The biggest challenges for nonprofit
Information abstracted from regional and national studies on the challenges faced by nonprofit organizations shows that there are some problems with non-profit leaders shared. Board development and fundraising and are the most important issues for nonprofit organizations with a secondary focus on issues related to improvement of the operation and management of resources.
EMERGING ISSUES
Some basic concerns have often been identified in studies examined the non-profitCEO and board members. Five major themes were evident from the inventories of different ratios of questions. These indicate areas of most urgent needs of nonprofit executives, said:
1. Development Council - the construction of an active and strategically focused Board of Directors was the most common concern. Specific issues were identified:
· Recruitment of high-impact board members
· Maintaining a dynamic culture, effective boardMembers
To promote a strategic orientation for the cards
2. Marketing / Fundraising - Developing effective marketing programs to attract and retain donors was also a high priority. In particular, respondents were concerned about:
• With the application of marketing / communications techniques to inform donors, activities
· Expansion of its current donor base
Improve donations from donors are increasingly present and the fidelity of the donor andRetention
3. Information Management - Use of effective information management to measure and evaluate the actions and programs is also very important.
· Establishing a clear set of quality standards for evaluating the performance
• With lower IT costs and create value
• Evaluation of programs and services on the basis of key indicators
· Definition of a better model for measuring and reporting results
· Measurement of the realAdvantages of investment for development and marketing
• Developing a consistent approach for measuring organizational performance and impact
4. Human Resources - Attracting, developing and retaining productive employees and volunteers was a major concern:
Be reached and retain qualified
· Get qualified, motivated volunteers
• Development of a leadership transition and succession planning
• To improve workforcePerformance
• Provision of training and skill building
5. Collaboration - the continuation of constructive alliances, partnerships, mergers, and was also an important issue.
• Development of partnerships with public sector institutions, including the government
Wrought · Cooperation with the private sector
Tracking the merger with the overlap of services / agencies
Extrapolating from these problems, a sixth subject is an implicitAnother problem:
6. Business Proficiency - the need to take the business skills and processes more effectively to the needs identified in the following five broad themes.
External influences
Several changes in the operating environment of the voluntary sector leaders to influence their perception of the problems facing them.
challenges of financing - Many nonprofit organizations are simultaneously facing a rapidly changing funding environment and a steady increaseThe demand for services by the communities they serve. Reduced government support or targeted a lot of pressure on the sector, which also has a proliferation of new nonprofits has seen over the past decade, making the competition for a smaller pool of funds. Countless nonprofit organizations feel the impact of the cuts at the federal level, their core funding streams simultaneously and provide a foundation down and state and local governments, manyGovernments are experiencing deficits, reflected in a decrease in spending on social programs.
Accountability pressures - as a result of a few important cases, nonprofit organizations face strong pressure on accountability, measurable evidence that the services that provide an impact on communities and populations are addressed. Sponsors and the public wants to know in detail whether the organization funded effective in doing what you propose to do and ifeffective, it does. How to win and maintain the confidence of the pubis is absolutely necessary, require that the liability can lead nonprofit organizations to spend more time looking for funding and accounting for services funded task order to continue the support of the source. This can lead to more business-like non-profit, but may also require attention by the reaction in an innovative and distinctive to the community and / or customer.
Collaboration charm - Governmentand donors of the Foundation are increasingly requiring the use of interorganizational relationships such as cooperation, partnerships and alliances as an element of projects. However, while there is a growing body of knowledge of the factors, the successful negotiation and integration to support strategic partnerships, much less is known about the actual achievements, experience non-profit and how to compare the expected results . Many nonprofit organizations spend large sums of organizationEnergy for questionable returns, during the persecution of interorganizational relations. Nonprofits often face greater obstacles to cooperation, such as autonomy and applications "turfism" conflict of cultures in the organization and strengthening of trust between organizations.
ADAPTIVE EFFECTS
In response to these difficult circumstances require adjustments that involve more than just the development of further financial support.
Leadership Challenges - The health of the nonprofit sectordepends on the quality of its management. Management Agency, including the directors, must be able to basic questions about strategy, mission and responsibility and role playing to increase their organizations in their communities. increase for many nonprofit organizations, which means that in response to changes in the environment must:
· Identifying the most effective way to grow a population of clients, or to serve the amendment;
• DevelopmentPolicies and procedures for access and management of new sources of funding;
· You decide where and how to make budget cuts;
• Development of technology to capture information for reporting and billing;
• Management of cash flow problems;
Yes ¨ View new partnerships, collaborations and explore the possibility of considering mergers or acquisitions.
Given the changes in the typical work environment demanding a non-profit board leadership is particularly effectivecrucial. The problems of the voluntary sector underline the need to respond, skilled and effective leader on board to maintain and improve the quality of organizational performance. It is appropriate that nonprofit boards play a major role in supporting the agency's management on key issues such as the definition of the mission and strategic planning, legal compliance and conflicts of interest, taking the rules of the financial management agency, human resource development, establishingmaintain relations of cooperation between EU companies and opportunities for skills training.
management issues - the non-profit managers are called upon to perform multiple functions and tasks such as driving their organizations through the current complex environment. You must be highly skilled not only in technical aspects of their mission organizations, but also in management areas such as finance, human resources, information technology, the programEvaluation, human resource development and many other managerial tasks. Also provide an organization of collective human resources skills and experience of the people. Unfortunately, non-profit organizations are often challenged when actively managing personal talent. need to provide recruiting and retaining quality personnel, and increased accountability and competition, specialized skills and business processes to develop the non-profit byOrganizations. Consequently, like their counterparts in business, nonprofit managers must constantly seek and use the latest methods and techniques of organizational management and leadership.
Impact on the success
The repetition of the six identified needs as evidenced by the positive attributes that nonprofits will have elastic:
1. A strong governance structure and board members visionary with the right skills and access to resources.
2. Sufficientflexible financing.
3. One of the best practices in service functions and management and an effective way to increase the size of benefits is defined in relation to these parameters.
4. skilled workers, which allows in a culture where opportunities for growth and innovation.
5. effective community relations, cooperation with other suppliers, lenders and other organizations and systems.
6. management capacity of support services, including accounting,Human resources, technology and marketing / development functions.
A seven-step prescription
From this perspective, there are seven events to take the non-profit organizations to achieve these properties and the challenges they face:
1. company organizational assessment and create a strategic plan to address any gaps in capacity.
2. Engage board members to ensure the quality of governance structures, practices and monitoring systems.
3. Embrace and adopt sound marketingand communication strategies.
4. building business skills and integrate basic business practices and tools.
5. for identification and implementation of appropriate metrics and better use of technology to assess the success and impact of the provision of services and programs and internal processes.
6. Institute progressive human resources management focusing on skills and team building.
7. Explore and adopt new collaborative business models with complementaryOrganizations.
Maximizing your Nonprofit's Media Coverage
You know what to do if your profit is negative, or just wrong, the cover is replaced by the media? How the media to cover your profit is only half the battle. Take the necessary steps to maximize the media control the message and the benefits that the press coverage through training and preparation for employees to manage.
Max King, president of the Heinz Foundation and former director of the Philadelphia Inquirer has some insightful tips to maximize media coverage of hisDays in the newspaper industry in recent Communications Network conference in Chicago, Illinois:
Being open and honest work in the media. Nonprofit organizations and foundations should be to include the contents in any balance public communication, including media relations, what works and what does not. If you do not cover what is not working, and how the organization tries to change the will of the press.
What this means for your nonprofit or foundation? Here are someIssues on which you posted, so the message when and if the fall in the press should inform the control:
Your organization does not do fund-raising goals this year.
Your organization is under investigation by the authorities.
They are cut accordingly to cut staff by 50%, and reductions in benefits.
Provide periodic training of media - training management and staff in key messages on how to avoid the pitfalls of overly aggressive reporter and sharehow the message of the organization, no matter what is asked.
Want to newspaper reporting, which reflects what your speaker actually said? If the TV stations, use your colleagues best quotes? Thus, media education is the best choice. Be sure to exercise regularly to keep skills sharp and news media.
Strengthening internal communication so that your organization know the management and staff, what and why. MakeI'm not surprised by their institution.
I would go to King's proposal will be recommended, a media update with a detailed description of how often develop by any means to inform key personnel and Chief Executive Officer for the news organization. The plan should be regular updates and emergency alerts.
I recently recommended to set a non-profit clients on Monday morning, the staff at the level of e-update on a high-level message only. This short e-mailis the President and also for those who wish to speak to the media, while ensuring that other employees feel included and are aware of the news that affects their work might work soon. It works great!
As sources of income form the cultures of the for-profit, non-profit and non-governmental organizations
If we look at an organization Internal Revenue Service (IRS) non-profit organizations reported on their IRS Form 990, many of the distinctions between profit and nonprofit companies are operationally meaningless. As Peter says the printer. "The differences between managing a chain of retail stores and management of a Catholic diocese surprisingly less than the retail executives and bishops have to realize the differences are mainly the use of principles." Manythe timeless principles that the indicators of financial performance and financial performance for high-profit companies can also non-profit organizations are used to produce continuously, as described by Collins in his monograph, Good to Great and the social sectors. Contrary to what is taught in schools of many firms, recent studies such as Collins and Porras' Good to Great have demonstrated that income and wealth are the driving force or primary objective of truly visionary companies for profit.Rather, for-profit companies have a bigger goal in life, and to this end, attention to the horizon of business, which drives every decision they make. revenue generation for a means to an end for real visionary company for profit, not an end in itself.
The Breckenridge Institute ® has two types of non-profit organizations to make powerful and defining the culture of an organization as they generate most of their revenue identified. Thisincludes:
Type-1 Non-profit
Type 2 non-profit organizations.
While such a non-profit foundations can generate some of their financial resources, fundraising, membership fees and donations from donors whose revenue comes mostly from the supply of products and services to customers and organizations Fellow has worked for the authority regulation, and how to apply the results of clinical trials, R & D, basic research or development of new technologies. Operationally, workjust like their counterparts at for-profit - are standard business processes and business functions, proposal writing, marketing and sales goals, suppliers, inventory, customer or client satisfaction, and competitors in both the nonprofit and for -profit arenas. Examples of such a non-profit organizations include: hospitals, clinics, care facilities, rehabilitation, agricultural organizations, retail (Good Will has more than 1,900 outlets), contract research organizations, researchThe institutions that make the R & D and education applied.
While non-profits type 2, companies can generate some of their financial resources by offering products and services to you, their income is beyond the majority of scholarships, awards, funding organizations, foundations , fundraising, membership fees and donations from donors. Operationally and culturally, these organizations are much more complex than their counterparts in for-profit and function very differently. ToInstead, for example, clients or customers in the traditional sense of the word, type 2 non-profit organizations to serve two main divisions: a) the needs of the public and society, science and promoting the arts and sciences as a legacy for generations future, and b) the requirements, donors, grantors, sponsors, partners and donors for the programmatic and fiscal responsibility. The ultimate responsibility for compliance with the requirements of federal, state and local public relations,Fundraising, and general fiscal and programmatic effectiveness and management of type 2 is for the device and / or a Board of Directors. The institution's administrative staff uses standard business processes and work to a scientific, technical and craft that are often the events in collaboration with other institutions or universities, working together, so that the people that the vital contribution of the purposes of type- two strategic objectives of the organization and can not produce must be full-timeThe employees of this institution. Examples of type 2, non-profit organizations are: a) institutions and universities, research in the physical, biological, ecological, political, social and Computing Sciences, b) organizations, medical care and food for the needy, distribute c), museums, art institutions and music schools, the creation and preservation of artistic expression and culture.
The revenue for most organizations, federal, state, county and municipalLevels comes from funds provided by the legislative bodies (such as the U.S. Congress), and this source of income appropriate forms strong and defining the culture of government organizations. Because the basis for the increase or reduction in revenues from budgetary funds is driven largely by political, not the actual performance of the State organization. One of the best ways is to characterize these differences, the most important factors driving the comparison for-profit companyin the field, with the authorities. More specifically, there are four drivers in the non-profit organizations: a) performance, b) customer satisfaction, c) the consequences for performance (good and bad) and d) adopt the necessary leadership and management, energy in the first three. Like the wind in the sails of a boat, business performance and customer satisfaction are the driving forces for the company for profit, the business environment outside the organization. Implications for thePerformance drivers are essential for managers to monitor day to day under the organization, systems, structures and culture. The consequences are the equivalent of responsibility and authority.
Our experience working with government organizations to the Secretary of State-level has shown that there is no equivalent to the real business results, customer satisfaction and the consequences for performance (good or bad) in most agencies government. L 'A notable exception is "hybrid" organizations that receive a portion of their revenue from products and services to customers. For example, in whether a company is not profitable, it should be out of business. exist in agencies, organizations and projects to continue even after the end times is questionable, often for political reasons. In industry, customer satisfaction as a bastion of business results and process improvement. If customers are not satisfied,buy elsewhere, the profits to the company, and eventually the company goes out of business. In many government agencies have managers and employees interminable debates that they themselves have different customers the ephemeral "taxpayer" or "future generations". In industry, if an employee's performance is exemplary, are rewarded, and if the power is not enough, the company can fire. There are consequences for the performance - good and bad. In most authorities,Difference between increases and the rewards are high performance and observation of low-wage jobs often cast a couple of dollars per month. An unwritten rule in many cultural administrations is that it fails to meet for operators of marginal votes for fear that even the incompetents takes revenge after filing complaints against a manager who dares to speak the truth about their level of performance . More importantly, the other industrialized driving driverand management will be compromised if top managers do not openly show that the performance impact because the system which are not incorporated in their responsibilities and authority.
Assessors should note that in the absence of sources of income, which is connected to the actual performance of an organization, the currency, the "business" in the bodies of state power-through-visibility. In other words, if a government agency or a managerinvolved with an "initiative" or "program" that is received by agency leaders, the media or the public, which creates a positive view of the coin. If the organization or the operator of actions and interactions that are frowned upon by the leaders of the agencies, the media or is assigned to the public, which creates a negative view of the coin. In general, all sectors of the government under increasing pressure, the applicability and value-added results show theirand services to meet the needs of the public of this control produces positive or negative currency effects in sight. But if an organizational unit within a state responsibility for the active control laws and regulations, the purpose, strategic goals, objectives and day to day interaction with the public often under close scrutiny by the public and Media with questions associated with the power of view are more intense, because these districtsFunction more like real customers. Government agencies are also under constant pressure to demonstrate that their operations are efficient and that the use of public funds generated responsibly, despite the absence of the four factors that determine the importance of creating the currency Increased positive visibility. The implicit, unexamined taken for granted in the currency of power-through-visibility is one of the most powerful forces in the world of public authority, andimportant to recognize this reality and actively manage through performance indicators.
The bottom line when you try to create an intentional ™ culture in a non-profit, and / or government organizations, focusing on revenue structures and governance. Gain a clear understanding of: a) the vitality of nature and sustainability of a company's revenue and funding streams, b) the expectations and pressures that are exerted on the customer organization,Competitors, suppliers, governments, taxpayers and other forces in the external environment, and c) the nature of the governance structure of the main factors for the creation of culture ™ intentional.
20 largest grant making foundations for Christian organizations
The question of what is again a foundation to fund Christian ministries and churches to think about all the time. Of course there are several factors to consider. The degree of compatibility between your mission and goals of a foundation is the most important consideration. But at the same time, the Foundation for the funding is declining, it is useful to know that the foundation damage - with a little knowledge 'of their overall objective, the types of ChristianOrganizations they fund, and the types of programs that interest them.
Here are the top 20 Christian sources in terms of grant funding generously funding.
1. Of all the grant applications at this time the Christian foundations Alharetta sees Georgia-based National Christian Foundation (NCF), the majority of the funds. Seeking to further the gospel of Jesus Christ, his national finance area. This is largely a donor advised fund. A donor advised fund is aDonate a vehicle to charity managed by a third party and created for the management of donations in the name of a family organization or individual. A donor advised fund offers the possibility to create to create a simple cost effective, flexible vehicle for charitable donations as an alternative to direct giving or creating a private foundation.
NCF helps individuals and families plan their programs, such as the Legacy Fund (after death) give. He advisesthey give to asset management (cash, securities, real estate, business interests, restricted securities) and shows how their income needs and estate planning objectives of balance (from foundations and charitable annuities.)
The only Charity Fund allows supporters to donate to all types of property, the professional advisory group - the financial planner, CPA, lawyers there, and more - to advise supporters in the art of tax-efficient.
2. Christian Aid Ministries is aFoundation in Berlin, Ohio. After a gift internationally, is looking to the ministry of spiritual and material assistance such as food, clothing, medicine and other Christian literature to people in need in different countries. " It also provides emergency funds and gifts in kind. The Ministry argues Amish Mennonites and other Anabaptists conservative, as a minister for physical and spiritual needs of people around the world. Help the victims of wars, famines and naturalDisasters.
3. The Nehemiah Corporation is a foundation of Sacramento, California. Its mission is to facilitate "home ownership opportunities and development activities of various populations in disadvantaged areas in the United States, while maintaining a commitment to a successful, responsible home ownership." There are mostly California foundations and individuals and organizations to support their Christian mission.
4. The Trinity Christian Center of Santa Ana is a foundationfrom Tustin, California. He claims services and Christian organizations who seek to spread the Gospel throughout the world. Provides support, comfort and relief to the sick, the disabled, the homeless. E 'for the production of television programs for religious ministries that spread the Gospel throughout the known world.
5. The Barnabas Foundation is a foundation of Tinley Park, Illinois, that its nearly 200 members of Christian communities, with the support of planned giving and estate planning.His legacy includes participating churches churches, the churches good steward ministry, said State Asset Management, member churches. It also provides education and management development programs to facilitate the management, "based on God's own gift of all."
6. The J. Bulow Campbell Foundation is an independent foundation in Atlanta, Georgia. The foundation aims to increase the "intellectual and spiritual life, instead of a permanent nature or project capital funds." E 'Non-operating expenses of the Fund or recurring programs, except in cases where it might be able to finance a major program again without any assistance from the Foundation. There are anonymous in the religious institutions of the Presbyterian church, but not to the municipalities. Most support organizations in Georgia, although organizations in Alabama, Florida, North Carolina, South Carolina, Tennessee and has to give.
7. Rupert H. Johnson Foundation is an independentFoundation in San Mateo, California, which usually means only education programs in California and Virginia. Only Christian organizations seeking grants for training programs in these two geographic regions would be eligible.
8. The Rees-Jones Foundation, a family foundation in Dallas, Texas, the fund-based "programs that improve the quality of life for the assistance of North Texas under-served." It provides employees and matching gifts fund capital campaigns, operations,Management and program development and scholarship. He claimed he asked to try to alleviate hunger, and provides medical care for people with physical and mental handicaps, educational opportunities for young people, and affordable housing, shelter and spiritual development for the bereaved.
9. The Cottonwood Foundation is an independent foundation, which is largely within its base of Memphis and the Metropolitan Region. It is funded primarily young people and education. Ministries, whichthese two areas are eligible.
10. The Way Foundation, an independent foundation in Grand Rapids, Michigan is usually within the County of Kent, and especially in Grand Rapids. Christian agencies, health, social, educational and supply is more likely that the funding of the Foundation for those who do not receive. E 'funds annual campaigns, building / renovation, capital campaigns, curriculum development, foundations, equipment, matching / challenge and campaignsDevelopment program.
11. Hope Christian Community Foundation is a Christian charity Public Citizen Foundation in Memphis, Tennessee, that "helps Christians to share their wealth with others in a thoughtful and effective." E 'used by administrative ministries and Fund Management Agency offers a pool of cash management, invest endowments and makes grants in the hope of Memphis funds. It works with churches serving the community, and church managementDonor-advised funds for church members, and to provide a pool of liquidity management.
12. The Maclellan Foundation, a Chattanooga, Tennessee-based independent foundation. There are internationally and nationally, said Chattanooga. It is the largest in a group of four family trusts that are committed "to fulfill the Great Commission of Jesus Christ through strategic giving." The Foundation provides financial and management training to local organizations that the spiritualProbably through the work of the Commission to extend the kingdom of God, every tribe, nation, people, and language. " With this objective is the basis for consultation, equipment, general / operating system support, development and program evaluation, and seed money to Christian organizations.
13. The New York City-based American Bible Society is a foundation which translates, publishes and distributes the Bible in all languages. The company wants to do to anyone "Bible is life changing revelation. "You work with other Christian organizations, including faith comes by hearing, the creator of an audio version of the Bible. The other partners are children, the Military Ministry, Mission Year Samaritans Purse / Operation Christmas Child, the United Bible Societies Feed and the National Association of State and Regional Bible Societies.
14. The National Endowment Association is a public foundation in Princeton, Indiana, that organizations of small and medium-sized businesses to helpUnited States, the majority of religious ministries, giving fund. The goal is to free the continuing requests from fund raising in order to devote more time to their duties. The association helps them to seek long-term planned gifts, charitable organizations and slightly larger ones have the means to do so. It helps you take advantage of multiple sources of funding through planning tax-free. It also helps to promote their love of website templates, training, marketing materialsModels, marketing / fundraising consultancy and donor / consumer workshops.
15. The Harold Simmons Foundation, Dallas, Texas, is a company-sponsored foundation. It offers scholarships, supporting zoos, art and culture, education, energy, health, drug abuse treatment for HIV / AIDS, disaster relief, athletics, social, human rights, social issues, programs that address women's issues and Christian organizations. There are mainly in the Dallas / Fort WorthArea.
16. The Norcliffe Foundation is an independent foundation in Seattle, Washington. There are organizations that benefit from the artistic and cultural organizations, hospitals, early childhood development, secondary and higher education, and historic preservation. It also supports medical research and health associations, hospices, the environment and the maintenance and social services programs for the disabled, the homeless, children and youth services, youth agencies and the elderly. L 'Christian Scholars Foundation, the Roman Catholic Church and religious associations. There are mainly in the Puget Sound in Washington, especially Seattle.
17. The Stephen and Mary Birch Foundation, Wilmington, Delaware is an independent foundation which is located in the United States. It supports non-profit institutions, communities and organizations that support research, medicine, health, education, sports, social services and arts programs in communities throughoutthe nation. Christian organizations working in each area are eligible.
18. The Harry J. Lloyd Charitable Trust in Overland Park, Kansas, supports the work of God, as described in the Great Commission by spreading the evangelization of the world. " Supports both the organizations and programs that further this mission. The Trust provides grants to help start new ministries or new programs or expand existing programs. IT organizations funds that are creative,responsible, stable and effective. These funds are also Christian programs include housing, food, medical care and education for the poor. It may also support medical research in various fields.
19. Foster and Lynn Freiss Family Foundation is an independent foundation in Jackson, Wyoming. This means mostly business programs based on faith, especially one-one-one mentoring. The Foundation provides general support system / operational support matching / challenge, and on the programInvestments / loans.
20. IBS-STL is a foundation of Colorado Springs, Colorado. It 'came in 2007 from the merger of the National Bible Society and send the light. There is a national and international Christian organizations that translate more of its functions, the interpretation and publication of the Bible. His goal is to have more and more people are living all over the world the opportunity, the Bible.
Some foundations are available only in Christian ministries and benefitsChurches. Others lack a direct connection to Christianity, but the work to solve problems, to solve the core of Christian concern. Some have a limited geographic focus, others are on a national level, while others have an international focus. But where the organization works and what it has programs, many (if not more) of these foundations are viable options for financing your business. And there are countless other possibilities. The Directory of funding Christian (CFD), FondazionePeople on-line and research foundations are the most valuable sources of information on foundations.
Revenue
According to the American Accounting Association, Committee on concepts and accounting principles "is the monetary expression of the amount of revenue transferred to the goods or services by an enterprise to its customers during a given period of time."
Retained earnings and capital revenue
capital gains of the company include contributions of the partners or shareholders, loans, proceeds from the sale of fixed assets, etc. In the case of clubs and associations, receivedLife account of subscriptions, fees, grants, inheritances and gifts entered the capital. tax revenue of a company's money from the sale, get discounts, commissions, interest on investments, etc., etc. Annual dues, sales of golf clubs and balls, revenue from other local, should be used on some charges .
revenue receipts in the income account (trading and profit and loss account), while the treatment of capitalRevenue in the treatment of the balance sheet.
If a particular receipt is capital or revenue? The guidelines can indicate the following:
- Type of income is by its nature in the hands of the person who has done can not be determined by the source of payment to the payment of interest on the capital of a company is still in development capital expenditures for the company but received revenue hands the person who receives it.
- In case of a singleSettlement of purchase and sale of immovable property of the owner to decide whether the receipt is capital or revenue, for example, A sells shares held by him as an investment, it is a capital receipt, but if A sells the shares speculative motive would be a confirmation of income.
- Evidence in regard to fixed assets is a capital preservation during a receipt of assets in the short term is a receipt, for example, sales of buildings, facilities, etc., form the entrance, while sales of capitalStock-exchange revenue received.
- If a receipt to replace a source of income is a capital receipt, but if it is "in place of income alone, such sales at the time in a car accident and passenger death or permanent disability , the compensation received from the capital of the railway company received, because this input is to say, as a source of income replacement for his life, but if it is made to temporarily disable the receptionRevenues and income replacement only mean the loss of earnings during the period of disability.
If a sum for the transfer of certain provisions have been received, but this is capital input, where it received the sum in the nature of compensation for loss of future profits is a receipt for income as A, tenant area of grog and producer of refractory products has been hindered by the railway company for work on the field next to the tracks. Amount paid byA railway company is the input of capital, because it is the receipt in place of his right to work in the field is the sound.
The importance of asset-liability matching (ALM)
In recent years, portfolio investment and talent scout acutely attuned to the unique risks of money in their wallets. In particular, flows of capital to the ability to generate sufficient cash, the liability has decreased funding commitments over the past ten years.
As a result, has placed the emphasis on so-called "asset-liability matching. In this brief, we examine an example of ALM. Consider the case that an investment manager hasa series of activities that need to finance a number of liabilities. For simplicity we assume that the assets of these investments are without risk and liabilities consist of a known set of payments in the future.
In an analysis of debt (or liabilities), it is important to measure the "duration" of income (or debt) to electricity. The duration of regular cash flow is the actual duration of a specific set of cash flows. Therefore, the durationsometimes referred to as "effective maturity". It 'also important to know that the duration of a portfolio of assets (or liabilities) is equal to the weighted average maturity of the underlying assets (or liabilities). In addition, the longer the duration of a series of cash flows, the greater the sensitivity to changes in interest rates.
There are several ways to calculate the duration that are beyond the scope of this short, but the majority or a simple calculationHeuristic or a spreadsheet automatically. In both cases, this is a great advantage to know the duration of a series of cash flows. A Noteholder who holds (and reinvested the coupons) bind on time is actually "immune" to changes in interest rates and should be a holding period yield (HPY), which is similar to the yield to maturity of the loan experience.
Of course, there are several assumptions (eg, not for the bond issuer does not default, etc).But in the base case, this term can be very valuable for an investment manager cash flow needs on a specific date and time. is often the case for foundations that have obligations or demands payment of pensions to pensioners.
If an investment manager to calculate the duration of its assets and the duration of their liabilities, can make a determination of interest rate sensitivity of the portfolio, and then appreciate its ability to meet itsfuture obligations. For example, if the duration of assets exceeds the duration of the liabilities of the portfolio, then the structure of the portfolio is vulnerable to interest rates.
For longer duration assets, liabilities are sensitive to interest rates than shorter duration. If interest rates rise, assets with a value faster than the decrease in liabilities. If interest rates remain at this level might be a shortage ofDebt financing.
One way to alleviate this problem is the balance of the portfolio of activities so that the duration of assets equal to the duration of liabilities, so that any interest rate has a negligible effect. If in the previous case, the duration of the portfolio is too high, the duration can be reduced.
This reduction can be achieved through a rebalancing of portfolios with shorter duration of activity (eg, short-term Treasuries or cash) or,Short-circuiting long-lived assets. The market for Treasury zero-coupon (strip) is often used because of the unique result that zero coupon maturity, which are exactly equivalent to their maturities.
If the duration of the portfolio of assets and liabilities of the portfolio to changes in interest rates should have a negligible effect on the structure: the portfolio is said to be adapted for long. This is an excellent example of the value of ALM.
Of course there areother risks such as interest rate risk. In addition, the same duration is not static, and the rebalancing of the portfolio should be dynamic, changing to these changes. But in principle, this form of ALM to help the work, the managers have some control over at least one form of risk in our increasingly complex world of investments.
Endowment plans
An endowment policy is a contract of life insurance offered to the death to pay a fixed amount for a specific period or earlier -. foundations can be converted at an early stage known as abandoned - and then each company pays for the surrender value of insurance , which is decided by how long the policy has been run and how much to pay status.
For the duration of the circumstances of the favorable investment climate, the redemption value or surrender value may be downsizing from a 'MarketSetting value 'to allow the cash required in units in a time when investment conditions are not perfect. This means that the investor takes delivery of the cash surrender value less the market value adjuster.
o A policy framework is a mixture of insurance and investment: the life of the individual under the policy of a specific sum assured. This life cover is also called the insured amount. A portion of the premium is calculated in the direction that the sum insured. A set ofPart of the award is given to the cost of management of operating costs of the insurance company that sells the policy. The left part of the premium is invested.
Or it could announce a life insurance capital of a bonus each year: the money invested annually produce a certain return. This return can be confirmed as a bonus. The bonus is intended to cover typical of a certain ratio of the sum insured or life, because it is widely acknowledged generated.
The bonus will be confirmed orare not paid immediately, as is the case of a stock dividend or an investment fund, the dividend will be paid immediately after it was declared, said building the bonus and will only be paid if the policy matured or in the case are the ' insured dies.
The bonus does not explain or more, accumulates only
Because the content or bonuses are not declared lower back
Foundation for retirement
That make a difference one year. People who enter early retirement last summer led to a strong market position of their nest eggs and cushion any anxiety over his life transition. On July 19, 2007, the Dow Jones Industrial Average reached a record high and closed over 14,000 for the first time. to the extent that the subprime crisis was also recorded, many observers the damage within the property sector should contain.
The investment was then obscured views, butparticularly for those who can not even take decades for the impact of volatility. Regardless of how markets perform, most retirees rely on regular income from their retirement nest egg while preserving as much of their capital as possible.
At the institutional level, face a similar task foundations. Congress needs to give away at least 5% of their assets each year, the main challenge is to grow with inflation to keep pace, allowing them to fulfill their obligationsFellows and operational costs. E 'as the guest ... for all eternity. "The problems of investors and board chair with the institute are closely linked," says Laurence Siegel, director of investment research division of the Ford Foundation. "Both are trying to produce a revenue stream that grows with inflation."
Do not need to hoard your customers' investment just like the Rockefeller and Ford foundations, not to mention Harvard and Yale say. In fact, most investorscan not, as Harvard or Yale to act in spite of books and articles that teach how to come together-just not enough money. But the lawyers are able to teach the basic strategies for the construction and maintenance of portfolios of retirement income. Here's a look at how.
All major award
Retirement Income Planning Act did not exist a few generations ago. By the mid-20th century, most people do not have a pension ten years, for the simple reasonthat life expectancy was shorter. People have stopped working a few years he lived on Social Security and then died. Later, in 1980, retirees may their portfolios with evidence of double-digit performance of government and bank certificates of deposit and parcel out the income to live well. In the same decade, when inflation cooled, began a bull market that lasted for the rest of the century.
Today the picture is extremely complex. People are living longer than ever. Lifeinsurance industry has adopted new mortality tables that reflect: From January 1, 2009, all measures must set prices which spans 121 years issued in place of tables in their late 100th And the markets are less friendly. Market watchers predict that the stock can be used for years in a range-bound market that none of the pizzazz of the bull market that ended in 2000 has languished.
In the meantime, people are not spending needs to be changed, if anything, have risen, as have costs for health careexceeded inflation and inflationary pressures mounted. However, the float 30-year Treasury yields at 4.50%.
Recent research reinforces the importance of asset allocation in retirement as one of the safest and most effective ways to meet today's long-term portfolio. Because of market capitalization, more than half of every dollar collected by generating a defined contribution plan includes returns after retirement, according to a study conducted by Russell Investments andpublished last month. The study examined a sample prototype 25 years 65 years who died at the age of 90 years. For every dollar that a pensioner from a defined contribution plan withdrawn, 10 cents of contributions to the plan came during labor, 30 cents was generated by the return on investments before retirement and a full 60 cents were generated from income investments after retirement. "The whole business is much bigger after retirement," said Bob Collie, director of the InvestmentStrategy for Russell. After retirement, the investment income for a portion of every dollar so far out from a defined contribution plan, only because the larger asset pool withdrawn in retirement, and because people are living longer, their money for shorter time Longer entries are to work as before.
life expectancy now means that an overly conservative asset allocation does not go far for most retirees. In fact, the consultants recognize that their clients are wealthiercomes from a secure retirement, for example, bond ladders. "You can not bind with itself, because the assets have eroded," said Thyra Zerhusen, director of the $ 1000000000 Aston / Optimum Mid Cap Fund's portfolio and a foundation in New York, who declined to name them and the same way their funds are running. If Zerhusen began managing the portfolio of the Foundation, was about 70% of its assets in bonds and the rest in shares. This distribution reflects the traditional seniorityPortfolio. But life expectancy, lower returns and a stagnant stock market may have zapped the effectiveness of these agents. Zerhusen convinced the Foundation meeting of the Finance Committee of the inverse mapping, and today, the portfolio is approximately 70% equities and 30% of high-quality bonds.
Alpha Alternative
The Foundation manages portfolios Zerhusen is unusual in that it does not have an allocation of alternative investments. "We only buy whatunderstand, "said Zerhusen. your expertise in identifying undervalued and misunderstood mid-cap securities has contributed to the foundation meet its annual operating targets, payments of 8% to 10% a year without authority.
Most of the major foundations and institutions (foundations must give the order of at least 5% of their assets per year, while foundations are not) will have at least one quarter of their assets in investments outside of the traditional long-onlylisted shares and bonds, says Siegel. "Alternative investments are, in principle, a more efficient way to generate alpha (if the manager has skill) than traditional long-only investments," he writes in an e-mail. "This is because short selling, leverage and the ability to use derivatives to block the ability of funds for a long period of time, and other characteristics of each alternative in many different ways to the efficiency of the portfolio (the expected return to risk unittaken). "
The Harvard and Yale are foundations more than 50% of their portfolio of alternatives such as private equity, hedge funds, property and resources by Frontier Capital Management, a Boston-based investment management company. A $ $ 34600000000 and 22500000000 and (from the end of fiscal 2007) and Yale, Harvard foundations could weather any liquidity shortages, the allocation of high-presents this alternative. But the funds and capitalizationprivate foundations, without access to new money from alumni or other interested parties (and whose circumstances are similar to those of retirees) could anger in a bear market, bringing them the highest percentage to provide alternatives, "says Siegel. can force margin calls or forward commitments in private equity assets sales, and must be chosen less liquid assets, much of the portfolio is in real assets. Your customers have less flexibility intheir tax returns, if they are assigned to real assets too.
Some consultants have embraced the use of alternatives. "During the design of the portfolio, the big goal, investments that are not related," says Greg Plechner, principal and senior asset manager Greenbaum and Orecchio only a tax consulting firm in Old Tappan, NJ "With alternative investments, we 'obtain again, dass "Greenbaum and Orecchio has on average between 15% and 20% of their clientsPortfolio of alternatives. retired clients have a budget slightly less than alternative investments, he says, because their share of fixed income is higher.
to invest the company's customers with more than 1.5 million U.S. dollars have access to private investment partnerships, while those with less than $ 1,500,000 may be similar strategies through Exchange Traded Funds and Notes, and institutional share class mutual funds access . For example, the company uses CommodityRealReturn Institutional PIMCO, VanguardEnergy ETF and Rydex Managed Futures Fund for the exhibition "market neutral.
The choice of private equity and hedge Opportunities Fund requires a lot more attention to the selection of investments sold on the stock, as the former have far fewer reporting requirements. Greenbaum and Orecchio employs three full-time professionals whose sole job is to evaluate private investment and that the work on the right.
savings products for the rest of us
Last year,Financial services sector has introduced new products to help consumers to generate income in retirement and to capitalize. wave of retiring baby boom design inspired the foundation of pension income of at least one new mutual funds in the market: Vanguard Payout Funds managed, launched in early May. The three funds rate target payout of 3%, 5% and 7%, respectively, while maintaining the capital, and something in this approach as a university functionDire talent, Vanguard executives. The underlying funds are Vanguard stock and bond funds and other investments, including REITs and Tips (inflation-indexed bonds) fund and investment related products.
Vanguard approach in contrast to Fidelity Investments, which will be paid the funds are designed to liquidate a major investor with a target date. Vanguard chose their approach because "it was generally a feeling that there is a strong desire among retireesCustomers keep their capital in liquid form for the duration, "says John Ameriks, Vanguard principal and economist. Vanguard Research Investment Fund shareholders in the company shows that many seniors continue to save in retirement." It 's very hard for people to turn a penny in retirement, says Ameriks. "They save their lives." In other words, even if customers are not saving enough for retirement, their savings behavior stillrooted.
According to the prospectus of the Vanguard fund, the Fund is required to pay 3% to investors, raise capital and to see payments in time and find only a modest payment of their current activities that the action, the fund payout of 7% on the other hand, it is expected that those who pay a greater need to call immediately to meet the expenditure requirements. While the payments of principal and on the bottom of 7% do not expect to keep pace with inflation, Vanguard will seek to preserveFund original value. The fund will provide 5% long-term inflation protection and capital preservation. The funds could be used as an investment vehicle to feature a small foundation, and in fact, Vanguard has a few requests from those institutions in the field, says Ameriks.
The rates of disbursement of the fund are goals, not guarantees. "These products are not pensions," a source of guaranteed income for life, Ameriks notes offering. "There are positives and negatives to it." The companybelieves that exceed the positive, such as liquidity and flexibility, the lack of security. In fact, pensions have not won wide acceptance in the market mainly because consumers are reluctant to provide access to the key.
But then again ...
share as much as retirees and foundations with similar problems, there are some notable differences between the two. To begin, people die. Nobody needs to generate revenue in the long run, such as foundationsStrive to do. Retirees should plan for at least 30 years of seniority and pensions may not survive to insure their property. Among the general unpopularity of these insurance products, advisers and their clients often overlook the benefits of risk sharing provided. "Pension produce a much higher income than bonds or suggestions for people who die pay the aid to those who survive," says Siegel wrote in an e-mail. In reality, you need 25% to 40% less capital to fend for themselves inRetirement Risk Sharing, which is structuring an investment portfolio on your own, according to a study by David F. Babbel and Craig B. Merrill Wharton Financial Institutions Center, co-sponsor of the New York Life.
annuity companies have repayment options that their products have introduced increased popularity. This popular feature ensures that the investor will receive back the money heirs after the death eat the benefits of sharing risk. A man of 65 yearswas 8% less income and a man of 75 years, 13% in less than an immediate connection with a refund as he would have received from one without, "said Mike Gallo, senior vice president of retirement income in New York Life.
Another approach is the traditional pension through the superimposition of a low cost insurance to deconstruct guarantee separately managed account. In March, Pershing LLC has launched a hybrid product that retirement income, the couple managed solution with a lifetime income accountWarranty offered by the company Phoenix. The product, known as Lockwood Investment Strategies Longevity Income Solutions, or LIS2 in short, will ensure that investors do not outlive their assets, says Len Reinhart, the former president of Lockwood, who has worked in product design and now consults for Pershing Managed Account Solutions.
LIS2 has a deposit of 5% per annum net of fees, is when an investor starts 65 years. The rate of 5% on the initial application forU.S. dollar fixed amount, which remains the same each year. For example, an investor would have led to $ 1,000,000 with the product in $ 50,000 a year to get the rest of his life. The Phoenix company buys 10 years, take cover for the guarantee, which assures consumers of the fixed dividend, regardless of performance of the underlying funds.
This structure ensures that investors do not invest too prudent to retire, says Reinhart. "The point is that the customera strategy of aggressive growth, "he said. In other words, ensuring a guaranteed source of income through LIS2, retirees can invest the rest of their portfolios more aggressively. This argument is often applied to pensions as well.
Another important difference between the retired and foundations is their tax treatment. Private foundations pay a consumption tax of 1% to 2% on income and capital gains capitalized and foundations to pay anything. Needless to say that individuals,not enjoy such a favorable treatment at the hands of the Internal Revenue Service.
Also, many strategies for retirement income are not designed for tax debts of efficiency. For example, since investors in Vanguard Managed Payout Funds a 1099 tax return every year showing how they were generated their monthly payments for the previous year, or a combination of income, capital gains or return of capital. This complex tax system means that investors would benefit from applying for these fundsin exchange for tax breaks. If investors Lockwood LIS2 product is able to generate payments on income or capital gains be taxed at 15% capital gains tax rate, says Reinhart. But if the account balance and crashed into the insurance must cover the payments, the investor will be taxed at regular income. Investors who open an IRA account managed by Lockwood Capital Management, and keep the offers within LIS2 would enjoy preferential tax treatment forIncome.
Financial Advisors at Greenbaum and Orecchio actively work to minimize their tax burden customers. If a client needs income, iRebal rebalancing software company used to quickly determine how to use capital, incomes and income balance to generate income as tax-efficient, said Plechner. Customers can invest with more than 1.5 million U.S. dollars of company funds and ETFs based on alternative investment strategies for tax purposes to choose, he says. Customers with the alternativeThe investments, including hedge funds, private equity, venture capital and real estate receive a K-1 tax form this state, that the share of taxable income of the partnership. The forms are often late, customers need an extension for taxes, Plechner says, wants to avoid a dispute some files.
Despite careful planning, many institutions and individuals fail to do so to meet their objectives of income at some point. Back after a year of poor people, a foundation may simply reduce the size ofgrants. The bills of customers but does not disappear in a bear market. If customers do not meet their revenue targets, you can cut expenses or increase their equity exposure, "says Deena Katz, president of Evensky & Katz in Coral Gables, Florida, the election, as expressed by his partner, Harold Evensky it is clear: "Do you not sleep, eat or not well at night? "