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Nonprofits Seeking Wealth Management Help More Often

Shelly Banjo writes in this Wall Street Journal article about a new trend where more nonprofits are seeking professional investing advice to preserve their reserves. One might think this is adding kerosene to a fire, but as stewards of their mission, nonprofits must do what is seen as proactive in preserving precious program dollars. Nonprofits should follow guidelines in selecting a wealth manager.


Charities Turn To Wealth Managers

Wealth managers are seeing increased interest from charities and private foundations that, hit by endowment declines and shaken by prominent fraud cases, are seeking more professional help with investment decisions and due diligence.

Large financial companies including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Bank of New York Mellon Corp. (BK) have long served these clients, but say more organizations are turning to them for help.

JPMorgan recently launched the JP Morgan Foundation Research and Investing Center, a group of investment, client, family wealth, philanthropic and tax professionals who meet at least monthly to manage foundation clients’ assets and coordinate grant-making execution and tax and administrative services. JPMorgan manages more than $18.3 billion in assets for charitable organizations and works with 60 client foundations.

Based on research and historical analysis of foundation performance and the markets, the center launched a new investment strategy. “Our new approach focuses on a more complete diversification of a portfolio,” said Tony Werley, managing director and global head of portfolio construction at JPMorgan. He said it depends less on equities and includes alternative investments and fixed income.

In 2008, foundation assets nationwide dropped about 22%, or almost $150 billion, from a year earlier, according to the Foundation Center, a nonprofit research firm in New York. Squeezed for cash, many foundations were forced to sell assets into a falling market to fund grants and operations. Nearly 150 foundations including the Picower Foundation of Palm Beach, Fla., and the Chais Family Foundation in Encino, Calif., lost millions of dollars due to the Bernard Madoff scandal.

As a direct result, investment-manager turnover could reach historic highs over the course of the next 12 months, according to a survey out Monday by Greenwich Associates, a Stamford, Conn., institutional financial-services research firm.

Two-thirds of U.S. institutions plan to hire a new investment manager in the next year and almost 30% of endowments and foundations plan to fire a manager, the report said.

This is an opportunity for investment managers who can answer to “increased demands for greater transparency, due-diligence practices and demonstrate that appropriate risk controls [are] in place,” said Chris McNickle, a managing director at Greenwich Associates.

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