Frequently Asked Questions – For ministries and organizations with investment accounts with the Foundation
I receive payments from a Charitable Unitrust with the LCMS Foundation. How will the recent drop in the market affect my payments next year?
Payments from a Charitable Remainder Unitrust for 2021 will be calculated using the asset values as of December 31, 2020.
How is the Foundation handling the market’s current volatility?
The LCMS Foundation is a long-term investor; we look to our Investment Advisor, NPEC, and our 15 professional fund managers for ongoing investment guidance. Our funds are very well-diversified across thousands of companies (stock) and debt issuers (bonds). Investors have experienced market volatility many times over the years, and our approach is to focus on the long term.
Is the Foundation changing how it invests to offset the market’s volatility?
The Foundation regularly consults with our investment advisor, NEPC, and our Investment Committee to update our Investment Policy Statement, which can be found here. This policy sets asset class targets, based on our portfolio constraints and investment return goals. We re-balance back to these target allocations monthly, seeking to buy low and sell high, and achieve good long-term returns.
Should we change how our ministry funds are invested?
Ministries should choose the investment allocation that is right for them given their situation. Most investment guidelines recommend that investors consider their timing of cash needs, and their risk tolerance level, when deciding how to invest. Ministries should also plan to have reserves with the Lutheran Church Extension Fund or in a bank, to be used in difficult situations like now.
How will drops or fluctuations in the market affect our endowment?
Endowments held with the LCMS Foundation are invested in the Foundation’s aggressive balanced fund, which is invested 75% in equities and 25% in bonds. These account balances move along with markets as asset prices fluctuate. We are hopeful to achieve long-term average returns in the mid to high single digits for these funds, with up and down market cycles along the way.
Will my organization still receive our endowment distribution?
Yes, all account distributions will still occur as planned. Endowments established with the LCMS Foundation use a spending rate approach that provides a smoothing effect of annual distributions. This approach is consistent with industry trends in the not-for profit worlds, and in line with the Uniform Prudent Management of Institutional Funds Act (UPMIFA).
How does the LCMS Foundation manage risk?
Like any financial institution, the LCMS has a well-developed disaster recovery program in place, and our operations are running smoothly. The LCMS Foundation uses US Bank as its asset custodian. Our financial statements are audited annually, and we have a SOC-1 report prepared annually to review our investment operations.