August, 2006
Dear Chapter Leaders:
The HFMA National Board of Directors has approved a new program to assist chapters wishing to invest their “excess cash”. Under this program, chapters, multi-chapter groups, and regions are intended to be able to mimic national’s investment profile by opening an account with Bernstein Global Wealth Management (“Bernstein”), the firm that serves as national’s investment advisor.
This new program is not mandatory, and is not intended to limit chapters’ investment options in any way. Instead, it is simply intended to give chapters an additional investment option that hasn’t been available until now. Chapters wishing to participate may submit the required materials (details follow) on or after June 1, 2007. These materials are being shared now to assist interested chapters in planning.
This communication is designed to provide an overview of the program’s workings, and is organized as follows:
Section 1: Bernstein Global Wealth Management profile
Section 2: HFMA National’s investment profile
Section 3: Key Questions
Section 4: Next Steps for interested chapters
Section 1: Bernstein Global Wealth Management profile
A detailed description of Bernstein and its investment philosophies is attached (PDF titled, “BernsteinFirmOverview”). Additional information may be found at www.bernstein.com. Bernstein became HFMA National’s investment advisor in August of 2003.
Bernstein contact information:
Elizabeth A. Hempstead
Bernstein Global Wealth Management
A Unit of AllianceBernstein, L.P.
227 West Monroe Street
59th Floor
Chicago, IL 60606
312.696.7870
312.696.7979 (FAX)
(or)
Richard (Rick) E. Meyers
Bernstein Global Wealth Management
A Unit of AllianceBernstein, L.P.
227 West Monroe Street
59th Floor
Chicago, IL 60606
312.696.7872
312.696.7979 (FAX)
Section 2: HFMA National’s investment profile
An overview of HFMA National’s investment profile and performance history is also attached (PDF titled, “HFMA Allocation and Performance1”). Bernstein manages HFMA’s investments at the direction of the HFMA National Board of Directors, working through the board’s Audit and Finance Committee.
“HFMA’s investment philosophy is to maximize returns over the long term by taking a long term investment posture which favors equity holdings and prudently investing assets in a high-quality diversified manner thereby achieving optimal return within specified risk parameters.”
For additional discussion on HFMA National’s investment practices, please contact Dan Johansson, HFMA’s Director of Finance and Accounting, at 708.492.3318.
Section 3: Key Questions
Q: How does the chapter determine the amount of its “excess cash”?
A: Each chapter, at its sole discretion and via it’s own method, determines what funds, if any, it considers “excess”.
Q: Will funds included in the program still count within the “Days Cash on Hand” chapter performance goal?
A: Yes, as long as the chapter reflects those funds in its financial reporting to National.
Q: Would National have access to reports on chapter account activity, and under what circumstances would National access information on a chapter’s investments with Bernstein?
A: Yes, National would have access to copies of reports on chapter account activity if it requested such from Bernstein. At this time however, National has no plans for accessing or requesting chapter account information, and would only do so to the extent there were concerns about the propriety of chapter account activity.
Q: Is there a minimum investment required? What is it?
A: Yes, the minimum investment is $1,000.
Q: Are there minimum amounts required for particular investments? What are they?
A: Yes, there is a minimum investment requirement for each of Bernstein’s investment vehicles. Therefore, the amount of total investment will affect Bernstein’s ability to mimic HFMA National’s investment profile. See the attached grid (Excel file, titled, “IllustrationTemplate082406”) for investment minimum per investment type as well as illustration of allocation at various levels of total investment.
Q: Is there a minimum term for funds to remain invested? What is it?
A: No, there is not a minimum term required.
Q: Are there minimum terms for funds to remain invested in any of the investment types?
A: No, but as the total investment amount fluctuates, those changes may cause Bernstein to reallocate the funds, as illustrated in the attached grid (Excel file, titled, “IllustrationTemplate082406”).
Q: How quickly will the chapter be able to get its funds back?
A: Exact timing depends on liquidity constraints of the market, but in almost all cases, funds would be available to chapters within one (1) to four (4) business days.
Q: What are the fees (how are they calculated)?
A: Fees vary on the total amount invested. See the attached grid (Excel file, titled, “IllustrationTemplate082406”) for illustration of fees at various investment levels.
Q: Are HFMA chapters getting a discount on fees?
A: No. The main benefit to chapters isn’t in discounted fees, but rather in Bernstein’s waiver of the normal $400K total minimum investment requirement.
Q: Is HFMA National absorbing any costs on the chapters’ behalf?
A: No.
Q: Is HFMA National receiving any compensation (or fee discounts, or other financial benefit) related to this program?
A: No.
Q: What is HFMA National’s investment profile?
A: Please see attached summary (PDF titled, “HFMA Allocation and Performance1”).
Q: How has HFMA National’s investment profile performed historically?
A: Please see attached summary (PDF titled, “HFMA Allocation and Performance1”).
Q: Can a chapter reallocate if it doesn’t like HFMA National’s investment profile?
A: Only in the event that total funds invested by the chapter were to exceed $400K.
Q: If HFMA National were to change its investment profile, causing Bernstein to reallocate funds on its behalf, how would that affect chapter accounts and allocations?
A: There would be no automatic change to chapter accounts. Bernstein would reallocate funds in a chapter’s account to mimic HFMA National’s new allocation only upon request from the chapter.
Q: How may a chapter learn about Berstein?
A: Please see the attached firm overview (PDF titled, “BernsteinFirmOverview”).
Q: What does the set-up paperwork look like?
A: Please see the following attachments:
1) Account Agreement (PDF titled, “Account Agreement082406”) that establishes the account.
2) Transfer Form (PDF titled, “Transfer Form”) that is used to transfer funds from an existing account.
3) Secretary Certificate (Word document titled, “Secretary Certificate”) that establishes authorized signatures for account instructions.
Q: What will the chapter need to do annually as chapter officers “roll over”?
A: The chapter will be required to submit documentation directly to Bernstein reflecting the installation of new chapter officers. Acceptable documentation would include chapter board meeting minutes, certified by the chapter secretary, on chapter letterhead. HFMA National, as an independent party to the account, will not be able to submit this information on the chapter’s behalf.
Q: Can regions and multi-chapter groups participate?
A: Yes. However, given that such groups aren’t incorporated entities, there are certain modifications that would be required to the Account Agreement (PDF titled, “Account Agreement082406”) and such groups should consider the added complexity that will be required to maintain authorizations. Please contact Bernstein (see Section 1, above) for details.
Q: What report(s) will the chapter receive?
A: Please see the attached illustrative example (PDF titled, “HFMA Sample Monthly1”).
Q: Can the chapter have multiple copies of reports sent to different parties?
A: Yes. Bernstein will distribute additional copies of reports to designated parties at no additional cost to the chapter.
Q: Whom do chapters contact with questions about HFMA National’s investment profile?
A: Dan Johansson, HFMA’s Director of Accounting and Finance, may be reached at 708.492.3318.
Q: Whom does a chapter contact with questions about its account?
A: Elizabeth Hempstead, of Bernstein, may be reached at 312.696.7870.
Q: Will investing chapters be able to access Bernstein research? How?
A: Chapters will have access to planning research only. Authorized account signators will receive mailings of such research. Additional copies will be available upon request.
Q: What’s involved in shutting down a chapter’s account?
A: Upon notification by phone, fax, or receipt of document, Bernstein will immediately cease active management of the account. Upon receipt of distribution instructions, funds will typically be liquidated in one (1) to four (4) business days. Securities transfers to a new manager takes longer, but generally may be accomplished in two (2) weeks.
Q: What would happen if HFMA left Bernstein and went with a different investment advisor?
A: Once a chapter establishes an account, any change in the relationship between Bernstein and National would not interfere with the ongoing relationship between Bernstein and the chapter.
Section 4: Next Steps for interested chapters
1) Review these materials completely.
2) Develop a list of questions and unresolved issues.
3) Contact Elizabeth Hempstead or Rick Meyers at Bernstein (see contact information, above) to address issues.
4) Determine whether to proceed, and if so,
- Access forms from the HFMA web site in the chapter resources area.
- Submit completed Account Agreement (PDF titled, “Account Agreement082406”) and supporting materials as per the instructions contained in that document.
- HFMA National recommends that chapters select (check) both boxes at the bottom left corner of the agreement, the first headed “ISS Proxy Appointment” and the second headed “Limited Disclosure Election”.
- Transfer assets into the new account using the attached (PDF titled, “Transfer Form”).
Attachments
“BernsteinFirmOverview” (PDF)
“HFMA Allocation and Performance1” (PDF)
“Account Agreement082406” (PDF)
“Transfer Form” (PDF)
“Secretary Certificate” (Word)
“IllustrationTemplate082406” (Excel)
“HFMA Sample Monthly1” (PDF)
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