Investment advice and solutions for non-profit organizations
Each non-profit organization is unique in its mission and approach, and so should be your investment portfolio. Your investments should work to provide long-term growth while reflecting what your organization stands for. This requires a bespoke approach to investment to help ensure that there are no nasty surprises which could disrupt your mission or damage your organization's reputation.
Embracing and embedding environmental, social and governance (ESG) factors into your investment strategy has the potential to help mitigate some of these risks, while ensuring that you are across the latest investment opportunities.
Investment considerations for non-profit organizations
AlignmentAligning your portfolios to your mission demonstrates your commitment to issues important to your organization. It involves assessing asset managers, strategies and providers to ensure they are aligned to your objectives. It also requires a transparent monitoring and reporting framework to ensure investments remain aligned to your objectives and policies.
EfficienciesInvestors are currently faced with market volatility so it’s important to build robust portfolios, and strategic asset allocation, designed to deliver efficiencies and capture opportunities. Your portfolios should adhere to your overall risk appetite and take into consideration how fees and other costs that could impact the outcome of your financial goals.
ExpertiseProfessional investment advice can help you navigate an increasingly complex investments market and define a strategy that is aligned with your goals. We can review your investments, including your asset allocation and approach, against your goals and help you identify which areas need to be prioritized. We provide sound advice to help you feel confident in your long-term investment strategy.
FlexibilityIt’s important that your portfolio is designed in a way that makes it responsive to changing circumstances and market movements. This flexibility means you won’t be caught off guard by adverse events and that your portfolio is well positioned to take advantage of potential opportunities that may arise. We can help you integrate flexibility into your strategy and portfolios.
Service standardsWhen working with external advisers or consultants, you need to ensure that they have the experience and the capacity to build, manage and monitor your portfolio with the utmost care. We work as an extension of your team to help you address topics most important to you, like alternative investments, or sustainability. This will allow you to focus on other priorities to help achieve your mission.
SustainabilityInvesting sustainably is a key goal for many investors. There are a few areas to consider, including environmental, social and governance (ESG) considerations; diversity, equity and inclusion (DEI) factors and impact investing opportunities which seek to help investors address key issues without having to compromise on overall financial goals.
Three steps for reviewing and setting your strategy
- 1 1. Review your investment objectives
- 2 2. Review your strategy against your goals
- 3 3. Source quality asset managers and strategies
You should carefully review your objectives and beliefs and assess whether they have been changed and how they can be documented. Below are some questions to help guide your review:
- What is your timeframe for investment?
- What return do you need?
- How much do you plan to spend?
- At what point does a market drawdown impact your ability to meet your spending requirements?
- What are your sustainability goals?
- What positive impacts do you want your investments to have?
- Who are your stakeholders and what do they need? For example, is reporting required?
It's important to align your investment strategy with your objectives and beliefs. You should consider having a broad opportunity set available across the full range of asset classes. Traditional asset classes, such as public equities, bonds and real estate, may not deliver the same returns in the future.
Consider how your strategy helps you achieve these goals and assess options if your current strategy doesn't help you achieve them. What strategic asset allocation helps you get the sustainable return you need, allows you to spend at the rate you need and fits with your risk appetite? How can you ensure your investments make a positive impact and are sustainable?
Once your objectives and strategy have been defined, you will need to source and allocate to quality asset managers that are best placed to deliver value for money and help you achieve your goals. Put a pro active review process in place so that these components can be changed when needed.
- Are your asset managers serving you well?
- What do you want to discuss or decide at the board/committee/management team level?
- Are there other ways to invest that may allow you more time to focus on your core mission?
- Do you want more control over the types of companies to which your portfolio has exposure?
- Do you have a team in place that has expertise to make investment decisions or does that sit with the board or a committee, do they have the necessary investment expertise?
Investment advice in action for a large UK charitable trust
One large charitable trust we worked with in the UK wanted to build a longer-term strategy, incorporating sustainability and the ability to fund the grants at the core of the trust’s mission. The trust’s investments were not well diversified and were exposed to potentially significant risk from falling asset prices.
Meanwhile, the trustee board needed to manage the operational aspects of its investments, however its in-house team didn’t have the resources and expertise to do so.
We worked with the trustee board to develop a clear strategy that was designed to support a sustainable level of grants each year, while seeking to retain the real value of trust assets over the long term. Together, we implemented a robust, diversified and ESG-aware investment strategy, helping reduce risk and position the fund to access potential opportunities.
Common questions from non-profit investors
We can help you improve the probability of achieving a better investment return by focusing on three key areas which are critical for any investment strategy.
- Portfolio mix: We can help you review your strategic asset allocation and integrate alternative asset classes such as private market opportunities that are designed to deliver strong returns.
- Improved governance: We can help you define and develop a strong governance structure that is designed to help you make better-informed decisions and implement them efficiently.
- Managing costs: Costs can significantly impact outcomes and are a critical factor. We can leverage our scale to try and help you reduce both your explicit and implicit costs.
Implementation services, sometimes referred to as OCIO or fiduciary management, provide you with the expertise of a specialized investment firm and are designed to help you manage your investments. You can use the services to help you make and execute investment decisions on key topics such as asset allocation and asset manager selection or you can enable them to make decisions on your behalf.
We have extensive implementation experience and can execute investment decisions quickly, efficiently and in a risk-controlled manner on your behalf. Working with us means you can leverage our expertise and operational experience and access a dedicated team who understands your organization and needs. We strive to deliver economies of scale, quality asset managers and potentially lower costs.
Private markets such as infrastructure, private equity, private debt and real estate can all offer you important sources of potential returns and income that are less correlated with public equity and bond markets.
However accessing these opportunities is not as easy. When looking for an investment partner, look for someone with scale, experience, and strong relationships with high-quality asset managers around the world which means they may be well-placed to assist you with building an alternative investment portfolio.
Extensive monitoring, reporting and engagement is critical to a successful review process of an asset manager. Having a solid understanding of the asset manager’s strategy, approach and specific exposures allows you to understand the asset manager’s patterns and make better decisions.
We conduct extensive research of thousands of asset managers and strategies and provide this forward-looking reporting via our MercerInsight® research platform, through our advice and it's integrated into the solutions we deliver clients.
Although it’s extremely difficult to predict where the next economic shock will come from, it’s important that your portfolio is well diversified and this diversification is reviewed and test on a regular basis.
Diversification is achieved through a mix of asset managers, asset classes and exposures and, drivers of return. Most not for profit investors are very well positioned to invest in less liquid asset classes and these can help reduce the volatility of your portfolio.
We can help you build a diversified portfolio and strategic asset allocation that is well positioned for the future and also enables you to take advantage of short–medium term opportunities that may arise.
We can work with you to develop the policies and principles that are aligned to your requirements and we will work with you to ensure these are executed, monitored and developed over time. Mercer is a signatory to the United Nations’ Principles for Responsible Investment.
We can help you develop and execute a diversity, equity and inclusion (DEI) policy and process within your investment portfolios. We provide advice on KPIs and a framework to monitor these KPIs for all of the managers within your portfolio. We place a high value on diversity and inclusion when monitoring and selecting asset managers.
DEI is part of Mercer’s social responsibility as a global company. It’s one of our core values and our work in this area centres on a commitment to employees, our clients, and the communities in which we operate. Our ESG committee oversees diversity and inclusion issues within the company, including monitoring and reporting.
Investment solutions to suit your needs
Implementation and OCIOWe can help you define, develop and implement your investment strategy by addressing areas such as governance, risk, sustainability and diversification. We flex our services to suit your needs and help you achieve your investment goals.
Sustainable investmentsWe help you build a sustainable investment strategy that integrates environmental, social and governance (ESG) considerations; diversity, equity and inclusion (DEI) factors and seeks an optimal mix between positive change and favourable returns.
Alternative investmentsLeveraging our existing relationships with hundreds of asset managers around the world, we can help you identify and source new investment strategies, opportunities, ideas and innovations across private markets and hedge funds.
Strategic researchBecome a member of the MercerInsight® Community today to get access to strategic research from hundreds of thought leaders around the world, including Mercer and third-party publishers. It’s complimentary and easy to join.
Asset manager researchBy subscribing to MercerInsight®, an alliance with eVestment, you can gain access to data, analytics and our forward-looking research on asset managers and thousands of investment strategies across both public and private markets.
Managing investment riskOur Mercer Sentinel team can help you conduct due diligence and mitigate operational risks across your portfolios and strategies. We assess asset managers, custodians and other service providers to help you deliver on your governance objectives.
Leverage our breadth and depth
US $16.45 trillion in global assets under consulting advice1
US $345 billion in global assets under management2
More than 12,400 investment strategies rated3
More than 7,000 asset managers rated4
US $17.3 trillion in global assets under advisement*
US $415.3 billion in global assets under management**
More than 12,400 investment strategies rated
More than 7,000 asset managers rated
We believe our significant scale and well-resourced team are best positioned to help you understand financial markets, construct an appropriate investment portfolio, and set out a long-term, sustainable strategy aligned with your organization’s goals and mission.
* As of June 30, 2022 - Source: Mercer
** As of December 31, 2022
Introducing some of our team
Speak to a non-profit investment specialist
- ESG investing refers to environmental, social, and governance considerations that may have a material impact on financial performance, and therefore are taken into account, alongside other economic and financial metrics, in assessing the risk and return potential of an investment. Thematic investing involves investing with a goal, at least in part, to achieve an impact on an environmental, social, or governance issue, alongside generating return and mitigating risk. As always, the decision whether to invest in ESG-themed options, like all options, must be made pursuant to a prudent process with the objective of advancing the financial interest of the plan and its participants.
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