Two well-known but unrelated local charities, each with approximately $5 million in assets, had their endowment and reserve funds managed in a manner consistent with the endowment model. Their respective investment management programs had been implemented by traditional consulting firms primarily utilizing actively managed mutual funds, but also employing passive funds to fulfill specific asset allocations. This resulted in a highly complex and expensive implementation that provided little to no income, limited transparency, and disillusionment on behalf of the investment committees. Surprisingly, these foundations’ returns were not poor compared to the average experience of similarly sized peers.

The foundations each put out Requests For Proposals (RFPs), and Crawford Investment Counsel was given an opportunity to submit. Both RFPs had been written for a traditional consulting mandate, which included strong language against “proprietary products,” but Crawford submitted responses knowing that we had a long history of managing endowment & foundation assets in what we believe was a differentiated yet highly effective manner. Crawford presented in the finals for both mandates, and we were ultimately awarded the management of both investment programs.

We think Crawford offers a differentiated, simplified approach, and for these two organizations, we were the obvious choice. Some of the value-added components of utilizing a simplified investment approach include: less risk, more income, greater transparency, lower fees, closeness to the investment process, ancillary services such as a high degree of client service, and ultimately, stronger returns. With Crawford, assets are consolidated under the firm’s care and managed according to its investment philosophy utilizing its proprietary strategies. We believe this enables a great deal of transparency, while ensuring our investors own only the securities we believe have the greatest chances of success. Below, we expand on each of the previously mentioned points.

Less Risk. We embrace quality as the primary way to mitigate the risks related to investing. Investing solely in high-quality securities creates a more consistent pattern of returns. It means that the companies in an investment portfolio will sustain participation in up markets and be less likely to suffer dramatic losses in a drawdown. This reduces the likelihood of permanent loss of capital.

Through combining our proprietary, high-quality strategies, we seek to mitigate volatility to a greater degree than most multi-manager portfolios that rely on low correlations across asset classes. While we believe in the merits of asset class diversification, we hold that the primary benefit of diversification accrues when U.S. stocks and bonds are combined. Most traditional diversification programs result in higher risk outcomes, and we believe sufficient diversification with lower volatility can be achieved with a simplified approach.

More Income. At Crawford, we view the dividend as a window into quality, and we only invest in dividend-paying securities. Because higher-quality securities tend to produce more income, a natural byproduct of our offering is an above-average level of both income and growth of income over time. Higher income is valuable for small-to-mid size endowments & foundations where a 4-5% spending policy is typically present. Without income to help meet annual spending needs, organizations become more reliant on capital appreciation and can find themselves in a position where they are forced to sell securities to fund expenditures in down markets.

Greater Transparency. Since we use proprietary strategies and most of our implementation comes in the form of separately managed portfolios comprised of high-quality, income-producing securities, investment committees and trustees can take confidence in knowing what they own. The overall transparency leads to a “sleep well at night” result that satisfies and, we believe, exceeds fiduciary obligations. Greater transparency also helps contribute to a stronger understanding of the overall cost structure of the investment program.

Cost. Crawford offers a cost advantage over most endowment & foundation managers because clients come directly to the investment source, eliminating at least one (if not several) financial intermediaries and layers of fees in the process.

Closer to the Investment Process. We have worked with endowment & foundation clients since our inception, and we have a dedicated team that holds itself to the highest standards of integrity and mutual respect. We seek to get our clients as close to the investment process and primary decision makers as possible. We strive to offer an extremely high degree of client service, including dedicated operational support; regularly scheduled in-person meetings; comprehensive reporting; staff, committee, and board education; a high degree of flexibility with regard to managing assets; and we serve as a resource on all other financial matters.

Stronger Returns. We mentioned earlier that prior to employing Crawford as their investment manager, the returns of these two organizations were comparable to their small-to-mid size endowment peers. With Crawford, we believe these two organizations have achieved competitive superior returns compared to their peer group. In fact, these organizations have earned returns that rival NACUBO, Council on Foundations, and the AlphaNasdaq OCIO Index. We believe this strong performance returns can be attributed to the factors above, which reflect the benefits of a simplified approach to investment management.

This is a case study based on two very similar client relationships within Crawford Investment Counsel’s endowment & foundation channel. Here, simplification is the key take-away and primary value added by Crawford’s services.

Crawford Investment Counsel (“Crawford”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Crawford, including our investment strategies, fees and objectives, can be found in our Form CRS or Form ADV Part 2, which is available upon request.

Past performance is not indicative of future results. This material is distributed for informational purposes only. The opinions expressed are those of Crawford. Forward looking statements cannot be guaranteed. Crawford reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met.

It is not known whether the clients listed above approve or disapprove of Crawford or the advisory services it has provided. Performance was not a determining factor for inclusion.

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