Investment Management for Parishes
Policy for Parish Investment Management
(scroll to end for application form)
Canon I.7.1. (b) of The Episcopal Church states that every Diocese and Parish, Mission and Institution shall observe the following “standard business method”:
Funds held in trust, endowment and other permanent funds, and securities represented by physical evidence of ownership or indebtedness, shall be deposited with a National or State Bank, or a Diocesan Corporation, or with some other agency approved in writing by the Finance Committee or the Department of Finance of the Diocese, under a deed of trust, agency or other depository agreement providing for at least two signatures on any order of withdrawal of such funds or securities. But this paragraph shall not apply to funds refused by the depositories named as being too small for acceptance. Such small funds and securities shall be under the care of the persons or corporations properly responsible for them. This paragraph shall not be deemed to prohibit investments in securities issued in book entry form or other manner that dispenses with the delivery of a certificate evidencing the ownership of the securities or the indebtedness of the issuer.
Canon IV.2.A) of the Episcopal Church in Connecticut outlines a similar obligation for parishes:
Trusts and permanent funds and all securities whatsoever kind shall be deposited in a Federal or State Bank or Diocesan entity. Any parish desiring to deposit permanent funds and securities of any kind whatsoever with any other organization must receive the approval of the Bishops and Finance Committee by filing an application that meets the requirements of the Diocesan Investment Policy. If approved, substantive changes to the information in the approved application as defined in the Diocesan investment policy must also receive the approval of the Bishops and Finance Committee. Small funds and securities refused for deposit as being too small for acceptance shall not be subject to the foregoing deposit requirement. However, this does not in any way diminish the fiduciary responsibility of the Parish to manage these funds appropriately.
The Episcopal Church in Connecticut (“ECCT”) has established “Donations and Bequests for Church Purposes, Inc.” (widely referred to as “D&B”) as a “Diocesan Corporation” or “Diocesan entity” to provide fiduciary oversight and investment management services for endowments of ECCT, parishes, worshiping Communities and Institutions affiliated with ECCT. D&B Trustees have engaged the US Trust division of Bank of America to provide investment management services that comply with D&B’s Investment Policy Statement. As of year-end 2016, ECCT has invested over $45MM in diocesan endowment assets with D&B and 120 parishes, worshiping Communities and Institutions affiliated with ECCT have invested endowment assets in excess of $60MM with D&B.
2015 Parochial Report data implies that over $120MM in parish endowment holdings are invested outside of D&B. These “non-D&B” endowment investments are held by 31 parishes with no D&B holdings and by a number of the 120 parishes that have some but not all of their endowment investments with D&B.
The Episcopal Church’s Canon I.7.1.(b) requires that ECCT Parish investments not managed by D&B should be in chartered commercial bank deposits or with some other investment management company that has been approved in writing by ECCT’s Finance Committee or its Canon for Finance and Operations. ECCT’s Canon IV.2.A) requires approval of Bishops and Finance Committee for deposit of parish investments outside of D&B or a Federal or State (chartered) bank.
It seems that many parish investment management arrangements outside of D&B have evolved over time without formal approval, and most have produced satisfactory outcomes for parishes. Nonetheless, ECCT Bishops, ECCT’s Canon for Finance and Operations and ECCT’s Finance Committee request the assistance of all parishes in complying with Episcopal Church and ECCT investment management Canons.
Written permission to continue endowment investment programs outside of chartered commercial banks or the D&B will be forthcoming when:
- The parish should have an appropriately-sized, well-qualified, active Finance Committee:
- Composed of at least three unrelated parishioners with extensive educational, professional or personal experience in finance and investment management.
- [In addition to the 3 + members specified above] With the Rector and Wardens serving as voting ex officio members of the Finance Committee
- Which meets at least twice a year to review investment performance
- With bylaws approved by the parish Vestry stating its purpose and scope of its authority, governance structure, endowment management practices and permissible investment vehicles.
- [It is recommended but not required that at least half the voting members of the Finance Committee also be current members of the parish Vestry]
- Any investment management firm selected by the parish should:
- Have publicly available audited annual financial statements.
- Have an established investment management track record of at least 20 years.
- Have substantial assets under management (at least $10B).
- No Finance Committee member, immediate member of a Finance Committee member’s family or personal associates of Finance Committee members should benefit directly from the placement of endowment funds. All members of a Finance Committee must sign pledges to avoid conflicts of interest in managing parish investments.
- Endowment investments should be broadly diversified, with no holdings in a specific corporation or non-Federal government entity to exceed 2% of the endowment’s value.
- Parish funds should be invested solely in securities that are traded in active markets for which market price information is publicly available.
- No unusual risk factors should be introduced by the selection of investments or other special circumstances involving the parish, the Finance Committee and the investment management company.
Note that parish vestries electing not to participate in the D&B investment program assume fiduciary responsibility and must adhere to the “prudent investor” standard of care. Vestries that rely on investment management guidance from Finance Committees still ultimately retain this responsibility, which explains the recommendation that at least half of voting members of the Finance Committee be current vestry members.
A form for requesting approval to manage parish investments outside of Donations and Bequests is linked here (MS Word). Please mail or deliver completed and signed originals of the form, along with all supplementary material, to:
Canon Louis Fuertes
Episcopal Church in Connecticut
290 Pratt Street Box 52
Meriden CT 06450