Ente r the T itle o f Yo ur Pre se nta tio n He re April 26, - - PowerPoint PPT Presentation

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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

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Ente r the T itle o f Yo ur Pre se nta tio n He re

THE OREGON COMMUNITY FOUNDATION

Endowment Partners 101

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www.oregoncf.org

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
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www.oregoncf.org

What and who is The Oregon Community Foundation?

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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.

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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
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www.oregoncf.org

The Oregon Community Foundation

Many types of funds – Discretionary – Advised

  • Donor
  • Community
  • Corporate

– Scholarship – Designated

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www.oregoncf.org

Designated Funds

The grantees are designated at the time the fund is established.

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www.oregoncf.org

Two Types

Donor = Individual = Business = Organization Donor Grantee

Donor Designated Fund

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www.oregoncf.org

Two Types

Donor = 501(c)(3) Public Charity Donor = Grantee

Agency Endowment Fund

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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
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www.oregoncf.org

Endowment

What does it really mean? Long-term fund created to support an organization

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www.oregoncf.org

Endowment

T wo Considerations:

  • Creation

– Donor? – Board of directors?

  • Use

– Income stream? – Rainy day fund?

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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
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www.oregoncf.org

Endowment

Board Designated “All boards distrust their successors.”

Jerry Westersund

Board Designated = Emergency Reserve

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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
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www.oregoncf.org

Investment Policy

Objective

T

  • retain (at a minimum) the purchasing power
  • f the funds,

while producing a reasonable return for distribution to meet current community needs.

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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
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www.oregoncf.org

Investment Program Overview

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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

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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.

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Main Investment Pool Allocation

December 31, 2016

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Social Investment Pool Allocation

December 31, 2016

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Why Equities?

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Volatility Matters

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Volatility Matters

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T wenty-four-year growth of an Endowment Partner Fund 1993-2016

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www.oregoncf.org

Investment Returns

for periods ended December 31, 2016

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www.oregoncf.org

Market Update Cambridge Associates

2016 – 1st 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

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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

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Ente r the T itle o f Yo ur Pre se nta tio n He re

THE OREGON COMMUNITY FOUNDATION

Endowment Partners 101

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www.oregoncf.org

Fund Administration

Statements Fees Distributions Additions

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www.oregoncf.org

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Fee Schedule

Endowment Partner Funds

Up to $1 million .50% Next $4 million .20% Above $5 million .10 %

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www.oregoncf.org

Deferred Giving

Sara Brandt Senior Philanthropic Advisor and Regional Director, South Willamette Valley

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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
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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

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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

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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
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www.oregoncf.org

How Life Income Gifts Work

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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
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  • 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

Who is best suited for a CRUT?

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www.oregoncf.org

Our Partnership

Gift Type Minimum Gift Designation of Residuum/Remainder Notes Charitable Gift Annuity (CGA) $25,000

  • Residuum designated to nonprofit

partner to add to an existing EP Fund

  • Create a new EP Fund, if residuum

meets current funding amount

  • Minimum age of the annuitant is 60
  • 55 and older eligible to set up

deferred CGA

  • No fee

Charitable Remainder Trust (CRT) $100,000

  • For OCF to serve as trustee, 50% of

the charitable remainder value must be designated to nonprofit partner to add to an existing EP Fund

  • Remaining 50% may be distributed

directly to nonprofit partner

  • New EP Fund may be created if the

net present value of the remainder interest for OCF is greater than or equal to the current fund minimum ($25K)

  • Minimum age of beneficiary is 55
  • Payout percentage to beneficiary

between 5% and 7%

  • Fees for preparation of trust

document

  • Expenses related to carrying costs
  • f unmarketable assets prior to

their sale

  • Administrator fee approximately

80 bps annually

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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
  • f one’s values
  • “A planned gift is life driven and death
  • activated. Legacy makers have beliefs and a

history of giving.” (R. Radcliffe)

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Thank you for coming!

The slide deck can be found at

  • regoncf.org/donors/endowment-partners