Investment Outsourcing Continues to Draw Interest in the Non Profit World

Directions DecisionsA recent article in Institutional Investor magazine highlighted the growing interest in investment outsourcing among college and university endowments. For a variety of reasons, these institutions decided to scrap their “in house” investment management operations and turn to an independent outsource to run the investment process, from soup to nuts. While investment policy and broad asset allocation design typically remain the purview of the endowments’ fiduciaries, the implementation of strategy and all tactical asset allocation decisions are outsourced. The outsource consultant/manager acts in the same capacity as the in-house endowment investment management company (think Harvard and Yale etc.), developing policy and broad asset allocation targets with the Board, identifying specific asset categories (international, commodities, mid cap etc.) to invest in, tactically allocating to those categories, selecting efficient vehicles to implement the strategy and reporting results.

One of the primary benefits of investment outsourcing is that tactical decisions to underweight or overweight asset categories are made on a discretionary basis by the outsourced consultant/manager and as a result are made in a more timely fashion than tactical recommendations made at quarterly meetings. Very often, there is an “implementation gap” between the time a tactical decision is actionable and the time an investment committee responds to a consultant recommendation. Investment outsourcing eliminates that gap. All tactical decisions are made within the broad parameters of the investment policy. This approach allows for a higher level view of the investment management process by the fiduciaries of the organization.

Jeffery Asset Management has partnered with Fund Evaluation Group, a leading investment management consultant and outsource provider, and is able to offer both turn-key investment management solutions and/or fully customized investment management programs. We combine our knowledge of investment management for the senior living industry with Fund Evaluation Group’s robust consulting “engine” to provide institutional level consulting to senior living providers. Fund Evaluation Group advises on over $25Billion in assets, the majority of which is in the non for profit sector.

Fee Analysis

When is the last time your organization conducted a fee analysis on investment funds, including trustee held funds? Well diversified portfolios, by definition, have many moving parts. Do you own the most efficient share class of your mutual fund? Did you know that some investment platforms are inherently more expensive than others? Are you paying a separate account manager a fee to select mutual funds outside of their direct management and is that fee fair and reasonable? Are you paying for active management (especially in fixed income) and not really getting it? What is the difference between a financial advisor and a true consultant? Is your financial advisor incentivized to work for you or them? Are you paying “top dollar” in fees and getting bottom quartile in performance?

About Jim Jeffery, CFA

Jim Jeffery, the founder and principal of Jeffery Asset Management has joined Solaris Advisors LLC as Managing Director where he will lead the non profit senior living effort. Jim is a Chartered Financial Analyst (CFA) with more than 20 years experience in the financial services industry. Have a question about your financial plan? ASK JIM
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