Outlook 2023: Investment management for nonprofits
Watch this video, moderated by William Jarvis, Philanthropic Executive, Bank of America Private Bank, as experts discuss the current economic, market and governance trends for nonprofits, endowments and foundations you may want to consider as we navigate 2023.
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On screen copy:
Outlook 2023: Investment management for endowments and foundations
Please see important information at the end of this program. Recorded on 1/4/2023.
JENNIFER CHANDLER: Thank you for joining us today. I'm Jennifer Chandler, Head of Philanthropic Solutions at Bank of America. We're so pleased you could join us for today's important conversation. Whether you're a donor or a non-profit leader, or in some cases both, you're making a positive difference and we thank you. Here at Bank of America we work with non-profit organizations in three primary ways. We provide tailored fiduciary investment management, fiduciary administration and strategic consulting services. We're also privileged to provide nonprofits with Bank of America's comprehensive suite of banking and credit solutions. In addition, through the trust we administer at Bank of America Private Bank, we're one of the largest grant makers in the country. In the pandemic year of 2020 alone, we distributed $498 million to non-profit beneficiaries throughout the United States. Now we framed today's panel around timely topics for you. This includes the market outlook for 2023 of course, portfolio implementation and asset allocation in an environment of higher inflation and rising interest rates. Also covering the role of investment committees and Outsource Chief Investment Office or OCIO in the current environment. And high impact philanthropy to further enhance endowment growth. In addition, we'll talk about fiduciary governance and preserving assets for the future. But most importantly, we'll talk about pursuing success in 2023 and beyond and what it will take for you to achieve your mission. Today we're joined with four of our most senior thought leaders. This includes Chris Hyzy, our Chief Investment Officer for Merrill and Bank of America Private Bank whom you see regularly on CNBC and other national media outlets. Chris oversees our entire investment platform and he's responsible for determining the investment view for the portfolios we manage. In addition, we have Dianne Bailey. She's head of Bank of America Private Bank's National Consulting and Advisory Practice. Dianne manages a team of professionals who bring our non-profit clients experience in board governance and evaluation. As well as foundation grant making and strategic fund raising. You've likely seen her speaking publicly through thought leadership spaces and other areas in our industry. Namaine Coombs is also with us today. He's one of Bank of America Private Bank's senior institutional portfolio managers. He works with boards and investment committees for nonprofit organizations just like yours to help them achieve their mission and goals and Namaine is a Chartered Financial Analyst Charter Holder, author, speaker and a coach. And last but not least we have Bill Jarvis. He heads thought leadership in Bank of America Private Bank's philanthropic practice. Bill will moderate the discussion to ensure we hit on the topics that are most timely and helpful to you in 2023. So, without further ado, I'll turn it over to Bill Jarvis.
WILLIAM JARVIS: Thanks very much, Jennifer. We're going to jump right in here. Chris, it's so good to be with you here in three dimensions with all of us. The last two years we've done this, it's been virtual. But now we're at the beginning of a different regime. 2022 was, as you'll describe in a couple of minutes, a very unusual year. We'd like your view as to what's happening going forward. Maybe you can set the stage for us as to what it looked like going through ‘22, but more important, what are your considerations are for investors in the coming year?
CHRIS HYZY: Well, I think Bill, you mentioned third dimension. I would characterize 2022 as a fourth dimension. We all lived in that. There were so many things that went on in terms of 100 years as relates to not happening in that long of a time frame. You could argue that the magnitude of rate hikes was the highest and largest since the 1970s. You could also argue that the 60/40 portfolio had its worst performance arguably ever, to a certain extent, at least in the bottom three. So, we're starting off this year thinking about where are we in that cycle of workout. We’ve long talked about this phase being a workout cycle coming out of the pandemic. All the quantitative easing that was put in place, 50% of US GDP was fiscal spending, monetary spending, 45% of global GDP collectively, and the number of central banks hiking rates literally in 2022 heading into ‘23 is 298 to 298 total hikes.
WILLIAM JARVIS: Are there that many countries in the world?
CHRIS HYZY: Total hikes!
WILLIAM JARVIS: Total hikes, gotcha!
CHRIS HYZY: So, think about that first perspective and where we are in the cycle. We're clearly late, late cycle. We expect two more Fed increases next month and then in March, hard to time this but overall, the Fed's job is to control price appreciation as it relates to the broader economy and keep the labor force going. Now, unfortunately, the labor force is the issue, which is why it's so hard to slow down the price increases. So, they're in a tough bind here. What does that mean for the market cycle? Well, the market cycle is trying to look through all this.
WILLIAM JARVIS: And this is why you talk about it being a foundational year in…
CHRIS HYZY: Absolutely. This being a foundational year, it's back to what market cycles are, which is looking at the yield curve, looking at equity valuations, earnings growth, profitability of companies, and then factoring in how does that feed into equities versus fixed income versus alternative investments and then ultimately in the sub asset classes. So this foundational year, by the end of 2023, I think we'll look back and say 60/40 has been resurrected. And if you do include alternative investments, it's been even more resurrected if you add them from our perspective. And the question is why? Well, we could get into where cash yields have gone to, fixed income yields have gone, to, and how far equity valuation has fallen. But this being a foundational year is back to the basics. We call it back to the new future and that has a lot to do with about what's coming versus what happened.
WILLIAM JARVIS: And you referred to, to inflation. I think our view is that it has peaked.
CHRIS HYZY: Inflation has clearly peaked.
WILLIAM JARVIS: Talk a little bit about that.
CHRIS HYZY: What hasn't peaked yet, but it's coming is wage growth.
WILLIAM JARVIS: Right.
CHRIS HYZY: So all other components have basically peaked – rent – when you look at new rents, look at housing prices, auto prices, both used and new. When you factor in where gas prices are, oil, all of that is feeding into new forecasts for inflation that has peaked, which is one of the reasons why the key, the key to start off this year is, has the two-year yield peaked as it relates to the yield curve? We think it has, but yet the two-year yield follows the Fed funds rate. So if you get two more increases, you can basically say it's back to where it was just a month or so ago. And then the question is, what does the yield curve do from there? Because the back end of the curve is telling us inflation has peaked, the front end is telling us it's not.
WILLIAM JARVIS: Right. And that's why in the paper you referred to sort of a bifurcation of the year where the first half you're looking at bonds, and the second half you're saying we may be resetting this secular bull market that you've talked about for equities.
CHRIS HYZY: Now, I wish it was that easy.
WILLIAM JARVIS: it's not that easy for sure. Yeah.
CHRIS HYZY: But there is this consensus view, and sometimes the consensus is right, by the way. But there's this consensus view that where we are in the cycle, it's fixed income that has a greater opportunity set to start the year. So we're on the defensive.
WILLIAM JARVIS: Mm hmm.
CHRIS HYZY: And that could mean anything for anyone's risk profile. But for our perspective in the Chief Investment Office, we're on the defensive. We think for the first time in a long time, fixed income has a greater opportunity set to start the year. And then we think the baton will be handed over to equities after the Federal Reserve pauses. And then we get better opportunity set in equities for the second half. Largely, the fact that investors will start to discount the profit cycle improving in ‘24 onward.
WILLIAM JARVIS: Right. And so this is combinations, Chris, which is your role as strategic and tactical. I want to now turn to Namaine, because your role is implementing into this. And obviously you have to think about the long-term goals of the clients that you invest for, but also to be aware of what's going on here. So tell us a little bit about your work.
NAMAINE COOMBS: A lot of times is individual investors with the volatility that's been going on in the market, higher inflation rates, you tend to want to go to cash or wind down the equity portion of the portfolio. But, you know, in terms of institutions, long term investors and oftentimes in perpetuity, you know, so that means you have to really think long term. And so, like Chris said, it's really back to the fundamentals, right? So we're talking about diversification, blending asset classes together that either are low correlated, non correlated and making sure that you are spreading out that risk. You know, overall you lower the risk to be more in line for institution, but you're also giving a chance to achieve risk adjusted return over time. Liquidity. You know, a lot of institutions distribute cash and so they are watching the market value and at times of volatility, seeing it go down, they want to go to cash. But there's an opportunity cost for that, right? You're exiting at some point where you don't have a chance to recover that or even predict the precise entry point to recover in an upward market. So you want to make sure that you're really being mindful in terms of your cash balances and making sure that you are revisiting the investment policy statement, taking a look at that strategic allocation. Taking that long term look, thinking decades, not days, not weeks, not months, but decades. Is this still in line with the mission? Is this still in line with our investment strategy? And hopefully that gives the investment committee confidence in the strategy to where they can stay disciplined and weather the storm.
WILLIAM JARVIS: You both mentioned the role of alternatives, which of course tend to be less liquid than traditional stocks and bonds. So getting the right amount in there, where you're leaning into that capability, that possibility of additional return, an additional diversification benefit, while at the same time not sacrificing liquidity so you can still make your distributions.
Now, pivoting back to you, Chris, we've talked a little bit about asset allocation. Let's drill down more into that because we were in this regime. You talked about it for many years between, say, ‘09 and the end of last year, ‘21 excuse me, that 60/40 did very well, didn't it? And bonds did well. Equities did well. There was some volatility, but now we're in a different idea here. So tell a little bit about how you're thinking about advising long term portfolios, institutional portfolios, and also potentially family offices that think as institutions in this asset allocation game.
CHRIS HYZY: You know, for many, many decades, if you go all the way back to different regimes, whether it's an economic regime, it's a market regime, Federal Reserve, you know, financial conditions changing constantly, volatility that was already mentioned. You have to find the wedge. What's in the way from something like a 60/40 portfolio working, you know, year after year or at least for many years and then getting reset. And that wedge this time around was inflation. Now that's leaving. So the wedge is being lifted, which is one of the principles of this year, for us, being a foundational year. When you think about asset allocation coming out of that, inflation coming down, what do yields do? Generally, they come down. So fixed income, we believe fixed income, as we discussed before, has a larger opportunity set. And most people believe that the market bottoms around when earnings bottom. It's not necessarily the case.
WILLIAM JARVIS: That’s right
CHRIS HYZY: It’s before earnings bottom. Yeah. So then, you know, we're not trying to time here. We always say time in the market's a lot more important than market timing. But there's an element of how do you adjust your tactical asset allocation. But most critically, you need an anchor. Strategic asset allocation for the long-term investor, particularly this particular investor, needs to have a very solid discipline to anchor. And then around the edges, you adjust your tactical asset allocation. That solid disciplined anchor is equity fixed income alternatives, and then making sure that you can meet the cash needs and liquidity overall. That doesn't mean on the alternative side, just having a little bit less liquidity is a bad thing. In fact, in that space, having less liquidity actually can help you as it relates to overall diversification. So we look at all those factors staying on course, number one. Starting the year off with where the opportunity set is and working through the year as you work with your principal advisors to make sure that you're staying on course through the year for the long haul is really important.
WILLIAM JARVIS: Right. And when we think about this, stocks versus bonds, as it were, leaning into that capability for growth, which is inherent in equities and in certain types of alternative equity based alternative strategies, is really the way that an institutional investor that's seeking to build wealth through compounding over market cycles has to behave. So to that point, your point about time in the market being more important than timing the market, which is essentially Namaine, to your point, impossible is really good and is important for investment committees to be remembering.
CHRIS HYZY: Yeah, I think one also additional point that you just anchored on there is compounded returns with consistency is very powerful. If you get compounded returns and high volatility, emotion takes over in a lot of regards and the work out back up to where you are is very difficult. So compounding returns on a consistent basis with a consistent risk budget and not overly taking too much risk, but at the same time don't let emotions come into the overall process that you have. My final point on compounded returns is this, we've had an extraordinary beta run not to over jargonize this.
WILLIAM JARVIS: Beta meaning general market returns.
CHRIS HYZY: General market returns and price appreciation over and above the earnings growth with equities. And then in bonds, too. Now we're back to fundamental foundation …
WILLIAM JARVIS: A foundational year! There we go. And Chris, while we have this topic, talk a little bit, we use probabilistic modeling to help guide our clients and investors, not to tell them what they should do, but to help them to discern what they want to do and how it can work out. Maybe both of you can address that. Chris and Namaine, before I turn to Dianne.
CHRIS HYZY: Yeah, really, just in terms of, having a flight course is really important if you're flying a plane, same thing in a boat. There are always going to be storms. There are always going to be issues that come into being. But having a disciplined process, again, an anchor, a plan is critical. That's number one. And then adjusting while you're going according to plan is also very important. So, you know, having that quantitative modeling as a guide to accept new information as it comes in and then adjust to all of that is critically important. If you're only looking at it from a qualitative perspective, emotions can pierce through that a lot more easily.
WILLIAM JARVIS: Yeah, and it's important to remember, too, that although the models we're talking about look out periods of 15, 20, 30 years, they are toned up, as it were, every year by our capital market assumptions, which are extensively researched and revised and Namaine, we've just published them. Can you talk a little bit about how that is playing into what you're doing with your clients?
NAMAINE COOMBS: Absolutely. Seeing that is refreshed every year when we run our asset allocation analysis, the different allocations for the various different asset classes may change.
WILLIAM JARVIS: And their correlations.
NAMAINE COOMBS: And correlations, right. So looking forward, higher inflationary environment, higher interest rate environment, that's going to change your positioning in terms of those asset classes. And so we run an analysis to see, you know, in terms of our expected return for our institutions, what would be the appropriate mix for that institution to generate that required return, which a component of it, you know, the nominal expected return is inflation and then that spending rate and making sure that we got the right risk metrics there. And then what we try to do is take it a step further. Try to ease the hearts and minds of our investment committees by running stress tests. So what would happen if the S&P 500 went down 10%? What would happen if the bond market went down by 5%? You know, how does that affect? And then you start to get the investment committees to really start thinking about what other resources do we have at these times of volatility to tap, to supplement some spending needs? You know, maybe we can reduce our grant making budget for a period of time, or maybe they can tap a line of credit, you know, or maybe they can pull forward some potential donors to help soften the blow there.
WILLIAM JARVIS: Well, thanks, both of you. And I want to turn now to Dianne, because what we've been discussing here is investment and quantitative related. But this all occurs in an atmosphere that is grounded in values and grounded in the values of the fiduciaries of these organizations and also, to your point earlier, of their donors. So can you talk a little bit about that and how that's playing into this environment that we're describing?
DIANNE BAILEY: Absolutely, Bill. Donor values are paramount in any time, but particularly in this environment. And we're seeing them exist on a continuum. And it's a broad continuum from yielding to wielding, right – Yielding – Mackenzie Scott, right. $14 billion invested in 1600 nonprofit organizations. These transformational gifts have been absolutely game changers. Certainly they've used those funds to invest and accelerate in current programs to more appropriately compensate in many instances, professional staff. But 73% have also used these funds to support their long-term financial stability, including in many instances either creating new endowments or adding to existing endowments. So that trust-based philanthropy – that yielding. On the other end of the continuum we have wielding power. And we see this particularly, Namaine, I know we talk about this a lot with sustainable investing strategies, donors that are demanding alongside other stakeholders that ESG be integrated into portfolios. And I would expect that this trend would continue going forward and really even accelerate.
WILLIAM JARVIS: And we see it in our study of philanthropy, particularly in the cut toward the millennial and next gen donors.
DIANNE BAILEY: Exactly, and our new Study of Wealthy Americans, 73% of millennials already are holding sustainable investments in their portfolios. So certainly their appreciation and understanding of the dual impact of these strategies will translate to the organizations they support as donors.
WILLIAM JARVIS: I want to talk a little bit in this context about governance models, because for many of our listeners today, they're working and Namaine, Chris, Dianne, I think you were aware of this, on a governance model where the investment committee or the finance committee might meet, say, oh four times a year or five times a year. But the environment that we've been in as investors really since the dot.com crash back in 2000 has been one of tremendous volatility. All of the endowment studies that I've edited over the decades show this volatility of returns that's very different than what is learned in finance textbooks. And so the governance piece of this needs to be adaptive to that as well. And this is where you see the better investment committees, and I'll use that word ‘better’, I think the wiser investment committees, understanding that meeting three or four or five times a year is not sufficient. You need to have someone who's available to be there, like a Namaine, like a Chris, to be looking at what's happening in the markets. When these waterfall selloffs are occurring, a committee can't decide how to meet. And this is what leads to this trend toward outsourcing, particularly with discretion. You see, for example well over 50% of colleges and universities and not just small ones, say that they have substantially outsourced their endowment to a third party. So this is a new model, which Chris, I think, was exacerbated by the volatility that we've seen in the last couple of years and may be becoming part of this new foundation that we're talking about.
CHRIS HYZY: Yeah, we talked about episodic volatility, something that we described a few years back and we talked about compounded returns just recently. While compounded episodic volatility is the world we live in.
WILLIAM JARVIS: That is, absolutely.
CHRIS HYZY: And when we look at all of that, you know, having the ability to be more flexible within a structure is imperative. And that structure being more frequent meetings, more frequent in touch, whether volatility occurs or not, and having the right governance structure and how that melds into your investment disciplines, particularly with this upcoming year when we think it's over.
WILLIAM JARVIS: Oh, no!
CHRIS HYZY: We're just beginning again.
WILLIAM JARVIS: Right.
CHRIS HYZY: And in the context of where yields are now and where potential longer-term returns are, think about this for a second. We were heading into ‘22 from ‘21. ‘21 was a fantastic year, but multiples were at a high point. If you didn't reset your capital market assumptions from there, you would think that ten-year returns might be negative. Now, unfortunately, we went through a terrible year. Now equity multiples are down again to a more reasonable level. Now, your ten-year assumptions or further out, are now positive again. So you need to be flexibly proficient in your governance structure, your investment structure, and your discipline overall to accept these new regimes that can happen quickly.
WILLIAM JARVIS: Yeah. Yep. And a flavor of this, a part that goes into this that's very important for our own practice is this strategic tactical rebalancing work that we do. It's never simply ‘a set and forget.’ We have a couple of hundred people who are looking at markets all the time and not every day, but at certain periods during the year, you are intervening, aren't you? With your opinion. So talk about that.
CHRIS HYZY: That is correct. So, you know, you have a few hundred people looking at this.
WILLIAM JARVIS: Yeah.
CHRIS HYZY: Basically every day. One particular discipline might be within equities, another in fixed income, another at capital market assumptions, another quantitative modeling, another due diligence which we haven't talked about. And it runs the full investment process. That investment process on an institutional basis must be connected. You have any gaps in that, you're going to have errors. So from our perspective, having people dedicated to that is absolutely also important. But also, when you think about where we are right now, you have a particularly strong opinion on tactics. We've talked about fixed income in the beginning, equities, and but we never talked about rebalancing. Rebalancing is absolutely powerful. It doesn't mean you're changing your tactics, but it accepts the capital market movements. It takes the volatility and uses that to your advantage. It takes emotion out. And when your risk budget changes, for instance, if fixed income significantly outperforms equities and equities drop, rebalance back to your bogey again and it takes the emotion out. And that's what we believe helps you be more successful in big turning points.
WILLIAM JARVIS: And this may be unnecessarily tactical, Dianne, because really in some parts of our world, and I know you work with people, as do I, the case needs to be made for endowment, doesn't it? There are those who say, wait a minute, long term is very nice, but we live here in the present. Talk a little bit about that end of the dialog.
DIANNE BAILEY: I would just remind everyone that long term investment funds are in many instances an example of the past and the present colliding. Right? I mean, so the past, you know, donors had a very strong emphasis on restrictions. Right? Whether it's the use of the funds, particular programmatic uses, the duration of the funds, endowment versus more flexible time horizons. And in the present, I've already mentioned it, right, we're seeing this trend toward an easing of restrictions on how you use funds, again, both the use and the duration. We're also seeing an urgency of many of our grant makers and other donors to put out funds much more quickly than a traditional 5% spend for a private foundation donor to really meet the needs of the day. And so it's this tension between the past and the present. Now, of course, if you're an institution, hopefully you have funds from all of these generations. So being very disciplined around gift agreements, documentation to understand just exactly what you're working with in the portfolio is absolutely key. But I can't overstate the importance of these flexible, transformational gifts to long term financial stability. These quasi endowments, and these endowments created by boards that are much more flexible in their use. You can use these funds for collateral, for borrowing. You can use them for strategic investments in innovation. You can use them to resource around unexpected challenges, but even more importantly, to pursue these new opportunities.
WILLIAM JARVIS: Yeah, no, very, very important. And you talked a little bit, Dianne, about spending. I want to focus in on that now with you, Namaine, because this is another area where you already alluded to this need for liquidity. Dianne's alluded to the 5% minimum requirement spend for private foundations. But we know that other types of charities do have flexibility. How do you work with institutions on deciding how much they can afford to spend in the context of their investment portfolio, and how do they guide themselves in that way, knowing that the voice of today is always urgent? Right. So talk a little bit about that.
NAMAINE COOMBS: Now more than ever, those conversations are taking place, you know, expecting a lower return environment. And it's really taking a look at the operating of budget. You know, they typically already have that set, you know, but are there things that they can do to change, to offset what's going on in the market as well as what's going on with the portfolio in terms of that spending need? And so, you know, as a portfolio manager, you know, we have basically those three sources of return, right? The strategic asset allocation, the tactical asset allocation, and then even manager selection, right? And so there's levers that we can pull to hopefully mitigate risk and actually position the portfolio opportunity to help support that spend need. And as long as you know we know what is needed throughout the year, we can help plan, you know, that rebalance. Taking some profits off the top, some assets that didn't fall as much or did better than others, to set that aside, to help them meet that spend need. And then hopefully when that time comes, we can distribute that accordingly. Now, different organizations use different ways to decide how much to spend. Some use that spending rule. Looking back the past 12 quarters, that funding value and hopefully having a sustainable spend rate overall. You know, so if we do have that method in place, you know, that kind of helps us navigate the markets, knowing that in times of great market volatility, they probably took less than they needed to knowing that times when the market's down, you can rely on that later. There's other organizations that may use the beginning of the year market value as their standpoint. So an absolute dollar of value level, it's different year to year and then they make adjustments as they need to, to make sure that spend doesn't evade the endowed assets.
WILLIAM JARVIS: Right. I want to wrap it up now by doing a little quick whip round. This is what people came for. What will it take to succeed in 2023 from each of your perspectives? And Chris, maybe I'll just start with you.
CHRIS HYZY: Well, I think just setting the course that this is a foundational year again, starting off the year a little bit more defensive, you know, with a little bit more volatility than we all want. But we're coming out, we're late, late cycle. The Fed should pause. We should re-engineer a bottoming out process where 60/40 becomes resurrected again and then the addition of alternatives might be more difficult in the mind. But in terms of the investment discipline, it's something to very much consider, particularly as it relates to your flexibility around liquidity and other things. Having a risk budget, having a plan, being diversified, and Dianne just talked about this before and Namaine before as well, discipline.
WILLIAM JARVIS: Yes!
CHRIS HYZY: It's hard to do in these types of years, particularly coming out of what we called at the outset, a fourth dimensional year in 2022. But things are getting better. We're ready for a new long term bull market. We don't know when it's going to start, but we do think it's in the next 12 to 18 months for the next couple of cycles.
WILLIAM JARVIS: Yeah, great stuff. Thanks. Namaine, what would it take to succeed?
NAMAINE COOMBS: Yeah, I think it's conversations, right. Conversation with your investment advisor. A conversation with your portfolio manager. Getting back to the fundamentals, you know, going back to that investment policy statement. Does this strategic asset allocation still make sense? Does it still carry out that long term view in terms of aligning with the mission? Making sure that the investment strategy you have today still aligns with those longer-term goals and objectives. Spending policy, you know, what is realistic, what is sustainable? Should we revisit that? And then understanding what all that means and how to put that together throughout the year and making sure that you don't get short minded. Removing the emotion, you know, really looking at that long term goals with two things in mind, you know, preventing claims on current assets and then preserving intergenerational equity.
WILLIAM JARVIS: Right. And also realizing that although risk can be defined as portfolio volatility, there are other types of risk that should be looked at. Some of them can be quantified, some like reputational risk, organizational survival risk are things that need to be looked at strategically in an investment context, even though they may not be quantifiable. And Dianne, with that, I'll turn it over to you for the last word.
DIANNE BAILEY: Right, and just to focus on the importance of these investment committees.
WILLIAM JARVIS: Right.
DIANNE BAILEY: And we have a really wonderful checklist that we've developed to help think through all of the considerations to make an investment committee really strong. And, you know, three that I would lift up today is the importance of these committees being diverse. We have great guidance as well related to the board level, but also committees around removing these barriers, the cultural barriers, the structural barriers to creating truly diverse and inclusive governance bodies. The second I will say that's critically, critically important is that we burst these investment committees out of their silo, out of their silos. They need to be communicating with the development committees, right? So we understand the importance of contributed income into these long-term investment funds, not just relying on the performance of the markets really to create that culture of philanthropy. And then the last thing I'll say is just going back to the health of the relationship with the financial advisor. We've all touched on it already, and you can do it in very specific ways, including how you construct those meetings. The conversation needs to be disciplined. There needs to be reporting, there needs to be data, but there also needs to be space for dialog and deliberation, particularly as it relates to these critical conversations related to sustainable investing.
WILLIAM JARVIS: So at the outset of this foundational year, we have our thoughts from Chris, from Namaine, from Dianne. Thank you very much. And now I'm going to turn it back to Jennifer.
JENNIFER CHANDLER: Thank you Bill and thank you to all our panellists for today, Chris, Dianne and Namaine. We hope the information we shared today is helpful for you as you navigate a complex and changing tomorrow. I also want to emphasize we're here to help you and your organization. We're here to help in a number of ways. As you make informed investment decisions. As you both manage strategically and tactically in a complex world. We're here as you seek advice around governance, philanthropy and other issues that affect your sustainability and the achievement of your mission. We're also here to help you with implementation, whether it's grant making, or creating greater impact, or the benefit of fiduciary administration. And as I mentioned earlier, Bank of America is also here to help with banking, liquidity and lending needs. We're an enterprise that can help you across both sides of the balance sheet with one comprehensive and consistent view. So please keep an eye out for invitations in the year. This is just a first in a series of conversations. We'll invite leaders in the sector to share challenges they're facing and the best practices with how they're addressing them. And finally, I know we just scratched the surface on a number of topics today, but the great news is we're here to help and follow up on any of these topics or anything else you'd like to discuss in detail. Simply reach out to your existing team or to the colleague that invited you to today's call. Please let us know how we can help.
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Opinions are as of the date of this webcast – 1/4/2023 and are subject to change.
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The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
Institutional Investments & Philanthropic Solutions (also referred to as “Philanthropic Solutions” or “II&PS”) is part of Bank of America Private Bank, a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). Trust, fiduciary, and investment management services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A. and its agents.
This material does not take into account a client’s particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select. For more information about these services and their differences, speak with your advisor.
Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.
This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
All investing involves risk. There is no guarantee that Sustainable and Impact Investing or investments applying Environmental, Social and Governance (ESG) strategies will be successful, there are many factors to take into consideration when choosing an investment portfolio and ESG data is only one component to potentially consider. Sustainable and Impact Investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.
Alternative investments are speculative and involve a high degree of risk.
Alternative investments are intended for qualified investors only. Alternative Investments such as derivatives, hedge funds, private equity funds, and funds of funds can result in higher return potential but also higher loss potential. Changes in economic conditions or other circumstances may adversely affect your investments. Before you invest in alternative investments, you should consider your overall financial situation, how much money you have to invest, your need for liquidity, and your tolerance for risk.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker‐dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill’s obligations will differ among these services. Investments involve risk, including the possible loss of principal investment.
The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC and other affiliated banks.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). Trust and fiduciary services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.
Bank of America and the Bank of America logo are registered trademarks of Bank of America Corporation.
Investment products:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
© 2023 Bank of America Corporation. All rights reserved. MAP5397031 - 1/2023
[End of transcript]
Hosted by: Jennifer Chandler Head of Philanthropic Solutions, |
Moderated by: William Jarvis Philanthropic Executive |
Hosted by: Jennifer Chandler Head of Philanthropic Solutions, |
Moderated by: William Jarvis Philanthropic Executive |
Panelists:
Dianne Bailey National Philanthropic Strategy Executive, |
Namaine Coombs Senior Institutional Portfolio Manager |
Dianne Bailey National Philanthropic Strategy Executive, |
Namaine Coombs Senior Institutional Portfolio Manager |
Chris Hyzy Chief Investment Officer |
Chris Hyzy Chief Investment Officer |
Important Disclosures
Opinions are as of the date of this audiocast and are subject to change.
Investing involves risk including possible loss of principal. Past performance is no guarantee of future results.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
Institutional Investments & Philanthropic Solutions (also referred to as “Philanthropic Solutions” or “II&PS”) is part of Bank of America Private Bank, a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). Trust, fiduciary, and investment management services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A. and its agents.