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NFPs Lack Formal Investment Strategies – Report


Tuesday, 11th December 2012 at 1:57 pm
Staff Reporter
A new report finds that only 50% of Australian Not for Profits have a formal investment strategy despite experiencing greater demand for their services post the Global Financial Crisis.

Tuesday, 11th December 2012
at 1:57 pm
Staff Reporter


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NFPs Lack Formal Investment Strategies – Report
Tuesday, 11th December 2012 at 1:57 pm

A new report finds that only 50% of Australian Not for Profits have a formal investment strategy despite experiencing greater demand for their services post the Global Financial Crisis.

The findings are the result of a survey conducted by The Trust Company.

The report, Do Not-For-Profits Need to Take More of a Risk?, was published by The Trust Company following consultation with 210 NFPs.

The report found investment strategy to be a lesser priority for NFPs than fundraising, regulations/compliance or administration/operations.

Formal strategies outlining investment goals, asset allocation and risk appetite were more prevalent for organisations with more than $25 million (75% prevalence) compared to smaller organisations with less than $1 million (only 20% prevalence).

With more than 40% of NFPs dependent on government grants as their primary source of funding, The Trust Company says investment management strategies with a focus on income and fixed dollar targets, rather than total returns, could be a viable solution.

Steven Marsh, General Manager Investment Management at The Trust Company, said: "There are many options for the sector to better support their fund flows. An investment strategy focused on delivering consistent income by investing in quality securities can assist NFPs to better meet their philanthropic commitments."

Despite 75% of organisations reporting they were 'extremely' or 'very concerned' about fundraising, few appear to be including income generating investments within their portfolios, with as much as 75% of NFP portfolios invested in cash and term deposits.

Marsh cautioned that NFPs need to remain alert to investment opportunities to ensure they do not miss out on a market recovery.

"Capital accumulation and wealth generation are equally important. The capital base of the portfolio needs to outgrow inflation over the long term, so that income continues to grow into the future. While NFPs may believe they are protected from volatility by investing in cash, in a declining interest rate environment such a strategy is unlikely to meet their increasing income needs or provide protection from rising inflation," Marsh said.

“We undertook this study to improve understanding of how the sector plans to meet the growing demands placed on it, how their funding models are evolving and whether organisations are giving due consideration to effective investment management to help meet their income needs,” the Head of Philanthropy and Community at The Trust Company, Simon Lewis said.
The Trust Company Group has almost $1 billion in charitable funds under administration.



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