In Perspectives

Investors can be broadly broken down in to two classes:  individuals and institutions.  While the distinction between individuals and institutions is self-evident, the category of “institutional investor” is quite diverse and can include defined-benefit and defined-contribution retirement plans, foundations and endowments, insurance companies, banks, and mutual funds.  As institutions often represent large pools of money, these investors can play a significant role in capital markets.

At Legacy Trust, in addition to our wealth management services that we offer to individuals and families, we also tailor our investment solutions to serve a specific type of institutional investor:  foundations and endowments.  These organizations play a vital role in the community by financially supporting non-profit causes such as education, health, and the arts.  Many different types of foundations and endowments exist, but they typically share some key characteristics – namely, that they must balance the dual obligations to accumulate a pool of assets sufficient to build capital for future use while also supporting current philanthropic needs.  This balancing act has grown more challenging in recent years thanks to the low interest rate environment that we have been experiencing since the global financial crisis.

In light of these considerations, as well as the fact that foundations and endowments often have a number of interested parties that play a role in the stewardship of the organization’s assets, we believe the key to success is the creation of a detailed Investment Policy Statement (IPS).  The IPS acts as a strategic guide for the organization’s investments and helps maintain consistency, discipline, and focus on the long-term objectives.  Creating, maintaining, and adhering to such a document can prove invaluable when you consider that many foundations and endowments have boards, investment committees, internal staff, and external investment advisors that can change frequently over the life of the organization.  Legacy Trust has a great deal of experience in working alongside foundation staff and investment committees to develop sound Investment Policy Statements that are customized to each organization’s unique situation and preferences.

Portfolio construction becomes a fairly straightforward process once a solid IPS is in place, as that document outlines a strategic asset allocation plan, criteria for third party manager selection and evaluation, and appropriate return and risk objectives that the portfolio should be measured against going forward.  Depending on the characteristics of the foundation, we can customize our level of involvement in the investment process to best meet the organization’s needs.  For example, some foundations with greater internal resources may prefer to utilize us purely as an investment consultant and keep the final decision-making to their internal investment committee, whereas other organizations prefer to delegate a wider scope of services to Legacy Trust including full responsibility for investment decisions. We believe we can add value in either situation, and we welcome the opportunity to explore the best set of solutions for the organization depending on the circumstances.

Please do not hesitate to reach out to us if you have any questions regarding institutional investment management.  We would love to connect with you!