Policy for Parish Investment Management

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 USTrust division of Bank of America to provide investment management services that comply with D&B’s Investment Policy Statement. As of year-end 2016, ECCT has invested over $45MM in diocesan endowment assets with D&B and 120 parishes, worshiping Communities and Institutions affiliated with ECCT have invested endowment assets in excess of $60MM with D&B.

2015 Parochial Report data implies that over $120MM in parish endowment holdings are invested outside of D&B. These “non-D&B” endowment 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.

The Episcopal Church’s Canon I.7.1.(b) requires that ECCT Parish investments not managed by D&B should be in chartered commercial bank deposits or with some other investment management company that has been approved in writing by ECCT’s Finance Committee or its Canon for Finance and Operations. ECCT’s Canon IV.2.A) requires approval of Bishops and Finance Committee for deposit of parish investments outside of D&B or a Federal or State (chartered) 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 Episcopal Church and ECCT investment management Canons.

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 educational, professional or personal experience in finance and investment management.
  • [In addition to the 3 + members specified above] With theRector and Wardens serving as votingex 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 requiredthat at least half the voting members of the Finance Committee also be current members of the parish Vestry]
  • Any investment management firm selected by the parish should:
  • Have publicly available audited annual financial statements.
  • Have an established investment management track record of at least 20 years.
  • Have 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 should 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 should be broadly diversified, with no holdings in a specific corporation or non-Federal government entity to exceed 2% of the endowment’s value.
  • Parish funds should be invested solely in securities that are traded in active markets for which market price information is publicly available.
  • No unusual risk factors should be 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 appears below.

Request for Approval of Parish Investment Management Practices

______

Name of Parish Town

requests approval of the following investment management arrangements.

Current Investment Management Arrangements

Our parish’s endowment funds are managed in the following way(s): [Please check all that apply and specify the name(s) of the institutions/investment management firms that your parish utilizes to manage your parish’s investment funds and the amount each managed on your behalf as of the most recent year end]

Name of Institution $Amount

  1. ___ deposited in FDIC-insured accounts with State

or Federally chartered bank(s) ______

______

______

  1. ___ Invested through Donations and Bequests ______
  1. ___ Invested in marketable securities through

bank trust companies or investment management firm(s) ______

______

______

______

  1. ___ Invested in individual securities based on guidance

of members of the congregation (Vestry, Finance Committee

or some other designated group) ______

Investment Oversight Practices

Please describe how this process is managed and overseen by the Vestry (e.g., Managed by the Vestry or by a committee reporting to the Vestry? Frequency of reviews/meetings annually? Process for Vestry approval/rejection of committee recommendations? Etc.):

______

______

Profile of Parishioners Overseeing Investment Management Activities

Please provide names and summary qualifications for the individuals that are supervising investments in 3 and/or 4 above. This section need not be completed if no assets are invested by approaches 3 or 4 above.

[Note that parishes should have at least 3 unrelated parishioners with investment management expertise overseeing approaches 3 and/or 4.]

  1. ______(please summarize educational, professional or other investment management background) ______
  2. ______(please summarize educational, professional or other investment management background) ______
  3. ______(please summarize educational, professional or other investment management background) ______
  4. ______(please summarize educational, professional or other investment management background) ______
  5. ______(please summarize educational, professional or other investment management background) ______

[Please provide additional summaries for all others responsible for guiding your parish’s investment management]

[Please have eachindividual overseeing your parish’s investment management activities complete the attached Pledge of Personal Accountability, or provide a “conflict of interest” form already used by your parish.]

[Pleaseforward your parish’s investment policy statementspecifying the types of permissible investments and the asset allocation strategy across these assets. Parishes seeking ECCT Finance Committee feedback on their investment policy statement have the option of attachingit with their submission]

[Please attach Finance Committee/Investment Management Committee bylaws or explain how groups other than Vestry itself interact and the relative responsibilities of committees and your Vestry]

[Please describe procedures used to ensure compliance with donor restrictions on withdrawals from and use of proceeds of endowment gifts and bequests.]

Endorsement of this submission

We attest to the accuracy of all information included in this submission.

In addition, wecommit to provide the Episcopal Church in Connecticut with notification of any material changes in the investment management policies outlined in this submission

Signed by: Date

______/____/____

(Rector)

______/____/____

(Warden)

______/____/____

(Warden)

______/____/____

(Treasurer)

______/____/____

(Clerk)

______/____/____

(Finance Committee Chair if applicable)

Pledge of Personal Accountability

As a member of the Vestry or Finance Committee of ______Episcopal Church, in ______CT, Icommit to act at all times with integrity and to do all I can to maintain in our congregation the highest level of confidence in the actions and decisions made by its lay leadership.

I pledge to safeguard the assets of our parish and hold its interests above my own in the policies I advocate. I will not knowingly benefit personally or attempt to advance the interests of members of my family or that of others with whom I have a personal relationship in my stewardship of parish financial assets.

On issues where I have a personal interest, I will disclose the nature of my interest and recuse myself from the decision-making process. I will do the same on issues where family members or personal associates might benefit directly on the outcome of the deliberations of the Vestry or Finance Committee.

Signed

______/______/______

V5 9/16/2016