Investments for Churches
INVESTMENTS FOR CHURCHES
Some HPBC churches and institutions from time to time can benefit from monitored investment opportunities. HBF makes available such opportunities. Under the oversight of HBF’s Board of Directors, HBF’s Investment Committee, has structured two options. One option is a pool of diversified investments in interest bearing fixed income debt obligations and the other is a pool of well diversified portfolios of common stock. Companies known for their involvement with alcoholic beverages, tobacco, gambling, and some objectionable products and services have been screened.
In deciding what portion to invest in which options, a primary selection criteria is often how long the funds are expected to be invested. This is because the short term volatility of common stock prices might make it difficult to withdraw funds at a gain when the money is needed.
A secondary selection criteria has to do with how much risk the investor is willing to assume. The assumption of more risk usually results in higher returns. For example, the returns on investments with banks that are FDIC insured (not one of HBF’s offerings) are usually comparatively low. On the other hand, investments in common stock equity usually provide a comparatively high return in the long run, but are subject to short term price volatility.
Academic research usually suggests that the best mix between equity and fixed income, for long term investments, is 60% in equity and 40% in fixed income investments. That is the allocation that over time usually provides the greatest risk adjusted reward.
Hawaii Baptist Foundation is available to discuss appropriate allocations for the circumstances of particular investable funds.
All investments are received by the HBF in accordance with a signed Funds Management Agreement that clarifies the roles of the parties and explains that for its role the HBF receives a cost reimbursement fee of approximately .5% per year of the amount invested.
Investors receive statements of earnings quarterly. Funds can be withdrawn upon 30 days’ notice.
The Foundation currently invests in a pool of mostly passively managed mutual funds selected by HBF’s Investment Committee. The investments are diversified among multiple equity asset classes. They are screened for companies known to be involved with alcoholic beverages, tobacco, gambling, and other objectionable products and services.
The total return (income and price change) on investments in common stock are usually more volatile (they fluctuate up and down more intensely) than investments in fixed income securities, such as bonds. However, over the long term, investments in common stock usually result in higher returns than investments in fixed income securities.
The total returns of the equity portfolio, as presently constructed, would have averaged over 13% over the ten years ending in 2019. Past returns are no guarantee of future returns.
The Foundation currently invests in a pool of mutual funds, selected and monitored by the HBF Investment Committee. The funds are screened for companies known to be involved with alcoholic beverages, tobacco, gambling, and other objectionable products and services.
The pool is constructed of mutual funds that collectively stress quality, diversification, flexibility, and along with income, across global fixed income sectors.
The returns of the fixed income portfolio, as presently constructed, would have averaged nearly 7% returns over the ten years ending in 2019. Past returns are no guarantee of future returns.