THE OREGON COMMUNITY FOUNDATION Endowment Partners 101 Ente r the T itle o f Yo ur Pre se nta tio n He re
April 26, 2017 Agenda • Community foundations • The Endowment Partners Program • Definition of endowment • Investment Program Break • Fund administration – Statements – Fees – Distributions – Additions • Deferred giving support www.oregoncf.org
What and who is The Oregon Community Foundation? www.oregoncf.org
Community Foundations Wikipedia: Instruments of civil society designed to pool donations into a coordinated investment and grant making facility dedicated primarily to the social improvement of a given place. www.oregoncf.org
The Oregon Community Foundation Mission To improve lives for all Oregonians through the power of philanthropy. Publicly supported 501(c)(3) Donors • Individuals • Families • Businesses • Nonprofit organizations www.oregoncf.org
The Oregon Community Foundation Many types of funds – Discretionary – Advised • Donor Community • Corporate • – Scholarship – Designated www.oregoncf.org
Designated Funds The grantees are designated at the time the fund is established. www.oregoncf.org
Two Types Donor Designated Fund Donor = Individual = Business = Organization Donor Grantee www.oregoncf.org
Two Types Agency Endowment Fund Donor = 501(c)(3) Public Charity Donor = Grantee www.oregoncf.org
Endowment Partner Funds Primary Benefits • Access to investment expertise • Create efficiencies • Access to planned giving advice and services • Advice on complex gifts www.oregoncf.org
Endowment What does it really mean? Long-term fund created to support an organization www.oregoncf.org
Endowment T wo Considerations: • Creation – Donor? – Board of directors? • Use – Income stream? – Rainy day fund? www.oregoncf.org
Endowment True Endowment = Donor Restricted • Obligated to maintain in perpetuity • Cannot fully expend in the short term • Annual income stream • Revenue diversification • Additional restriction to use of income • OCF maintains arm’s length www.oregoncf.org
Endowment Board Designated “All boards distrust their successors.” Jerry Westersund Board Designated = Emergency Reserve www.oregoncf.org
Endowment OCF’s Definition • Fund maintained in perpetuity • Annual income stream • Goal = to manage the fund in a prudent manner as to not exhaust it in the long term. Model Considers • Investment • Expenditure www.oregoncf.org
Investment Policy Objective T o retain (at a minimum) the purchasing power of the funds, while producing a reasonable return for distribution to meet current community needs. www.oregoncf.org
Spending Policy • Board reviews rate annually • Investment committee’s 10 year projection • Target 9% return – If 9% or higher 5% payout rate – If below 9% 4.5% payout rate • Basis = 13 quarter trailing average of market values www.oregoncf.org
Investment Program Overview www.oregoncf.org
Investment Committee William Berg, Chair, Portland Lyn Hennion, Medford Karen Harding, Portland Chris Magana, Portland Tim Mabry, Board Chair Hermiston Duane McDougall, Board Member Lake Oswego William Moffat, Portland Garth Nisbet, Portland Ronald Parker, Portland Eric Parsons, Portland William Rutherford, Portland Lane Shetterly, Board Member Dallas Benjamin Whiteley, Portland Duncan Wyse, Board Member Portland www.oregoncf.org
Endowment Investment Model Three tenets – High allocation to equities is generally required for most spending levels. – Broad diversification mitigates risk inherent with high equity allocation – Fixed income supports spending during periods of prolonged economic contraction or deflation. www.oregoncf.org
Main Investment Pool Allocation December 31, 2016 www.oregoncf.org
Social Investment Pool Allocation December 31, 2016 www.oregoncf.org
Why Equities? www.oregoncf.org
Volatility Matters www.oregoncf.org
Volatility Matters www.oregoncf.org
T wenty-four-year growth of an Endowment Partner Fund 1993-2016 www.oregoncf.org
Investment Returns for periods ended December 31, 2016 www.oregoncf.org
Market Update Cambridge Associates 2016 – 1 st 19 days, China meltdown – Oil decline – Low return environment • All asset classes • Low global growth – Brexit at end of Q2 – November • Election of Donald Trump • OPEC cut of oil production – Energy stabilized eoy www.oregoncf.org
Market Update Cambridge Associates 2017 – Highly uncertain investment environment • Protectionism & de-globalization • Impact of Trump administration’s fiscal & trade policies • European elections – Netherlands, France, Germany, Italy www.oregoncf.org
THE OREGON COMMUNITY FOUNDATION Endowment Partners 101 Ente r the T itle o f Yo ur Pre se nta tio n He re
Fund Administration Statements Fees Distributions Additions www.oregoncf.org
www.oregoncf.org
Fee Schedule Endowment Partner Funds Up to $1 million .50% Next $4 million .20% Above $5 million .10 % www.oregoncf.org
Deferred Giving Sara Brandt Senior Philanthropic Advisor and Regional Director, South Willamette Valley www.oregoncf.org
Deferred Giving What is a deferred gift? A deferred gift is any gift that will result in a gift to a nonprofit after a term of years or after the donor’s death. Deferred gifts fall into 2 broad categories: Bequests Life Income Gifts www.oregoncf.org
What makes a successful deferred gift? It forwards an important priority/initiative of a nonprofit organization It aligns with the donor’s objectives It uses the right gift asset It uses the right gift type It meets the donor’s expectations www.oregoncf.org
How do deferred gifts help nonprofit organizations? They provide substantial income that is either Unrestricted or Restricted and can be either: Endowed and perpetual www.oregoncf.org
Who is best suited for a bequest? • A consistent annual gift donor, regardless of size, who has strong loyalty to a nonprofit organization • A donor who wants to participate in a capital or special campaign, but can’t give a large outright gift. • A donor who is uncertain about the future and desires flexibility • A donor with large retirement account accumulations www.oregoncf.org
How Life Income Gifts Work www.oregoncf.org
Who Is Best Suited for a CGA ? • Income beneficiaries 60 or older, median age is late 70’s • Donors with lesser financial capacity • Donors looking for secure payments • Donor likes that the contract is backed by an institution they want to support • Looking for higher yields than cash, CDs or savings accounts provide. • Donors looking for simplicity www.oregoncf.org
Who is best suited for a CRUT? • Donor can handle payments that change from year to year • Donor may need as a tool in their will or trust • Donor needs flexibility because s/he has complex or illiquid assets, such as real estate, for funding the CRUT • The donor owns a highly appreciated asset (real property or stock) that they can afford to make a gift www.oregoncf.org
Our Partnership Minimum Gift Type Designation of Residuum/Remainder Notes Gift Charitable $25,000 Residuum designated to nonprofit Minimum age of the annuitant is 60 • • Gift partner to add to an existing EP Fund 55 and older eligible to set up • Annuity Create a new EP Fund, if residuum deferred CGA • (CGA) meets current funding amount No fee • Charitable $100,000 For OCF to serve as trustee, 50% of Minimum age of beneficiary is 55 • • Remainder the charitable remainder value must Payout percentage to beneficiary • Trust be designated to nonprofit partner between 5% and 7% (CRT) to add to an existing EP Fund Fees for preparation of trust • Remaining 50% may be distributed document • directly to nonprofit partner Expenses related to carrying costs • New EP Fund may be created if the of unmarketable assets prior to • net present value of the remainder their sale interest for OCF is greater than or Administrator fee approximately • equal to the current fund minimum 80 bps annually ($25K) www.oregoncf.org
Embrace the Intangibles • Committing to a legacy gift can be a joyful act • It’s not a death experience, but a celebration of one’s values • “A planned gift is life driven and death activated. Legacy makers have beliefs and a history of giving.” (R. Radcliffe) www.oregoncf.org
Thank you for coming! The slide deck can be found at oregoncf.org/donors/endowment-partners www.oregoncf.org
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