Piedmont Educational Foundation Takes Long Term Investment Approach

Given the looming threat of a double-dip recession and continued economic uncertainty, a local community-based organization is applying the principles of Wall Street to manage an education fund that helps keep schools running as state financing continues to decline.

The Piedmont Educational Foundation, a non-profit organization that provides grants and financial support to Piedmont schools, has established a diversified portfolio using cash, fixed-income and equities with the goal of transforming donor funds into a sustainable source of funding for the school district.  

PEF Investments Chair Bob McBain said the organization’s Investment Committee is tracking the volatile markets very closely.

“For us, like everyone else, the market swings and volatility are frustrating,” he said

Despite the difficulty to predict where the markets will go, PEF takes a long term, structured approach to investing in order to protect donor funds. The organization seeks to maintain a stability of returns with an eye on cash liquidity for distribution needs, said McBain.

“So as the markets change, we reallocate and invest accordingly,” he said. “We're all confident that this approach is appropriate for our investment goals.”

In the 2009 – 2010 fiscal year, PEF disbursed $524,164 in grants and funding to Piedmont schools. The foundation also has a sizable endowment fund, which as of July was valued at $4.2 million.

McBain said PEF chooses to avoid investing in individual stocks given the high volatility in the market these days. Rather, the organization relies on “highly liquid investments such as Exchange-traded funds or index funds that provide us with the most efficient and appropriate asset allocations,” said McBain.

In the current market conditions, PEF’s Investment Committee is reviewing its investments more regularly than before. The organization has had to up its cash balance more than usual to satisfy distribution requirements and market conditions.

Making profitable investments is a challenge in the current market, said McBain.

“It’s just been difficult to get much done given all the volatility of the last several quarters,” he said.

McBain stressed that the committee tracks its fees and execution costs very closely.

“In difficult markets these costs can materially impact returns. Our focus on low fees and low turnover ensures that doesn't happen,” he said.