s policy and results to your peer group for a flat fee. We can’t thank you enough for participating and we strongly encourage you to participate again next year. For more information: • Visit www.npinvesting.org • Or email info@raffawealth.com
  • 39. 2nd Annual 2014 SONI Survey Results/ Page DISCLOSURE 39 This information was gathered from reliable sources but we cannot guarantee accuracy. Any performance related information is based on participant responses and have not been verified. Past performance is not an indication of future results and any investment can lose value. Performance results have been compared to balanced benchmark portfolios comprised of broad market indexes. The benchmarks were selected because we feel they are the broadest market benchmark available in each broad category. They may or may not be suitable benchmarks for comparison to any particular investor’s portfolio or for the average results reflected in this study. You should consult with your investment professional to determine suitable benchmarks for your portfolio. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.

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