As part of our continued efforts to support and partner with the higher education industry, we participated in the annual Association of Governing Boards (AGB) conference. At its annual Leadership Forum, we held a pre-conference workshop for Board leaders on effective governing techniques such as communicating responsibilities, planning committee work and enhancing board engagement.
I wanted to share the highlights from the Leadership Forum.
Enterprise Risk Management
Enterprise Risk Management (ERM) is a critical consideration. Foundations need to be aware of a university's ERM and the factors that can influence the total enterprise's financial health, such as:
- Credit rating/cost of capital, which can be impacted by the foundation’s asset allocation
- Environmental, Social and Corporate Governance (ESG)/Socially Responsible Investing (SRI) view points from the Foundation vs the University
- Regulatory awareness on issues like Title IX and gender inequality
- Real Estate investments owned by the University or what’s in the foundation’s portfolio
- Fundraising and development goals
- Headline risk and how it’s measured and the plan for response
An outlook for global economic change
Austen Goolsbee, plenary speaker from the University of Chicago, gave his economic outlook. His engaging presentation included takeaways that align with SEI’s views, in that all 14 recessions since WWII were either caused by Fed increasing rates (66% of the time this was the cause), asset bubbles bursts, oil price increases and major policy blowups.
He talked about recessions being hard to predict – like in June 2000, fewer than 10% of economists thought we would have one in the near term and the next one was June 2001.
All recessions start with drops in consumer and business confidence, some warning signs on manufacturing/durable goods orders and housing. Austen thinks we will grow at a modest pace, absent any “yellow” warnings that could turn red. He pointed out trends that should continue to evolve, including:
- Artificial intelligence
- Income inequality
- More spending on services
- The U.S. as a productive workforce, relative to the rest of the world
- Innovation and active entrepreneurship
The conference gave foundations the opportunity to discuss areas for improvement when it comes to governance, such as:
- Improving the onboarding process
- Improving continuing education
- Helping ensure transparency and readily available information
Regarding board meetings, foundations were encouraged to set meeting agendas. Leadership should be involved, ask questions and “be courageous.” Succession planning is also important, as recruitment can be difficult, depending on the location of the school, and there can be high turnover in fundraising staff.
Foundations are seeing pressure to lower the endowment administration fee in order to lower the overall hurdle rate. In fact, some foundations have a significant part of their operating budget funded from the endowment admin fee. The conference found that payroll is transitioning to being funded by the foundation, rather than the university. Also, there is less interest in perpetual endowments, as more donors are writing a one-time check or using donor advised funds and charitable gift annuities.
We’re in this together
We’re proud to be a part of the higher education community, speaking with board members and others at conferences like AGB.
Nonprofit organizations face a continually changing and challenging market environment. Working with an established nonprofit team can help keep your investment committee aware of the latest trends and changes.
Information provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company.
This information is provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company. The material included herein is based on the views of SIMC. Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results. This content should not be relied upon by the reader as research or investment advice (unless SIMC has otherwise separately entered into a written agreement for the provision of investment advice).
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