The Florida United Methodist Foundation is revising its investment options for church and agency investors, effective July 1.
It’s the second phase of the foundation’s transition to new investment consultant CAPTRUST Financial Advisors.
Investors will still have three fund choices, but they will now include a new long-term fund designed to meet the investment needs of churches wanting greater returns. The current balanced and aggressive growth funds will remain largely unchanged.
What will no longer be offered to new investors is the foundation’s cautious fund. Churches and agencies can instead look to the foundation’s Development Fund for similar growth, but without the market risk. That fund offers an interest rate of 2%, and deposits can be withdrawn at any time.
“The foundation’s investment philosophy has always been to look to the future and not react to every variation in the market,” said the Rev. Mark Becker, the foundation’s president. “We also understand that our valued partners demand … an investment option that offers a higher return in the short run, while maintaining a long-term investment horizon for the vast bulk of our investments.”
Both the switch to CAPTRUST and changes to the funds, Becker said, are designed to meet that goal.
New option, greater returns
The foundation is committed to diversification and investing for the long term, Becker said, but “what became obvious, especially with the stock market runup over the years, (is that) some of our clients wanted much more than that.”
The long-term fund will be diversified, but it will also offer the potential for clients to achieve the greater returns they desire.
“We still want to offer long-term investments, appropriately diversified investments, but we also want to provide something for clients who want returns that mimic the equity markets,” Becker said.
Those higher returns are possible because 75% of assets in the long-term fund will be U.S. and international equities — also known as stocks — with 25% in alternative investments of commodities and real estate
Unlike the balanced and aggressive growth funds, the long-term fund will not include fixed-income investments like bonds and money market funds, which provide a lower level of risk.
Simplifying fund offerings
New investors that want to invest for the short-term will be encouraged to consider the foundation’s Development Fund as a replacement for the cautious fund, which comprises only about 2% of assets in the foundation’s funds.
Like the cautious fund, the Development Fund offers a steady rate of return and no risk for the principle.
“The foundation’s investment philosophy has always been to look to the future and not react to every variation in the market. We also understand that our valued partners demand … an investment option that offers a higher return in the short run.” — Rev. Mark Becker, Florida United Methodist Foundation.
“Basically, the Development Fund and the cautious fund, for all practical purposes, were both 100% fixed income — both short-term, interest-bearing,” said Eric Bailey, CAPTRUST’s principal and head of endowments at foundations. “Out of four choices, two of them were virtually identical, so the idea to not have one of those two made a lot of sense.”
Investors can also choose to invest in more than one fund to customize their risk-return level.
Phyllis Klock, chairperson of the foundation’s investment committee, understands investing is not a one-size-fits-all approach for churches.
“The investment goals of the various clients range all over the board … which makes it difficult to do any single approach,” she said.
Guided by social principles
Despite the changes, the foundation’s commitment to investing in a socially responsible way remains the same.
CAPTRUST money managers will work with the foundation to develop an exclusionary list of companies, based on guidelines established by the foundation’s investment committee and the Social Principles of The United Methodist Church. The majority of assets in the foundation’s funds will then be invested in companies not on that list.
More information about the funds and how the changes may affect investors is available in a list of frequently asked questions or by contacting the Foundation at foundation@fumf.org or 866-363-9673 ext. 7000.