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Nonprofit Investment & Development Solutions + Website: A Guide to Thriving in Today's Economy

ISBN: 978-1-118-30477-8
187 pages
February 2013
Nonprofit Investment & Development Solutions + Website: A Guide to Thriving in Today
Solid guidance for managers and trustees to better position their nonprofits now and in the future  

The Great Recession has left a paradigm shift for nonprofit leadership and their board members as fiduciaries. It has changed how boards make, evaluate and document investment decisions, the risks they are willing to take and the way these details are communicated to donors.  Nonprofit Investment and Development Solutions + Website will provide solid guidance for nonprofit leadership, staff and volunteers to better position their nonprofits to thrive now and in the future.   

This guide will provide:

  • Sophisticated investment and development principles that are easily understandable and adaptable
  • Specific steps to take in order to avoid unnecessary investment risk and secure financial stability
  • Solutions and techniques for capitalizing on opportunities created by funding shifts and evolving donor expectations
  • Principles and practices of fiduciary responsibility, behavioral finance, socially responsible investing, strategic development planning and charity efficiency

In addition, Nonprofit Investment and Development Solutions + Website offers a web site resource with a variety of online tools and templates to help readers implement key concepts discussed in this book.

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Preface: Here We Are ix

Background: Where We Have Been x

Multiple Factors x

This Book’s Setup xiii

Acknowledgments xv

CHAPTER 1 Philanthropy History and Statistics 1

American Philanthropy 1

Examining the Statistics 3

Summary 5

CHAPTER 2 Fiduciary Responsibility 7

What Is a Fiduciary? 7

What Are the Duties of the Fiduciary? 8

Pressure on Fiduciaries from Increased Volatility 9

Protecting the Assets—The Prudent Investor 10

Training and Education of Fiduciaries 12

Increasing Government Regulation 14

Protecting the Mission 15

Effective Use of Professional Consultants 17

Valuable Resources 17

Summary 19

CHAPTER 3 New Roles for the “New Reality” 21

The Investment Consultant 22

The Investment Committee 24

Fundraising and Finance 24

Investment Policy Statement 28

Summary 30

CHAPTER 4 Behavioral Finance 31

The Psychology of Investing 32

Behavioral Factors and Investing 33

Psychology and Decision Making 34

The Psychology of Group Decisions 39

Behavioral Finance and Investment Consulting 41

Summary 44

CHAPTER 5 Understanding Risk 45

The Individual and Risk 45

Biases 46

Investment Committee Psychology 46

Risk and the Fiduciary 47

Group Dynamics and the Nonprofit 48

The Theory of Groupthink 49

The Blind Risk Model 52

Understanding Individuals—Gathering Information 53

Assessing the Power on the Investment Committee 54

Completing the Process 55

Summary 57

CHAPTER 6 Asset Allocation 59

Asset Allocation Analysis 59

Types of Risk in Asset Allocation 60

Risk and Portfolio Performance 62

Preparing for Asset Allocation Analysis 64

Summary 68

CHAPTER 7 The Investment Policy Statement 71

The Elements of an Investment Policy Statement 71

The IPS Provides Essential Discipline 73

UMIFA and UPMIFA 75

IPS and Investments 78

The IPS and Asset Allocation 79

The IPS and Risk, Return, and Money Manager Retention 80

The IPS and Major Donors 81

Summary 82

CHAPTER 8 Money Manager Selection 83

The Goal 83

Outlining the Process 84

Step 1: The Search 85

Step 2: The Evaluation 86

Step 3: The Analysis 87

Step 4: Selection 93

Summary 94

CHAPTER 9 Dynamic Portfolio Optimization 95

Before Modern Portfolio Theory (MPT) 95

Modern Portfolio Theory 96

The Efficient Portfolio 99

The Mean-Variance Model 99

Dynamic Asset Allocation and Market Timing 100

Summary 101

CHAPTER 10 Investment Program Analysis 103

Monitoring Accounts 103

The Procedure 104

Assessing Money Managers 106

The Evaluation 109

Summary 110

CHAPTER 11 Socially Responsible Investing 111

The Roots of Socially Responsible Investing 111

What Exactly Is Socially Responsible Investing? 113

How Do We Accomplish Socially Responsible Investing? 115

The Risks of Socially Responsible Investing 116

Additional Means of Accomplishing SRI 118

Why Does a Nonprofit Implement an SRI Portfolio? 119

Summary 120

CHAPTER 12 The Changing Landscape for Fundraising 121

Our New Reality 121

Donor Motivations 122

Communication Strategies 124

Revenue Source Diversification 125

The Strategic Development Plan 127

Understanding Donors 128

Effective Communication Tools 130

The Case for Support 131

Measuring Programmatic Impact 133

The Strategic Development Planning Process 134

The Importance of Planned Giving As a Strategic Development Tool: Building Endowment with

Planned Gifts 136

Donor Values That Affect Their Legacy Giving 138

Summary 140

CHAPTER 13 The Evolution of Donors—Trends and Truths 143

The Modern Donor 143

Transformations in Giving Patterns 146

Growing the Donor Pool 151

Summary 159

CHAPTER 14 Growing Expectations 161

Resources 162

Two Key Measures of Financial Health 165

Financial Ratios 171

Integrity and Credibility 173

Summary 174

Conclusion 175

About the Companion Website 177

About the Authors 179

Index 181

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ROGER M. MATLOFF, CFM, CIMA, CAP, CRPC, is a senior vice president and institutional consultant at a major financial institution. Working with the team he founded in 1983, Roger creates sustainable strategic solutions for nonprofit organizations around the country. In his current role, he oversees the analytical, investment, and management programs that the team's foundation and endowment clients utilize. In his capacity as a consulting and investment expert, Roger has appeared on national television news programs and been cited in such national publications as the Wall Street Journal and Research magazine as well as numerous international publications focused on serving the nonprofit market.

JOY HUNTER CHAILLOU is a Senior Vice President and Senior Nonprofit Advisor for a major financial institution. In her current role, she serves as an advisor working with nonprofit organizations of all sizes to increase their organizational capacity and help them reach their goals by offering in-depth strategies and tailored solutions, providing them with the knowledge and resources needed to address the challenges they face as they pursue their mission and impact goals. Joy's advice and consultation focus is in the areas of governance, development strategies, staff training, and board education.

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