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Not-for-Profit

Not-for-Profit
Investment Services

Escala Partners has experience in working with and advising foundations, charities and Not-For-Profit (“NFP”) organisations. The lead investment advisors of the Escala Partners NFP Investment Management Team (“the team”) have been providing services to NFPs for over 15 years. The longevity of these relationships demonstrate their commitment to the sector.

At Escala Partners, the team is complemented by the services of a Chief Investment Officer (CIO) and supported by an Equity Investment Analyst and Fixed Income Specialist. The addition of these resources to the team enhances the services that can be provided to NFP organisations.

Whilst asset allocation in the NFP sector is client specific, the fiduciary duties of NFP custodians are applicable for all clients. Escala Partners acknowledges that funds managed by NFP organisations have mostly been derived from donations for the purpose of funding each organisation’s mission. When working with NFP organisations, we are conscious of the fiduciary obligation of each NFP to manage donors’ monies prudently with due care 

and, where appropriate, recognising the purpose of the donation. This is consistent with our approach and we acknowledge these obligations within our advice.

We advocate an approach where the NFP organisation sets out its priority – capital growth, income or capital preservation. Once that is established, the other aspects have to play a secondary role – a portfolio cannot achieve all of these objectives without some compromises. 

The lead investment advisors of the Escala Partners Not-For-Profit Investment Management Team have been providing services to NFPs for over 15 years. The longevity of these relationships demonstrate our commitment to the sector.

Objectives

We believe the intent of an asset allocation approach for NFPs is to:

  • Create a benchmark for required returns and volatility.
  • Smooth the returns across the portfolio, as asset classes performance tends to vary in extent and time of contribution.
  • Focus on long term capital preservation as the funds are either generally not replaced or carry a known liability stream.
  • Participate without bias in any source of return.
  • Mitigate the risk of any macro trend such as interest rates, inflation or exchange rate movements.

We always consider:

  • The tax concessions which may apply to each NFP organisation.
  • The rate of return the NFP organisation’s portfolio can achieve and, importantly, the potential volatility and risk in those returns. There are a number of other risks which are critical to each portfolio, including, concentration risk (overreliance on any factor), liquidity risk and regulatory risk. In each case, we assess these risks in the context of each NFPs objectives.
  • Any investment portfolio requires a degree of compromise. For example, does the organisation prioritise preserving capital, or limiting the risk of capital loss, and if so, acknowledging this is likely to compromise the real growth of the investment portfolio.

Reporting

Escala Partners understands that the obligations of any NFP Investment Committee are onerous given the requirements for reporting performance, the mix of income and capital returns and maintaining investments within asset allocation ranges and ultimately satisfying the Board. In recognition, Escala Partners’ reporting is seamless and aims to provide a concise and clear statement of the relevant entity’s performance against key indicators and current financial status. Each client’s reporting can be tailored to address the metrics required and can be reviewed over time to ensure it continues to meet the organisation’s requirements.

Solutions

Increasingly driven by broader social objectives, NFP entities are seeking sustainability related investments. When considered as part of investment analysis and portfolio construction, these companies may offer investors potential long-term performance advantages. Similarly, NFPs are also becoming aware of ownership issues, which may, for example, include identifying governance risk in the companies they invest in or activities that the NFP does not support or wish to be associated with. As a matter of course, we engage with each NFP to understand the importance of these issues. We can both positively and negatively screen companies to reflect these objectives and concerns.

We believe NFPs investment portfoliosare best served by a selection of fund strategies that we are able to provide and manage to best meet the organisation’s objectives and return profile. To this end, we generally recommend that NFPs utilises a blend of managers and investment styles, which have undergone considerable due diligence by our CIO team.

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