Investment management for not-for-profits

As the trustee of funds that are intended for a charitable purpose, not-for-profit (NFP) boards and their investment processes are held to a higher standard.

Previously, many NFPs rolled term deposits or held funds in high-interest bank accounts. This investment approach, combined with donations, bequests, and grants, allowed organisations to achieve their strategic objectives. However, as the returns from cash have dropped dramatically and other asset classes have seen capital value erode from inflationary pressure, many NFP boards are rethinking their investment processes.

Held accountable by members, donors and other stakeholders, boards may find creating or rethinking their investment process a complicated and daunting prospect. We believe the implementation and investment of funds is one of the last steps in a five-step process. This approach is designed to protect the board, members and eventual beneficiaries of your organisation.

BDO’s Private Wealth team have compiled a unique five-step process for a robust NFP investment framework, outlined below.

Step one: Determine alignment with the NFP’s objects

This step determines when and where the funds are to be used to best further the purpose of the NFP entity.

We can assist boards in modelling different scenarios to identify available funds, how much can realistically be invested and for what purpose.

This will help in stage two when determining what risk profile is required from the portfolio.

Step two: Establish governance

This stage involves education around the various investment opportunities available to your organisation and constructing an Investment Policy Statement document.

This document contains vital parameters and informs the investment manager how they can invest the funds. Our advisers work with your team to identify a mix of assets, strategically aligned to your organisation’s objectives, such as your environmental, social and governance (ESG) investing approach.

Step three: Strategy execution

This stage includes finding the best fit for your objectives.

Once your investment policy is in place, we will assist in creating a bespoke portfolio that best fits your objective. This process may involve a consultation with your investment committee and/or our external asset consultant.

Step four: Portfolio implementation

This stage is when we undertake the physical investment of your funds.

We assist you to implement processes for the safe keeping of your funds which allows us to deliver a tailored, full investment management service to your organisation. We suggest your funds are invested on a secure platform where the authorised body, generally the Chief Financial Officer (CFO) or Chief Executive Officer (CEO), can access and view a browse-only area of the portfolio.

Step five: Review and report

At this stage, you should cement your organisation’s reporting and advice preferences with your adviser.

Once funds are invested, our advisers will develop a custom reporting and advice process for your organisation. For example, some organisations prefer regular, in-person consultation at board meetings, while others prefer a more passive approach with fewer meetings.

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Cystic Fibrosis Queensland case study

“Cystic Fibrosis Queensland engaged BDO Private Wealth Advisers to work with our board, to educate and build an investment framework for funds to be invested for the longer term and secure the future of the charity. BDO’s process was comprehensive, with expert advice and an easy-to-understand approach. The outcome resulted in a formal Investment Policy Statement and assistance in recommending and implementing a suitable investment portfolio that reflects our underlying goals and we believe will provide long-term value to our beneficiaries. We appreciate their responsiveness and professionalism in dealing with the board, and we feel comfortable with their professional ongoing portfolio management. We look forward to a long-lasting relationship.”
Petrina Fraccaro, Chief Executive Officer, Cystic Fibrosis.

Specialist advice for NFPs

Each organisation will be at different stages of the investment cycle, and should reflect your organisation’s unique needs, potential challenges, and opportunities. BDO Advisers will assist your organisation from step one, or at any stage of the investment journey.

Our Private Wealth Advisers have a proven track record of delivering tailored advice to help clients make the right decisions for their circumstances. We take time to develop a solid understanding of your organisation, your mission and values and combine this with our in-depth knowledge of issues affecting the NFP sector to deliver proven results.

For tailored advice or to discuss your investment framework, get in touch with your local BDO Private Wealth adviser.