As a firm, Natural Investments has long provided portfolio management and financial planning services to institutional clients across the country. By the end of December 2022, there were 27 nonprofit and foundation clients with about $90 million in assets under management firmwide. In this article, we want to share a case study about a nonprofit client we advised on portfolio management.
ABOUT THE NONPROFIT
The mission of this client focuses on equitable health outcomes for communities of color within its state. The nonprofit had gone through a period of successful fundraising, where it had enough cash to cover short-term operational expenses and was seeking an investment advisor to help invest board reserves that would fund future projects and organizational needs.
This client owned an investment mix that included laddered CDs, as well as an annuity that the organization could draw down from annually without penalty. This nonprofit has a great diversity of backgrounds within its staff, leadership, and board, all very accomplished in their respective fields of healthcare, public policy, community organizing, and finance, but not many had professional investment experience.
Since part of the organization’s core mission is helping communities of color build power, the board intentionally wanted to hire an investment advisor who had experience working with mission-based organizations, identifies as a Black, Indigenous, (or) Person of Color (BIPOC), and could help carry out a mission-aligned investment strategy.
The board was also seeking an advisor who could speak to members about investing in terms they understand and who could help them continue to build their knowledge and education around investing responsibly with a social justice lens.
HOW THE NONPROFIT FOUND NATURAL INVESTMENTS
Often organizations ask for financial advisors to respond to complicated RFPs to be considered as a potential advisor, and advisors who have limited time and team capacity to submit these RFPs often can’t compete with financial advisors at larger firms who have large teams and lots of capacity to respond to the RFPs.
Instead of circulating an RFP to find an investment advisor that met its criteria, this nonprofit used its network for a referral to Natural Investments, which eventually led to me since I am also based in the Bay Area.
The nonprofit asked me to respond to a few questions:
- Why would I be a good fit to support the organization’s mission and equity values?
- What investment strategies would we recommend for supporting the organization’s objectives?
The nonprofit board had recently formed an investment subcommittee and had created an investment committee charter. In the initial conversations, we talked more about the firm’s investment philosophy and approach to socially responsible investing. Through more discovery, I was able to gather a greater understanding of their goals, suitable risk tolerance, and ESG priorities of the portfolio.
We determined that the organization was ready to develop a strong investment policy statement (IPS) that would outline the objectives, time horizon, restrictions, and positive screening with the addition of community investing strategies.
The IPS would also help better articulate a spending policy, as well as set standards for measuring the success for the portfolio’s investment strategy.
Once we approved the client’s investment policy and constructed their portfolio, we moved into the period of implementation and monitoring of their investment plan.
While keeping a long-term focus is key, we have been able to help the client make tactical decisions around changing market conditions, such as the opportunity to reinvest money drawn down from its annuity each year into higher impact, community-based investments at more attractive yields given the changing interest rate environment.
Open communication with the client is key. We’re in touch throughout the year with a point staff person. We also hold meetings twice a year with the investment committee to review the portfolio, discuss investment performance and market conditions, talk about areas of potential risk, and review the organization’s spending policy.
This process has been a great way to help the board members continue building their financial knowledge.
It has been a rewarding experience to support their amazing organization.