Posts in FYI
7 Rules For Implementing A Growth Mindset At Your Nonprofit

“Possessing a growth mindset, or encouraging improvement through hard work and dedication, is an important component of success for most companies—including nonprofits. Both personal and professional growth should be supported and developed by managers in order to ensure all-around success for their employees and their business.”

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Source: Forbes

Why is Philanthropy Important to Business?

“Charitable giving is something that many large corporations and high net worth individuals contribute their time and earnings to, often for tax relief purposes. But donating to an important cause is not just about reducing your tax burden for the financial year. There are many hidden (and surprising) advantages of giving to others.”

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Source: Thrive Global

The Society for Resource Management's 2019 Survey Reveals Most Popular Employee Benefits

“SHRM conducts the survey annually to gather information on the types of benefits employers are offering their employees and to report on trends. The survey revealed that employers were more likely to increase, rather than, decrease, their benefits offerings.”

See what trends managers are moving towards by clicking here!

Source: Xpert HR Blog

Risky Business

By Kristy LeGrande, CFA, MBA, Principal

Acclaimed investor Warren Buffet summed up risk when he said, “Risk comes from not knowing what you are doing.”  So, what is risk?  How do we measure and monitor it?  How can we protect against it?  How much risk should we take?  There are numerous types of risk in the investment world and it is crucial that investors understand these risks and take steps to monitor them. 

In an attempt to educate investors, below is a list of some of the main types of investment risk, and, importantly, how they can be prudently monitored. 

Type

Financial Risk

Definition

Risks from heavy use of leverage or unsustainable spending rate that could jeopardize corpus longevity.

Who Monitors and How is it Monitored?

Client. Monitors through financial statements, prudent decision making by Board of Directors/Investment Committee/Family Decision Makers. Innovest assists clients through education.

Type

Volatility

Definition

Return fluctuation for a given security, strategy, market or portfolio, i.e. the potential range of a change in the security’s value. Higher volatility means price can change dramatically over time in either direction while lower volatility implies less price fluctuation in either direction.

Who Monitors and How is it Monitored?

Investment Consultant. Addressed through prudent asset allocation using non-correlated assets to mitigate portfolio-level volatility. Monitors volatility at the portfolio level and fund level in quarterly reports and annual asset allocation study.

Type

Market Risk

Definition

The risk and impact of equity market moves on an investment and on the portfolio as a whole.

Who Monitors and How is it Monitored?

Investment Consultant.  Monitors through in-depth diligence and continual monitoring of each investment strategy as well as through careful portfolio construction, including the addition of diversifying, non-correlated investment strategies.

Type

Liquidity Risk

Definition

Inability to sell an investment quickly either due to terms of investment contract or thin market with limited or no buyers.

Who Monitors and How is it Monitored?

Investment Consultant. Monitors through a liquidity schedule for the entire portfolio that demonstrates the availability of invested assets over time based on specific terms of each investment.

Type

Inflation Risk

Definition

The damaging effect that rising inflation rates can have on future purchasing power and erosion of real return on invested assets.

Who Monitors and How is it Monitored?

Investment Consultant. Monitors through the portfolio return target, which is represented as the return in excess of inflation (CPI +) and tracked over time. Use of asset classes with above-inflation returns protects purchasing power.

Type

Downside Risk

Definition

Estimation of the amount of loss a portfolio could sustain as a result of a decline arising from factors that affect the market as a whole or asset classes in particular (recession, loss of confidence, geopolitical events, etc.)

Who Monitors and How is it Monitored?

Investment Consultant. Monitors potential downside risk at the portfolio level. Downside risk is reviewed and quantified annually in an asset allocation study.

Other risks for investors to be aware of when constructing and monitoring portfolios include:  tracking-error risk (an investment strategy’s deviation from its benchmark), key person risk (risk of the departure of an investment strategy’s key decision maker), headline risk (risk of adverse news stories impacting the price of individual securities, strategies, or asset classes), factor risk (risk of having intentional or unintentional factor exposures in the portfolio), interest rate risk (risk and impact of changes in interest rates), credit risk (risk related to the credit of a borrower), counterparty risk (possibility that the other party in an investment, credit, or trading transaction may default on the contractual obligation), maverick risk (risk associated with venturing outside investment best practices or engaging in overtly risky positioning or strategies, i.e. a highly concentrated portfolio), legal risk (potential financial loss due to a contract between two parties being considered unenforceable), geopolitical risk (chance that an investment's returns could suffer as a result of political changes or instability), currency/exchange rate risk (the possibility that currency depreciation will negatively affect the value of investments) and other macroeconomic risks.

Risk is unavoidable in the investment world.  It is crucial that investors determine their risk tolerances and are aware of the risks they are taking in their portfolios.  In addition, investors along with their advisors, must take steps to quantify risk when possible, understand the qualitative aspects of risk, and monitor risk on an ongoing basis.

About Innovest

For more than 20 years, Innovest has provided excellent client service as well as forward-looking, innovative investment solutions for endowments and foundations, retirement plans, and families. We are an independent provider of investment-related consulting services and work on a fee-only basis.

Employee Spotlight - Scott Middleton, Innovest Principal
  1. Why did you choose investment consulting?

    I enjoy working in an environment that is in harmony with fiduciary responsibilities. The ability to work for clients without any conflicts of interest is something I really value. I try and bring a combination of trust and expertise to my clients and their investment objectives. Innovest’s approach to conflict-free investment consulting makes my work extremely rewarding. 

  2. How did you get started in the industry?

    In the early 1980s I began learning about investments from my father, and soon thereafter began investing on my own. Over time, some friends and associates began asking me for advice regarding their personal portfolios. I started my own investment advisory firm to serve these clients and pursued the Chartered Financial Analyst (CFA) designation.  

  3. Where did you go to college? What did you study?

    I received my bachelor’s degree in history and a minor in business from Oral Roberts University in Tulsa, OK. 

  4. What did you do before coming to Innovest?

    Before Innovest, I spent seven years as a portfolio manager serving high-net-worth families and non-profit organizations in the Denver area at Northern Trust. Previously, I was a portfolio manager for clients of another trust company, both in Colorado and the region of eastern Ohio and northern West Virginia.  

  5. What was your most interesting job?

    All of my jobs have been interesting and engaging. The financial markets are constantly changing, and clients’ needs and objectives change over time. I am thankful for those experiences, as I have been able to build upon them while working at Innovest.

  6. Do you have any certifications? What are they? Why did you choose them?

    I hold the Chartered Financial Analyst (CFA) designation from the Institute of Chartered Financial Analysts and the Certified Investment Management Analyst (CIMA®) designation from the Investments & Wealth Institute. I chose to obtain these certifications because I wanted to deepen my investment knowledge and be of better service to clients.

  7. Do you do any continuing education?

              One of the most gratifying and challenging aspects of investment consulting is continually learning.      I endeavor to stay on top of market news and trends so I can help clients understand the markets and have the discipline to be successful long-term investors.

Source: Innovest

E-Delivery Bill's Introduction in the Senate Sets the Stage for 2019 Action

“Bipartisan legislation to allow plan sponsors to use e-delivery as the default distribution method for ERISA required retirement plan documents was reintroduced in the Senate in the waning days of the 115th Congress.

The “Receiving Electronic Statements to Improve Retiree Earnings (RETIRE) Act” (S. 3795) would permit retirement plan sponsors to automatically enroll participants in electronic delivery for plan communications, while providing an opt-out option for employees who prefer to continue receiving paper documents.” Click here to continue reading.

Source: Napa.net

The Grinch Comes to Loanland, but Expect a Short Visit

“Just seven short weeks ago, the floating-rate loan market was standing tall with 4.0% year-to-date return through October. Not only were loans on pace for the 5%+ calendar year mark that many anticipated, they had performed with remarkably low volatility and a performance profile that trumped all major asset classes.

Enter the Grinch.

Click here to continue reading.

Source: Eaton Vance