Long-term investment strategy of the GRCF

October 19^th, 2008

The following message was sent out last week to our various fund holders and I share it as an open letter to all: Since becoming the President of the Grand Rapids Community Foundation 21 years ago, there have been a few national events that have shaken the financial market. The current economic crisis is yet another event that we must weather and persevere through. We are all in the market for the long haul, and the "long haul" of a Community Foundation is much longer than any of us can really comprehend. The 5 or 10 or 20 years that each of us think about until we retire, does not exist for a community foundation, we are in the market literally, forever. The Community Foundation invests assets in order to maximize the long-term return while assuming a reasonable level of risk and providing for current grantmaking. Our Investment Review Committee and our Board of Trustees know that these assets have been entrusted to the Foundation to respond to the many needs in our community and they exercise this role very responsibly and view it as most important. Our investment counsel for the past decade, Colonial Consulting, LLC, has been guiding us in developing an effective investment policy while working with our fund managers to follow the strategies set forth in our policy. Charlie Georgalas, the firm's Managing Director works closely with us. As you can imagine, we have been in contact with him regularly in the past three weeks. Colonial has a number of community foundations and nonprofit endowment clients and they are wise stewards of "charitable capital" and understand the important role that our type of capital plays when times are tough across our community, our country and indeed on a global scale. Here is an excerpt of Mr. Georgalas' advice to us: "As stewards of charitable capital, we are faced with the challenge of how best to react to the turmoil which has emerged. While it may seem "safe" or prudent to move to a more defensive posture until conditions improve, this is likely to do more harm than good for it is during difficult periods that we must remain focused on a coherent philosophy geared to achieving investment goals: Therefore, our fundamental view of how best to invest charitable capital has not changed despite all that is happening today. While we have no ability to foresee how much worse the current crisis may become, we can definitively state that the future, much like the past, will bring forth both good days and bad as markets swing between the extreme ends of optimism and pessimism. Ironically, our emotions and the balance between risk and opportunity typically move in opposite directions as great optimism breeds risk while pessimism creates opportunity." Our investments are made for long-term growth and can weather this storm better due to that orientation. We are guided by a spending policy that takes into account fluctuations in the market and is set at a five percent of a 16-quarter rolling average market value. Our primary role is to provide the needed financial resources to keep this community strong and healthy. As you know, building endowment is building a cushion for the future to mitigate the stress of future economic cycles. The Grand Rapids Community Foundation is this community's permanent endowment and, as always, we are diligently working to support critical needs in this community.

Tags

• charitable capital
• investment policy