The OAF Blog

Achieving Steady (And Growing) Investment Returns

November 04, 2013

A recent article in a US philanthropy publication reported that endowment funds held by charities and foundations were reporting average 5% returns (2011) and that investment performance has still not fully recovered from the steep market declines in 2007-2008. The article indicated, in this environment of low returns, some organizations were moving to ‘protect’ the endowment value by  lowering endowment payouts, appealing to donors to contribute, or seeking higher returns by investing in alternative asset classes.

 

OAF Investment Policy
The Investment Policy of the Ontario Arts Foundation states that the principal objective is to secure steady, positive long terms returns that help ensure consistent income payouts to arts organizations.  An equally important objective is to grow the value of the endowment portfolio so that the income it generates can keep pace with or be greater than the rate of inflation.

Each year, the board  of the Foundation reviews investment performance and determines how much can be paid out from the endowments we administer. This helps arts organizations to plan how they will use this important source of ‘unrestricted income’.   This annual review takes a balanced approach:

          • pay out income such that organizations receive steady, and increasing income; and
          • retain and reinvest part of the returns for future years.

Retaining some of the investment return is a safe guard to ensure that in a year where investment markets may experience a downturn, we are holding sufficient funds that enable the foundation to pay a similar level of income even if markets underperform.

 

Strong Investment Returns
We are pleased to report that changes the Board made in our asset mix and investment strategy in 2012 are resulting in positive investment results which exceed the levels reported in the US.  To the end of September 2013, the Foundation portfolio achieved a positive 9.1% year to date return, and for the one year period, performance was a strong 12%.

 

2012 Investment Strategy
In 2012, we made changes in our investment managers, which included allocating part of the portfolio to alternative investments. Without materially increasing the level of ‘risk’ in the portfolio, the more active investment strategies of the managers are adding value to positive results from more traditional asset classes of equities/fixed income.  Earlier this year, the Board also felt that investment returns from fixed income/bonds are lower than the risks associated with fixed income ( we continue to be in a period of low interest rates ) and fixed income weights were reduced, reinvesting into equities.

The Board of the Foundation meets regularly with our investment managers to receive information about their view of global investment markets, current strategy and performance. We are pleased with these results, which will support our ability for continued stable distributions of income.

 

Unrestricted Income
As the income we pay out is ‘unrestricted’, arts organizations can allocate the income where they feel it is most needed within their organization. It is recurring income and not subject to lengthy, sometimes complex granting program requirements.

 

 

2016

Summer Travels - 2016

September 01, 2016

Taxing Endowment ?

May 25, 2016

2015

Ontario's Culture Strategy

November 25, 2015

Arts and Aging

June 30, 2015

Getting Capital Right

April 02, 2015

Arts Advocacy - 2015

February 23, 2015

2014

Canadian Women in Philanthropy

November 05, 2014

Dialogue on Capitalization

October 08, 2014

2013

Tax Changes to Be Aware Of

August 26, 2013

2012


BLOG: Arts and Aging.... Read more >>