Vanguard to offer leading risk management technology for institutional foundations and endowments
10 September 2018
Vanguard today announced an expanded partnership with RiskFirst, a leading financial technology company, to provide its institutional nonprofit clients with the same innovative risk management solution, PFaroe, that pension clients have utilized since 2016. Vanguard is one of the first firms in the asset management industry to offer PFaroe to its outsourced chief investment officer (OCIO) foundation and endowment clients. The tool supplements Vanguard’s risk management capabilities and offers a comprehensive analysis of portfolio risks.
“In an industry where every penny lost on investment underperformance undercuts a nonprofit’s ability to fulfill its mission, it’s critical that organizations truly understand the risk exposures within their portfolios, as well as the source of returns,” said Christopher Phillips, principal and head of Vanguard Institutional Advisory Services. “This tool maximizes our ability to stress-test, in real-time, a variety of scenarios an endowment or foundation may be face—from gifting amounts and increases in the donor pool to inflationary and economic shocks—and assess the impact on future cash flows.”
Vanguard first partnered with RiskFirst to provide PFaroe’s asset-liability stress-testing capabilities to its pension clients. RiskFirst recently launched a new version of PFaroe to also serve institutional foundations and endowments, enabling all of Vanguard’s OCIO clients to access the industry-leading risk management and modeling technology.
Despite a prolonged bull market, many nonprofits have struggled to generate the returns needed to cover costs, and have reached for riskier, less liquid, and more costly investment products in their search for alpha. According to the NACUBO-Commonfund Study of Endowments, colleges and universities allocated an average 52% of their portfolios to alternatives last year. In looking at the longer-term impact of these high-cost strategies, endowments had average annualized ten-year returns of 4.6% in 2017.
“With risks for institutional investors being so multifaceted, solutions like PFaroe become an absolute imperative to help asset owners understand the investment and enterprise risks they are truly running,” Matthew Seymour, CEO, RiskFirst, said. “All too often risks such as the critical importance of maintaining real spending rates in perpetuity are forgotten or overlooked, by focusing solely on investment risk. These risks are even more relevant in the current low yielding fixed income and volatile equities markets, coupled with threats of prolonged inflation and shrinking returns from investments in alternatives.”
Vanguard Institutional Advisory Services: A time-tested, trusted OCIO
Vanguard has provided OCIO services to pension plans, foundations, and endowments for more than 20 years. The firm offers a full range of advisory and discretionary services, and works as an extension of the board and investment staff. As an OCIO, Vanguard partners with clients to build an asset allocation strategy and implement it, providing ongoing oversight and management—enabling clients to focus valuable time and resources on broader strategy planning and key initiatives. With more than $43 billion in OCIO assets under management, Vanguard is one of the largest and most trusted OCIO providers in the industry.
To read the FundFire press release on this up exciting development, please click here: http://fundfire.com/c/2080003/246093/vanguard_rolls_risk_mgmt_tool_endowment_foundation_clients?referrer_module=MarketingTwitter&campCode=MarketingTwitter
Vanguard is one of the world’s largest investment management companies. As of July 31, 2018, Vanguard managed more than $5.2 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 400 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.