Administration July 7, 2009

Market Turmoil Prompts Foundations' Investment Consultant Review

July 7, 2009 (PLANSPONSOR.com) - The recent market turmoil has sparked many nonprofit foundations and endowments to take another look at their overall investment management process.
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An SEI news release said 31% of nonprofits currently using a consultant model for investment management said they are concerned about that approach and are investigating alternatives.

Meanwhile, SEI said, 45% of that group feel their consultant should have communicated with them more frequently during the recent downturn, and 30% of all polled said that defining investment management fiduciary responsibilities for trustees and investment consultants is a top priority.

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The poll results highlight numerous areas of focus within investment management:

  • Almost three-quarters (71%) of those polled said their organization is making asset allocation changes in response to the current economic environment.
  • Many are decreasing allocations to U.S. equities (56%), non-U.S. equities (63%) and hedge funds (58%). Conversely, allocations are being increased towards fixed income (69%) and other alternatives (67%). In addition, 63% of respondents said maintaining an appropriate level of liquidity in the investment portfolio is a top priority.
  • The market downturn significantly impacted nonprofits, as 81% said their organization's overall invested assets decreased by at least 21%. Poor investment returns are impacting operational functions, as 45% of those polled said the economic downturn has forced the organization to choose between reducing staff and making program cuts.

"For many nonprofits, the wheels came off the entire process and they are seriously considering if their current approach to investment management is the best approach moving forward," said Carolyn McLaurin, vice president and Managing Director of SEI's Nonprofit Group, in the announcement. "As nonprofits determine strategies for addressing a wide range of issues, the external help they receive needs to be aligned with their efforts. Many are realizing this wasn't always the case."

The poll, conducted by SEI's Nonprofit Management Research Panel, was completed by 160 U.S.-based nonprofit organizations with total invested assets ranging from $25 million to more than $1 billion.

More information is available by writing seiresearch@seic.com .

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