Most American Nonprofit Groups Changing Their Investment Mix

Investment Losses Causing an Evaluation of Traditional Consultant Approach

An SEI (NASDAQ: SEIC) Quick Poll released last week shows that nonprofit foundations and endowments are thoroughly evaluating their overall investment management process in response to continued market volatility. Nearly one-third (31 percent) of nonprofits currently using a consultant model for investment management said they are concerned about this approach and are looking into other options. Almost half (45 percent) of that group said they feel there should have been a higher level of proactive communication from the consultant during recent market turmoil. Nearly one-third (30 percent) of all polled said that defining investment management fiduciary responsibilities for trustees and investment consultants is a top priority.

“For many nonprofits, the wheels came off the entire process and they are seriously considering if their current approach to investment management is the best approach moving forward,” said Carolyn McLaurin, Vice President and Managing Director of SEI’s Nonprofit Group. “As nonprofits determine strategies for addressing a wide range of issues, the external help they receive needs to be aligned with their efforts. Many are realizing this wasn’t always the case.”

The poll results highlight numerous areas of focus within investment management. Almost three-quarters (71 percent) of those polled said the organization is making asset allocation changes in response to the current economic environment. Many are decreasing allocations to US equities (56 percent), non-US equities (63 percent) and hedge funds (58 percent). Conversely, allocations are being increased towards fixed income (69 percent) and other alternatives (67 percent). In addition, 63 percent of respondents said maintaining an appropriate level of liquidity in the investment portfolio is a top priority.

Last year’s market downturn significantly impacted nonprofits as more than four-fifths (81 percent) said their organization’s overall invested assets decreased by at least 21 percent. Poor investment returns are impacting operational functions as nearly half (45 percent) of those polled said the economic downturn has forced the organization to choose between reducing staff and making program cuts.

The poll, conducted by SEI’s Nonprofit Management Research Panel, was completed by 160 U.S.-based nonprofit organizations with total invested assets ranging from $25 million to more than $1 billion. None of the participants were institutional clients of SEI.

A complete summary of the poll is available by emailing seiresearch@seic.com.

about: SEI’s Institutional Group delivers integrated healthcare, retirement and nonprofit investment solutions to over 500 global institutional clients (of which 340 are U.S. based) in six different countries.

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