Case Study

Disconnecting the Dots

We helped a local not-for-profit organization disconnect the dots and restructure their investment portfolio to better meet their cash flow and spending needs.

When we first met with members of the investment committee* of a regional not-for-profit, they faced a situation not uncommon for organizations of their kind. The entity had a number of underlying endowments, each established for funding distinct types of projects and initiatives, and each with unique constraints with regard to spending policies
and floors.

To date, the assets within these approximately a half-dozen sub-funds had all been invested in a single managed account with the organization’s investment advisor. We believe the advisor had suggested this approach because it was convenient for their investment solution. Yet this structure posed significant operational and accounting challenges for the foundation: when they received statements from the advisor, the not-for-profit had to spend a significant amount of time and resources disaggregating the information and creating separate accounting statements for each of the sub-funds.

We looked at of the sub-funds individually and conducted asset/liability analysis on each, asking the organization to provide us with specific information as to anticipated inflows and withdrawals from each of the separate endowments. We then proposed a structure whereby each sub-fund was structured as its own portfolio, treated separately with respect to its risk profile and liquidity. This offered a solution that not only was more appropriate from a fiduciary standpoint, but also relieved them of a significant bookkeeping burden. Additionally, Gerstein Fisher’s solution was not any more costly than what they had been doing in the past.

The organization made the decision to transfer their investments to Gerstein Fisher. In subsequent review meetings with the investment committee, members have expressed that they have far more confidence that they are meeting their roles as fiduciaries, and also feel more comfortable seeing each individual endowment segregated into its own account with an appropriate investment strategy.

* Names and some details have been changed to protect client confidentiality. Each investor’s situation can differ based on his or her unique needs and objectives.

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