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 2018, ECCT has invested over $55MM in investment assets with D&B and 120 parishes, worshiping Communities and Institutions affiliated with ECCT have invested endowment assets in excess of $70MM with D&B.
Parochial Report data implies that over $130MM in parish investment holdings are managed outside of D&B. These “non-D&B” 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.
As stated above, ECCT’s Canon IV.2.A requires approval of ECCT’s Bishops and Finance Committee for parish investments assets to be managed outside of D&B or deposited in an account at a chartered Federal or State 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 the investment management Canons of The Episcopal Church and ECCT.
Written permission to continue endowment investment programs outside of chartered commercial banks or the D&B will be forthcoming when:
- The parish has an appropriately-sized, well-qualified, active Finance Committee:
- Composed of at least three unrelated parishioners with extensive investment management expertise as demonstrated through educational, professional or personal experience.
- [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]
- The investment management firm selected by the parish has
- Publicly available audited annual financial statements.
- An established investment management track record of at least 20 years.
- 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 will 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 are broadly diversified, with no holdings in a specific corporation or non-Federal government entity exceeding 2% of the endowment’s value.
- Parish funds are invested solely in securities that are traded in active markets for which market price information is publicly available.
- No unusual risk factors are 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
updated April 15, 2019