Maintaining and reviewing an Investment Policy Statement (IPS) is one of the core fiduciary duties for Not-for-Profit investment committee members. Too often, IPS’s are outdated, incomplete, or don’t reflect the purpose and goals of the organization or its funds. The good news? Little changes can make a big impact.

These are common mistakes that investment committees make when it comes to managing their organization’s investment portfolios.

Misaligned Investment Goals

Benchmarking investment performance using a specific return target can only offer limited reassurance that funds are performing as expected. Instead, investment goals and objectives may need to be reframed according to what they mean for the organization: time horizon, level of support, and what level of variability is acceptable. It’s helpful to refer back to Objectives and Constraints and Portfolio Parameters and consider revisiting how goals are defined.

Rebalance the Portfolio

Rebalancing is a key strategy to achieve long-term investment performance objectives. For example, portfolios may hold too much in fixed income, which can affect long-term growth prospects. Another common scenario is concentration risk: a donor pledges assets, like securities, which roll into the portfolio. In either case, the whole portfolio would need to be rebalanced. Or a portfolio may have a high withdrawal need but funds are weighted heavily toward stocks.

Care should be taken to avoid rebalancing as a market-timing exercise; instead, use a disciplined approach to meet target allocations.

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About the Authors:

Brad Wilks PBMares Wealth ManagementBradley C. Wilks, LACP
Senior Wealth Advisor

Bradley Wilks provides wealth management advice, risk management, and comprehensive financial planning to his clients. He holds a Life and Annuity Certified Professional (LACP) license from the National Association of Insurance and Financial Advisors (NAIFA) Commission.

Jonny Rosch PBMares LLPJon-Michael “Jonny” Rosch, CPA

As a partner with our parent firm, PBMares, LLP, Jonny manages audit and assurance engagements for not-for-profit organizations, including public charities, social welfare organizations, trade associations, business leagues, non-profit childcare centers, private schools, independent research organizations and 527 political action committees.