Blog

At Park Bank, we’re mission first, and sound investment management can help a nonprofit better support its mission. An investment strategy does more than just generate potential returns. It can also give donors more confidence, complement a risk management strategy, and pave the way for additional opportunities to expand.

Park Bank welcomed John Friar of Park Capital Management to provide guidance on nonprofit investment management. John joined Peter Benson, SVP of Business Services at Park Bank, after CPA Mike Hablewitz shared investment accounting considerations.  Here are some of John’s insights on how nonprofits can work toward investment success.

Create a Foundation First

For a nonprofit that’s just getting started, investing is not as simple as just opening an investment account. Even established nonprofits that have been investing for years may have missed some important elements of a solid investment foundation.  Before initiating or changing an investment strategy, it’s important to begin with a planning process.  The investment planning process helps a nonprofit:

• Identify goals, concerns, and expectations [27:18]
• Identify risks to the organization’s financial future, and strategies to mitigate those risks [28:40]
• Empower its team to feel more confident and in control [29:14]
• Provide a roadmap for the future, including how to achieve longer-term goals [30:05]

Understand Why You’re Investing

Each organization will have different needs and goals. These needs will change as the organization grows and evolves, and/or as external factors like the economy impact operations. Typically, nonprofits invest for a combination of reasons, including:

• Growing an asset base and building up savings
• Preparing the organization to receive large gifts and additional donations
• Creating a safety net so the organization is less affected by fundraising fluctuations
• Building a legacy so the nonprofit can continue its work long into the future [30:40-39:50]

Take a Holistic Approach

A holistic approach includes considerations that go beyond the investments themselves:

• Cash flow and spending, including reserves and liquidity to cover operational expenses [37:57]
• An investment analysis and an investment policy. An analysis helps determine the most appropriate way to invest, and an investment policy provides written guidelines to keep the organization on track. [34:40]
• Education and engagement, which helps ensure that everyone involved in the investment process, including fiduciaries, understand their responsibilities. [37:01]
• Donor policies - donors may ask how investments are made or specify how they want dollars invested. Having a donor policy can help manage and encourage donations. [38:48]

Know Your Risk Profile

While each organization will have its own risk profile, most nonprofits have a moderate risk tolerance.  An advisor can help a nonprofit invest according to its profile, which protects long-term financial health, and also provides some peace of mind during periods of market volatility.  A well-balanced investment allocation includes a mix of  risk-managing assets, such as cash reserves and municipal bonds,  and return-generating assets, such as stocks, mutual funds, and real estate. [39:51-50:01]

Investment management contributes to a nonprofit’s longevity in multiple ways, providing financial benefits, and helping drive its mission forward.  Park Bank has a long history of supporting nonprofits in the community. To discuss business services to support your nonprofit, reach out to our team.