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V O L . X X V I N O. X V I 54 Fact Book / Doing Business in Maine H OW TO B Y J A C K M O O R E B Y J A C K M O O R E W hile swings in volatility and dramatic sell-offs are par for the course in today's markets, the recent upheaval was stressful for even the most seasoned market-watchers. We haven't seen the end of extreme fluctuations related to the global pan- demic and recovery efforts. However, there are steps that every not-for- profit can take to feel better prepared and buttress an endowment against the next round of market stressors. Plan ahead Establish the endow ment's role with respect to your institution's mission and align your investment policy statement accord- ingly. e most common source of anxiety for nonprofits during peri- ods of heightened market volatility stems from a misalignment between investment policies and the role of the endowment. Define your endowment goals to set appropriate time-hori- zons. Is your endowment a source of perpetual support, a rainy-day fund or a means to fund future growth? Invest based on your established goals. For long-term goals, you can afford to weather downturns and be posi- tioned more aggressively, for instance with more equities than bonds. For nearer-term needs, more conservative positioning is preferred as prospects of recovering from a sudden sell-off are reduced. Consider your potential cash needs. Institutions with less capac- ity to weather financial stress need to have an investment policy statement that can yield distributions during downturns. Conversely, an entirely different set of policies should govern institutions that can forgo payouts during downturns. What now? First, assess your needs and take advantage of the market bounce(s) to raise cash from the portfolio if war- ranted. Remaining mindful of restricted funds, taking action to avoid a cash emergency can outweigh the oppor- tunity costs of not being fully invested. Second, take advantage of the recent turmoil to determine if the endow- ment is managed according to your expectations. Down markets reveal the poor strategies and expose who might have been taking too much risk. As Warren Buffett says, "you can see who is swimming without a bathing suit when the tide goes out." Consider whether a specialized endowment-advisor might benefit your institution.ird, talk with your endowment advisor and ask ques tions. Sound communication is a key for successful long-term partnerships and becomes even more crucial in times of crisis. If you have not heard from your advisor, reach out and propose a Zoom meeting. Fourth, take stock of your endowment framework and determine if you need to make changes. Is your investment policy statement updated and does it reflect your goals? Is the endowment sustainable and able to deliver what you need? Do's and don'ts: ✓ Stick to the plan — don't act with emotion ✓ Minimize risks from cash crunches ✓ Know your endowment's charac- teristics. Know what it would have done in other volatile time periods so you can anticipate how it should perform under future scenarios. ✖ De-risk after the damage is done. Instead, plan in calm times ✖ Take out more cash without planning ✖ Panic. Instead, trust your endow- ment advisor ✖ Monday morning quarterback in the short term ✖ Miss the opportunity for a post- mortem. Downturns can provide clarity on whether your endowment is aligned with your mission. Jack Moore, managing partner of Harpswell Capital Advisors in New Gloucester, can be reached at jpm @ harpswelladvisors.com Weather this crisis as a nonprofit Creating business & educational opportunities for Maine people since 1983. Helping Maine People Succeed Since 1983 1-800-228-3734 • FAMEmaine.com 2015 - 2016 - 2017 - 2018 - 2019 Free Programs & Info on Planning & Paying for Higher Education Job-Creating Commercial Loan, Equity, and Bond Programs 2019 200 200 IDEAS FOR MAINE'S Some of Maine's light- houses were commissioned by George Washington. BICENTENNIAL

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