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UU Endowment Fund Open to Congregations
In 2005 the Unitarian Universalist (UU) Church of Berkeley in Kensington, Calif., had a decision to make. Its substantial endowment was being managed by a group of members of the congregation. They were getting older and the work was becoming a bit more than they wanted to do. At the same time the money management firm the congregation was using was sold to another firm.
Time for a change. The congregation had had a small part of its endowment in the Unitarian Universalist Common Endowment Fund for years; now it moved all of its endowment funds there—all $1.3 million.
“It’s been great,” said Anne Greenwood. “Our return has been very acceptable, the expenses are the same or lower than what we’ve been paying, and we can get one person on the phone who can answer all our questions.”
The Berkeley congregation is one of 297 congregations and other UU entities that have their funds invested with the Unitarian Universalist Association's (UUA’s) Common Endowment Fund (CEF). That’s almost a third of all UU congregations. UUA Treasurer Tim Brennan would like to see that figure grow. He’s hoping that recent changes made to the CEF might encourage more congregations to participate in it. He noted that as of July 31 the fund has assets worth $137 million, of which approximately $80 million is the UUA’s. The balance belongs to congregations.
“At least half our congregations have endowments," he said. "For most of them we’re a good option, especially in this economic climate where congregations are concerned about managing their money themselves. Most congregations don’t require a lot of convincing once they see how the fund is structured.”
Changes made recently include conducting a legal review to ensure the fund is compliant with all state and federal laws. “We had to do some filings in certain states,” said Brennan. “We also improved all of the accounting systems so we can do monthly statements rather than quarterly. Congregations can deposit or withdraw monthly now too. Everything we’ve done has created a more professional investment environment for congregations and made it much more user friendly.”
There is also a quarterly conference call for congregations on how the fund is doing. The call sometimes includes outside experts, he said. “We’re much more transparent than we were five years ago.” There is also an investment memorandum on the CEF website providing all the information that someone would need to make a decision on investing in the fund.
The fund had a rate of return of 15.6 percent after all fees and expenses for the year ending July 31. Over the past five years it has achieved a return of 5.4 percent. Brennan said the fund is in the top 15 percent of all funds of its size for rate of return.
Congregations can invest a minimum of $10,000. Brennan emphasized that investors should be thinking long term. “This is not the right fund for a cash reserve that a congregation may need on a moment’s notice, for example,” he said.
Some, but not all of the CEF’s investments are in socially responsible funds, he noted. And there is some risk. “We plot a middle ground, balancing risk, return, and justice.” About half of the CEF investments are subject to social screening, he said.
“The key advantage that CEF has versus what a congregation can do on its own is that it is highly diversified,” said Brennan. “Because of the size of the fund we can get into investments that most congregations cannot.” Expenses amount to approximately 1.1 percent per year, he said, including all management fees, consulting fees, and an administrative fee of 0.20 percent.
Brennan cautions congregations against turning assets over to a member of the congregation to manage. “Congregations can put themselves in an awkward situation. How do you dismiss that person if you become unhappy with management of the assets? How do you question that person’s investment strategy? A congregation is generally always better served by outsourcing fund management.”
For congregations interested in socially invested funds, being invested in the CEF means that every year the UUA will represent them in stockholder actions with several companies. Companies have been asked by the UUA to reassess their climate change impacts or add sexual orientation and gender identity to their nondiscrimination policies. The CEF also allocates 1 percent of the fund to community investing, including microfinance and community housing.
The CEF is managed by an investment committee, including Brennan. The committee works with outside professional advisors and investment managers. More information is on the endowment web page. Brennan encourages congregational leaders to read the memorandum and subscription agreement and to study the return data. He’s happy to answer any questions they have or do web presentations for investment committees.
First Parish at Wayland, Mass., transferred three endowment funds into the CEF in March. Stephen Winthrop, treasurer of Wayland’s endowment funds, said the funds had been managed by a group of volunteers. Three factors led the endowment trustees to consider the CEF: A new trustee suggested it, members of the congregation had increasingly been asking about socially responsible investing, and there was growing concern about depending on volunteers to assess the markets and chart a financial course.
“Our performance had been solid, but when we looked at the UUA’s approach, it had done marginally better over the past three years than we had," said Winthrop. "And we recognized that performance hadn’t suffered because of socially responsible investing.”
The committee got its first quarterly report this summer. “It was consistent with our objectives,” said Winthrop. “Someone asked me if I sleep more soundly now that I don’t have to worry so much about what the markets are doing. The answer is 'yes.' It means 8 to 10 hours less work for me every quarter. It’s made my job a whole lot easier.”
The Unitarian Universalist Urban Ministry in Roxbury, Mass., whose programs support at-risk youth, people escaping domestic violence, and men involved with the criminal justice system, moved its endowment funds into the Common Endowment Fund in 2006.
“We’ve been very satisfied,” said UU Urban Ministry Treasurer Lawrence Bennigson. “This has been a particularly volatile time in the markets, and it’s important to us to have our funds managed in ways that give us confidence.” He noted that his organization’s funds have had a return of about 5 percent, while the Standard & Poor 500 index was about 3 percent for the same period.
Before joining the Common Endowment Fund, the UU Urban Ministry had its funds with a private money management firm. “Part of our reason for changing had to do with performance and day-to-day working relationships,” he said. “The staff at the UUA is very responsive, helping us solve problems when they come up.”