NOT FOR PROFIT
OUTSOURCED CIO SOLUTIONS

Step 01: Objective

The objective step for a not-for-profit organization is arguably the key step in the process. It's where the key members of that organization need to sit down and really sort of draw out what their mission goal is. What is the objective for the entire organization? Through that articulation, we, as your investment consultant, can start to form that into what are the investment objectives that are likely to provide a good chance of meeting those mission objectives. That's where you're just tying those different objectives together.

If you just look at your investment objectives in isolation, who knows whether they're going to meet those mission objectives and what the society, trust, or fund is really looking to achieve. Almost as important as setting the investment objectives is defining those investment constraints that you need to build that portfolio within. For a not-for-profit organization, this comes from the source of cash flows into the fund, the spending requirements, the liquidity requirements, and any ESG constraints around their investment policy.

Defining those upfront is key to putting together a portfolio that meets all of their goals, be they return risk or just ethical investing. For example, universities often have an environmental objective, but they may have a social objective as well. They focus not just on having a neutral or positive effect on the environment but also want to have a positive impact on society and individuals' health, for instance.

It is challenging having multiple sets of goals because sometimes they don't always align. Even over a medium term, you may construct a portfolio that is ticking your ESG objectives, but it might not be ticking your performance objectives and vice versa. You need to strike a balance between the two because you can't always have both.

Recently, we worked closely with an organization that came to us as a new client. They had just increased the size of their funds and realized they needed to step through this investment objective process to work out how to invest those assets. The funds were sitting in cash, not achieving the long-term goals they had as an organization. It was through stepping through that process that they were able to assess their level of risk and return targets and therefore invest their portfolio. Over time, that portfolio will provide much greater returns to their organization and help them exist longer into the future.