Through decades of partnering with our clients as stewards of perpetual endowment funds (i.e. endowments and retirement plans), H.M. Payson has acquired significant experience in dealing with the challenges faced by trustees and directors with oversight responsibilty for such funds; spending issues, investment policy formulation, risk management and benchmark selection, to name a few. This policy work complements our investment process with emphasis on intrinsic valuations, free cash flows and dividend growth — important portfolio characteristics for any entity seeking capital growth potential together with an inflation-protected income stream. In many respects, the partnership between H.M. Payson and the trustees of a charitable organization naturally evolves into a status akin to ex officio to the group’s finance/investment committee.
As advisor to trustees charged with the management of perpetual funds, H.M. Payson leverages our policy experience to create the framework to allow the pertinent committee(s) to dispassionately formulate conclusions as to the relative priorities of its unique fiduciary considerations.
In working with trustees to review and edit or develop an entirely new investment policy, H.M. Payson will employ, at a minimum, the following framework:
- Garner a detailed understanding of the client’s liability structure, including both cash flow timing and dollar amounts.
- Identify and rank order specific risks, including, but not limited to, funding shortfall risk, inflation risk, duration mismatch risk and market volatility risk.
- Measure the amount of current assets and the timing of expected cash inflows.Identify permissible asset classes appropriate for investment given the client’s asset/liability situation and specific risk situation, as well as any legal or statutory constraints.
- Document a plan to achieve the resultant investment objectives in an Investment Policy Statement.
- Execute the investment plan, making changes as market conditions warrant.
- Communicate performance, portfolio analytics, policy compliance and outlook on a regular basis.