Case Study: O-CIAO Services for Large Private Foundation
Background:
A large private foundation has an endowment fund which is a mix of traditional investments (ie largely passive with a few active elements) with a 10% allocation to alternative investments. The Board has decided that the organization does not need an external investment consultant and has delegated the task of managing the endowment to the Investment Committee (IC). The IC is comprised of a mix of volunteers and Board members. They are a sophisticated group who formally meet 4-5 times per year. The IC’s main tasks are as follows:
Annual Asset allocation review
Review fund and manager performance
Periodically review IPS for updates (has not been done since 2020)
The financial staff of the organization is tasked with creating a quarterly reporting package which includes, but is not limited to: investment performance, portfolio analytics, target to actual analysis, and periodic portfolio rebalancing recommendation. They also work with the IC for ad hoc information requests and reports that they may need.
The endowment’s marketable investments are held on the Vanguard brokerage platform and the organization receives capital statements for the four (4) alternative investments.
Challenges:
The financial staff of the organization is extremely busy with non-endowment financial functions and does not have the time nor the expertise to provide the necessary oversight to the endowment funds. The quarterly reporting package is all calculated in excel. Financial staff is not completely confident that the investment performance is calculated properly – especially consolidating the four (4) alternative investments. The financial staff has challenges benchmarking the portfolio and does not know how evaluate the Alternative investments.
The IC members feel as though they spend a large portion of their time going through a great deal of existing manager data. They would prefer to spend their limited time looking at other investments -particularly in the Alts space. They are also curious about how other similar endowments are performing and if they are “way out of line”.
Elevation’s Outsourced Chief Investment and Administration Officer (O-CIAO) service solution:
The Foundation retained Elevation to help the IC and financial staff to manage various tasks in the managing he endowment. This arrangement was a strictly a non-advisory relationship.
Elevation met with the Foundation’s IC Chair along with Foundation financial staff to discuss the engagement. They discussed various investment reporting related tasks as well as some of their main “pain points”. In addition, the group discussed some items that the Foundation is not currently doing but would like to do going forward.
It was decided that The Foundation would use Elevation’s O-CIAO platform to assist the Foundation. On-going services would include the following:
Elevation would prepare the quarterly reporting package that goes to the IC. Specifically, Elevation would take on the investment performance calculation for the portfolio. It was also agreed that the 5 years’ worth of transactional data would be loaded into the Morningstar system.
Any portfolio related reporting such as target/actual, manager reviews, and Private Equity reporting.
Finance staff would continue to fund any capital calls. Elevation and Finance staff work together on portfolio rebalancing and withdrawals.
Elevation would work with IC to vet / review any new potential managers – especially new Alternative managers.
New Tasks going-forward
The Foundation would like to participate in some peer surveys such as the Council on Foundation annual report. Elevation will take the lead to fill out the survey and report back findings to the IC.
Elevation will help run projections on future spending needs and stress test various market conditions. The IC specifically requested this as a part of its risk assessment.
Key Takeaways
Your organization does not need to choose between a full-service investment consulting relationship or nothing.
Elevation can help your organization to strengthen its endowment management and portfolio reporting responsibilities.
This bespoke service can be tailored for the specific needs of your organization on an on-going basis or project basis.
For more information or to learn more about how Elevation Consulting can add value - contact us today!