AGENCY ENDOWMENT FUND MANAGEMENT PROGRAM

This program, which is offered to Vermont nonprofits at a greatly subsidized rate, is designed to help organizations manage their permanent or long-term funds in a manner which can produce significant growth over time. The VCF currently invests more than $115 million using a sophisticated strategy of asset allocation with the professional assistance of a national institutional investment consulting firm, Colonial Consulting, based in NYC. Your organization benefits from the economies of scale, active professional oversight, and broad diversification over many asset classes.

Although the majority of the VCF’s charitable funds are created by individuals and families, many have been established by Vermont nonprofit organizations as endowments to support future programs and operations. These funds are invested and tracked by the VCF, and the income distributed back to the agency. The VCF currently manages over 85 “agency” funds for various organizations, including the Vermont Land Trust, St. Johnsbury Athenaeum, Flynn Center for the Performing Arts, Chelsea Public Library, Rutland Health Foundation, Brattleboro Area Drop-in Center, and the Vermont Mozart Festival. See a list of our agency funds.

Here are some of the benefits of establishing your agency fund with the VCF:

  • Professional and Diversified Investment Management – When you decide to place your agency fund with the VCF, it becomes a part of our pool of funds. Investing as part of this pool, which is valued at approximately $115 million, diversifies your agency fund across many more asset classes than would be possible investing it individually. The VCF pool of funds is managed using a diversified strategy and is invested on a "total return" basis (combining capital appreciation and earned income), with a variety of asset classes used to lower volatility. Within each asset class, the VCF retains highly skilled investment managers who specialize in that particular asset class. To ensure that the VCF's portfolio is managed effectively, we retain Colonial Consulting, an independent investment consultant that focuses on institutional endowments. Colonial’s role is to objectively advise the VCF on investment and manager selection, best strategies and appropriate benchmarks, and to closely monitor the performance, allocation, and style adherence of each of the fund managers.
     
  • VCF Fund Management Services – The VCF provides several services to agency fundholders. Basic administrative services include accounting and record keeping, including quarterly reports, and automatic income distributions to your organization. We can also manage various types of gifts to the fund, including appreciated securities, real estate, closely-held stock, insurance policies, tangible personal property, and bequests.
     
  • Planned Giving and Endowment Fundraising Support – Our Donor Relations Team is available to meet with your agency staff, board members, and donors. We have a planned giving specialist (and Certified Financial Planner™) on staff and can issue charitable gift annuities, charitable remainder trusts, and other vehicles to benefit your agency fund. For specific information on how the VCF can help your agency develop or enhance your planned giving program, please refer to the enclosed sheet, “The VCF as Your Planned Giving Partner”.
     
  • Increased Donor Confidence – Having a fund with the VCF affiliates your agency with a respected statewide public charity with a 21-year history and total assets of over $150 million. This affiliation can be especially helpful if the agency is new to major gift fundraising, planned giving, or wishes to attract new donors. Your VCF fund can also provide increased exposure to potential donors and the general public, through listings in our publications, press releases, web page, and participation in the VCF annual meeting and other events.
     
  • Automatic Calculation of Annual Spending from the Fund - The VCF distributes the income from agency funds according to a pre-determined spending formula, which is carefully calculated to enable funds to grow over the long term while supporting annual distributions, fees, and inflation. Each fund essentially has two accounts – an actively invested “principal” portion, and a non-invested “distribution” portion that temporarily holds cash to be distributed back to the agency. To determine the annual distribution amount for your fund, the VCF annually calculates the average value of the fund over the past 36 months, and transfers 5% of that value from the fund’s invested portion to its distribution portion. That amount is then made available to your organization; payments of this distribution can be issued annually, semi-annually or quarterly. Alternatively, agencies may choose to reinvest these distributions to the principal portion of the fund at any time. Agencies may also request distributions that exceed the spending formula amount; such distribution requests will be addressed on a case by case basis.
     
  • Built-in Fund Protection – The VCF ownership of the assets in the fund (see below) helps provide a layer of separation to ensure the fund is maintained in perpetuity. This separation can provide a “buffer of protection” from excessively spending your endowment to meet short-term needs, which can erode donor confidence, violate donor intent, and jeopardize the long-term health of your agency. Putting the assets with the VCF can also insulate them from liability and litigation.

Important to Note:  The Assets Become the Property of The VCF – The agency’s fund assets become the property of the VCF upon establishing the fund. This is required by IRS regulations. Ultimate control of investments and disbursement is given to the VCF board. The agency may request that the funds be returned under certain conditions, by a resolution of its board and concurrence by the VCF board, as outlined in the signed fund agreement.

  • Variance Power – In the event that your agency ceases to exist, loses its nonprofit status, or the original purpose of the fund becomes irrelevant, the VCF board maintains “variance power” to change the beneficiary or purpose of the fund. Your agency may also designate a “contingency” beneficiary in the fund agreement. Variance power helps assure donors their gifts will remain relevant in perpetuity.
     
  • Fees – The annual investment fee for agency funds averages 0.88% of the fund value. An annual supporting fee of 0.80% is assessed to cover costs associated with managing the fund, for a total annual fee of about 1.68%. Our fees also support the VCF’s larger efforts to strengthen Vermont communities by providing statewide leadership on key issues, helping to build the capacity of nonprofits, and encouraging responsible philanthropy by linking donors with community needs.

To learn more about the planned giving services the VCF offers to its agency fundholders, click here.

To learn more or to schedule a presentation to you your board by a VCF staff member, please contact Scott McArdle at 802-388-3355 or smcardle@vermontcf.org.