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Today’s Nonprofit Investment Committees Face Existential Challenges — Five Basic, Simple Tips for Long Term Success
November 2018

Legend has it that a college professor once awarded an “A” for the best existentialistic description of a simple chair. The “A” paper contained just two words, “what chair?”

It’s been said “the existential attitude” is a sense of puzzlement, misperception, or anxiety in the face of an apparently empty or illogical world. Does that not sound like a perfect description of the investment climate faced by investment committees today?

Today’s investment committee member’s existential struggle is to make investment decisions that address the ongoing need to fund the nonprofit’s current and future endeavors. Given our current long bull market, it’s easy to forget 2008. Chasing higher returns when you have more “house money” is common among committees feeling the pressure of a nonprofit’s administration demands for more available capital. The time is always right to spend more than your typical four percent spend rate, especially when your investments are doing well. But chasing more money carries a higher risk that could put your organization’s mission at risk.

The timeliness of best practices is not in question as value has always been the foundation of a long term investment strategy. But with today’s hot market headlines, are investment committees perhaps getting seduced by “easy money” and moving away from a safer value-oriented portfolio?

It’s time to get back to the basics of what constitutes an effective investment committee. Here are five tips to help guide your decisions.

 

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