Foundation strategies emphasize reassurance for donors and investors
By Jan Walther Hamblen, Presbyterian Church (USA) Foundation, December 15, 2000
JEFFERSONVILLE, Ind. – The headline from the Nov. 22 Wall Street Journal reads “Parishioners Sue Over Losses From Risky Investments By Lutheran Foundation.” The article chronicles the failed investment performance of funds managed by the Lutheran Church – Missouri Synod Foundation, including church funds and life income plans that have “gone bust.” Why? The Missouri-Synod Lutheran Foundation placed 40 percent of its bond portfolio in risky “stripped” mortgage-backed securities, which became valueless when interest rates dropped. The Journal reports “the imbroglio has become an object lesson for conservative institutions that, like mutual funds taunted by the dot-com returns, feel pressured to beat the markets. The results can be disastrous for churches …”
This latest headline and the Arizona Baptist scandal several years ago validate the Presbyterian Church (USA) Foundation’s decision to voluntarily submit to regulatory oversight by the Office of the Comptroller of the Currency (OCC) and other agencies by the development of New Covenant Trust Company, N.A. (NCTC).
A subsidiary of the Foundation, NCTC is a federally chartered, national trust bank that provides certain advisory services previously offered by the Foundation directly. NCTC accounts receive extensive scrutiny by the OCC. In fact, just last week the OCC completed a four-week exam by six examiners. This rigorous exam is equal to those conducted for other national trust banks.
According to the article, the Lutherans have recently restructured their investments to be managed by professional outside managers as a response to the crisis. Their new strategy patterns the approach that the Presbyterian Foundation has followed for decades and continues to follow through its investment services. The Foundation has selected a portfolio of equity and fixed-income investment management firms with different styles and investment objectives. Through this structure, the Presbyterian Foundation is able to deliver a higher degree of balance, accountability, diversification, and sophistication than would otherwise be beyond the reach of most congregations.
The Presbyterian Church (USA) Foundation has long taken its fiduciary responsibilities seriously. Our conservative approach to the investment of the assets we hold – assets that are vital to the growth and mission of the Presbyterian Church (USA) – has always guided our management of the Church’s money. The pressure to outperform the market has led many organizations to take extraordinary risks in order to compete and to meet the aggressive expectations of investors and donors. With ongoing competition to produce high rates, the overall objective of capital appreciation is sometimes lost in the push for higher returns. The Foundation’s long-standing strategy has been to invest for the long term, since the largest class of investments is endowments for perpetuity. The mission and ministry of the Presbyterian Church (USA) are foremost in our overall philosophy.