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5/28/2010

1

Eastern Association of College

and University Business OfficersMay 24, 2010

Presented by:

Cornerstone Advisors Asset Management, Inc.74 West Broad Street, Suite 340

Bethlehem, PA 18018

www.cornerstone-companies.com

Thomas AschoffManaging Director

Kevin Karpuk, CFASenior Investment Analyst

1

Who is Cornerstone?

• With roots going back 40 years, Cornerstone advises to almost $3 billion of assets for fiduciaries and was recently ranked as one of the nation’s 50 largest independent RIA firms

• A privately owned firm that values professional development and integrity above everything else

• Two integrated teams, one devoted to plan level consulting, the other to employee benefit plans

• A conflict free advisor to our clients

• A firm built with the following goals in mind:

- Client-centered business with superior capabilities

- Fiduciary Best Practices and Fiduciary Insulation

- Risk Management

- Open Architecture Investment Solutions

- State of the Art Performance Reporting

- Superior Risk-Adjusted Returns

- Clear Communication of Results to Committees and Plan Participants

2

5/28/2010

2

Managing Risk

• No one can predict the movements of the market, but through thorough

macroeconomic insight and tactical asset allocation decisions, Cornerstone can

mitigate the shortfall risk facing our clients.

• Our performance technology allows us to have visibility of risk both at a

manager and portfolio level

• Money grows geometrically rather than arithmetically, so a dollar lost is more

damaging than a dollar gained is beneficial to overall performance

3

Open Architecture Investment Solutions

• Cornerstone currently works with over 30 custodians and 75 managers,

downloading daily trading activity and allowing for complete account

transparency.

• As an independent consultant with no financial ties to any other provider,

Cornerstone’s advice is solely in the best interest of our clients.

• Our relationship with Callan Associates, Inc., one of the world’s largest

independent consulting firms, allows us to gain leverage over service providers

that other consultants of our size are unable to match.

Money Managers /

Mutual Funds

Client/

Consultant

Custodian Execution/

Brokerage

Functions of Service Providers

(Money Management, Custody

and Brokerage) Should Be

Separate.

Consultant Should Be

Independent of Any Service

Provider and Compensated

Solely by Client.4

5/28/2010

3

State of the Art Performance Reporting

• We have combined Callan’s reporting with an internally built

database that downloads, on a daily basis, all of our clients

holdings and transactions.

• Cornerstone is a data interpreter rather than a data gatherer.

• Our focus is on risk and risk-adjusted returns within our reporting

rather than solely returns based information as many consultants

provide.

• Our client-specific reporting is flexible and geared towards

maintaining compliance with a client’s individual Investment

Policy Statement guidelines.

5

Risk-Adjusted Returns

• Our focus on managing and budgeting risk is designed to generate

superior risk-adjusted returns over complete market cycles.

• Protecting our client assets during down markets is more

important to us than maximizing return in up markets.

• We create transparency to monitor the success of both the

manager matrix and the portfolio in total by consistently reporting

the following statistics:

- Sharpe Ratio: overall risk-adjusted returns

- Sortino Ratio: excess return over downside risk

- Treynor Ratio: excess return adjusted for market risk

- Information Ratio: value added through security selection

- Up Market/Down Market Capture

6

5/28/2010

4

Recent Market Trends

1.15

1.2

1.25

1.3

1.35

1.4

1.45

1.5

9,000

9,500

10,000

10,500

11,000

11,500

Dow Jones Price Level (LS) vs. Euro/Dollar (RS)(12/31/2009 - 05/14/2010)

Dow Jones Euro/US Dollar

04/12/2010 VIX drops

to lowest level since

2007 (15.6)

01/14/2010 Greece

announces austerity plan

04/16/2010 Goldman

lawsuit announced

05/06/2010

“Flash Crash”

05/09/2010 EU

announces emergency

stability measures

05/10/2010

Fannie Mae

announces

$11.5 bn 1Q

loss

03/31/2010 Fed ends

mortgage purchases

03/25/2010 Healthcare

Law Passed into law

02/04/2010 Estimates of

recession job losses

adjusted up by 1 mm

7

Longer Term Market Trends

0

200

400

600

800

1000

1200

1400

1600

1800

12

/31

/19

79

12

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80

12

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81

12

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82

12

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83

12

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84

12

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85

12

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86

12

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87

12

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/19

88

12

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/19

89

12

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/19

90

12

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/19

91

12

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/19

92

12

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/19

93

12

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/19

94

12

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/19

95

12

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/19

96

12

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/19

97

12

/31

/19

98

12

/31

/19

99

12

/31

/20

00

12

/31

/20

01

12

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/20

02

12

/31

/20

03

12

/31

/20

04

12

/31

/20

05

12

/31

/20

06

12

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/20

07

12

/31

/20

08

12

/31

/20

09

S&P 500 Price Level(Since 1980)

Series1

06/30/1998

1133

12/17/2001

1134

01/29/2004

1134

05/14/2010

1135

8

5/28/2010

5

Outlook for the Next Decade

9

New Thoughts on Asset Allocation

• Appropriateness of traditional style boxes?

• Rules-based versus Thematic rebalancing? What are the proper signals to

watch?

• Are you benefiting from illiquid alternatives?

• Correlation changes?

• Risk versus Uncertainty? Some things are knowable, others are not.

• Fiduciaries must leverage the technology available to them while using

common sense to make final decisions.

• Managing long-term asset growth versus intermediate spending needs

10

5/28/2010

6

Rules Based vs. Thematic Rebalancing

• Historically, fiduciaries have used strict rebalancing back to an “optimized

portfolio”.

• Markets have trended longer recently than one would expect.

• Market volatility has increased as headline risk, interventions and leverage have

increased.

• Optimized portfolios are the equivalent of “driving using your rear view

mirror”.

• Must see the macroeconomic forest through the trees.

11

Asset Class Periodic Table(2000-2009)

Growth

Russell:1000

(22.4%)

Growth

Russell:1000

(20.4%)

Growth

Russell:1000

(27.9%)

Growth

Russell:1000

29.7%

Growth

Russell:1000

6.3%

Growth

Russell:1000

5.3%

Growth

Russell:1000

9.1%

Growth

Russell:1000

11.8%

Growth

Russell:1000

(38.4%)

Growth

Russell:1000

37.2%

Value

Russell:1000

7.0%

Value

Russell:1000

(5.6%)

Value

Russell:1000

(15.5%)

Value

Russell:1000

30.0%

Value

Russell:1000

16.5%

Value

Russell:1000

7.1%

Value

Russell:1000

22.2%

Value

Russell:1000

(0.2%)

Value

Russell:1000

(36.8%)

Value

Russell:1000

19.7%

Growth

Russell:2000

(22.4%)

Growth

Russell:2000

(9.2%)

Growth

Russell:2000

(30.3%)

Growth

Russell:2000

48.5%

Growth

Russell:2000

14.3%

Growth

Russell:2000

4.2%

Growth

Russell:2000

13.3%

Growth

Russell:2000

7.0%

Growth

Russell:2000

(38.5%)

Growth

Russell:2000

34.5%

Value

Russell:2000

22.8%

Value

Russell:2000

14.0%

Value

Russell:2000

(11.4%)

Value

Russell:2000

46.0%

Value

Russell:2000

22.2%

Value

Russell:2000

4.7%

Value

Russell:2000

23.5%

Value

Russell:2000

(9.8%)

Value

Russell:2000

(28.9%)

Value

Russell:2000

20.6%

Free

MSCI:EAFE

(14.2%)

Free

MSCI:EAFE

(21.4%)

Free

MSCI:EAFE

(15.9%)

Free

MSCI:EAFE

38.6%

Free

MSCI:EAFE

20.2%

Free

MSCI:EAFE

13.5%

Free

MSCI:EAFE

26.3%

Free

MSCI:EAFE

11.2%

Free

MSCI:EAFE

(43.4%)

Free

MSCI:EAFE

31.8%

Markets

MSCI:Emer

(30.6%)

Markets

MSCI:Emer

(2.4%)

Markets

MSCI:Emer

(6.0%)

Markets

MSCI:Emer

56.3%

Markets

MSCI:Emer

26.0%

Markets

MSCI:Emer

34.5%

Markets

MSCI:Emer

32.6%

Markets

MSCI:Emer

39.8%

Markets

MSCI:Emer

(53.2%)

Markets

MSCI:Emer

79.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

12

5/28/2010

7

Asset Class Periodic Table(1990-2000)

Growth

Russell:1000

(0.3%)

Growth

Russell:1000

41.3%

Growth

Russell:1000

5.0%

Growth

Russell:1000

2.9%

Growth

Russell:1000

2.6%

Growth

Russell:1000

37.2%

Growth

Russell:1000

23.1%

Growth

Russell:1000

30.5%

Growth

Russell:1000

38.7%

Growth

Russell:1000

33.2%

Growth

Russell:1000

(22.4%)

Value

Russell:1000

(8.1%)

Value

Russell:1000

24.5%

Value

Russell:1000

13.6%

Value

Russell:1000

18.1%

Value

Russell:1000

(2.0%)

Value

Russell:1000

38.4%

Value

Russell:1000

21.6%

Value

Russell:1000

35.2%

Value

Russell:1000

15.6%

Value

Russell:1000

7.3%

Value

Russell:1000

7.0%

Growth

Russell:2000

(17.4%)

Growth

Russell:2000

51.2%

Growth

Russell:2000

7.8%

Growth

Russell:2000

13.4%

Growth

Russell:2000

(2.4%)

Growth

Russell:2000

31.0%

Growth

Russell:2000

11.3%

Growth

Russell:2000

12.9%

Growth

Russell:2000

1.2%

Growth

Russell:2000

43.1%

Growth

Russell:2000

(22.4%)

Value

Russell:2000

(21.8%)

Value

Russell:2000

41.7%

Value

Russell:2000

29.1%

Value

Russell:2000

23.8%

Value

Russell:2000

(1.5%)

Value

Russell:2000

25.7%

Value

Russell:2000

21.4%

Value

Russell:2000

31.8%

Value

Russell:2000

(6.5%)

Value

Russell:2000

(1.5%)

Value

Russell:2000

22.8%

Free

MSCI:EAFE

(24.8%)

Free

MSCI:EAFE

10.4%

Free

MSCI:EAFE

(14.0%)

Free

MSCI:EAFE

32.7%

Free

MSCI:EAFE

7.7%

Free

MSCI:EAFE

11.3%

Free

MSCI:EAFE

6.2%

Free

MSCI:EAFE

1.6%

Free

MSCI:EAFE

20.1%

Free

MSCI:EAFE

26.7%

Free

MSCI:EAFE

(14.2%)

Markets

MSCI:Emer

(10.6%)

Markets

MSCI:Emer

59.9%

Markets

MSCI:Emer

11.4%

Markets

MSCI:Emer

74.8%

Markets

MSCI:Emer

(7.3%)

Markets

MSCI:Emer

(5.2%)

Markets

MSCI:Emer

6.0%

Markets

MSCI:Emer

(11.6%)

Markets

MSCI:Emer

(25.3%)

Markets

MSCI:Emer

66.4%

Markets

MSCI:Emer

(30.6%)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

13

Benefits of Illiquid Alternatives?

• The purpose of alternative investments is to access manager alpha in a non-

correlated investment. Is it working?

Up Market Capture Down Market Capture

(80.0)

(60.0)

(40.0)

(20.0)

0.0

20.0

40.0

60.0

Group: CAI Hedge Fund of Funds Database

for 10 Years Ended March 31, 2010

Statistics relative to S&P:500

10th Percentile 41.91 35.10


Median 28.51 6.01

75th Percentile 24.30 (1.67)

90th Percentile 19.94 (9.43)

BC:Aggr Bd A 9.40 (57.92)

HFR:FOF Index B 27.71 28.47

A (97)

A (98)

B (55) B (18)

14

5/28/2010

8

Correlation Changes

60% S&P 500/40% BC Agg 1.000

50% S&P 500/50% BC Agg

0.9938

0.9955

0.9971

1.000

S&P 500

0.9542

0.9723

0.9876

0.9150

0.9457

0.9727

1.000

Barclay’s Aggregate Bond

0.6490

0.5834

0.1445

0.7295

0.6579

0.2198

0.3917

0.3775

(0.0124)

1.000

60% S&P

500/40%

BC Agg

50% S&P

500/50% BC

Agg

S&P 500 Barclay’s

Aggregate

Bond

10 Years ending 12/31/198510 Years ending 12/31/199010 Years ending 12/31/2009

15

Risk vs. Uncertainty

Risk is the type of information that a fiduciary can quantify:

• Manager and Plan Level Risk

• Quarterly Peer Reviews

• Enforcement of Investment Policy Statement Guidelines

Uncertainty is the type of information that a fiduciary cannot quantify:

• Market Fluctuations

• Government Intervention

• Headline Risk

Risk should be understood and handled proactively

Uncertainty should be handled flexibly

16

5/28/2010

9

(5.0) 0.0 5.0 10.0 15.0 20.0 25.0 30.0

(7.5)

(5.0)

(2.5)

0.0

2.5

5.0

7.5

Scatter Chart for 12 Quarters for periods ending 3/31/10

Standard Deviation

Ret

urn

s

CAI:Pub Fund Total DB

Public Pension Plan

IPS Benchmark

Risk – What is Knowable

17

Last Quarter Last Year Last 3 Years Last 5 Years

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

Group: CAI Public Fund Sponsor Database

for Periods Ended March 31, 2010

Returns

10th Percentile 4.35 38.92 2.16 5.25

25th Percentile 3.95 36.55 0.56 4.99

Median 3.48 32.63 (0.57) 4.39

75th Percentile 2.97 28.64 (2.03) 4.00

90th Percentile 2.23 18.74 (2.71) 3.28

IPS Benchmark A 3.70 32.79 0.15 4.10

Public Pension Plan B 2.74 27.13 1.67 4.96

A (41)

A (49)

A (33)A (70)B (83)

B (78)

B (13)B (27)


18

5/28/2010

10

3/31/10

Quarter Ending

12/31/09

Quarter Ending

9/30/09

Quarter Ending

6/30/09

Quarter Ending

3/31/09

Quarter Ending

12/31/08

Quarter Ending

(20.0)

(10.0)

0.0

10.0

20.0


1 1/2 Years Ended March 31, 2010

for 1 Quarter Rolling Periods

Returns

10th Percentile 4.35 4.33 13.64 14.12 (4.13) (9.55)

25th Percentile 3.95 3.84 12.68 12.76 (5.02) (12.13)

Median 3.48 3.39 11.34 10.93 (6.18) (13.75)

75th Percentile 2.97 2.89 10.31 9.36 (7.59) (15.17)

90th Percentile 2.23 2.23 8.26 6.21 (8.22) (16.44)

IPS Benchmark A 3.70 3.15 11.23 11.61 (7.17) (11.93)

Public Pension Plan B 2.74 3.67 9.18 9.32 (3.70) (9.84)

A (41)

A (68)

A (53) A (39)

A (68)A (22)

B (83)

B (34) B (87) B (76)

B (8)B (11)


19

Beta

Deviation

Standard Residual Risk Downside Risk

0.0

5.0

10.0

15.0

20.0



Statistics relative to IPS Benchmark

10th Percentile 1.22 17.61 4.38 5.49

25th Percentile 1.16 16.80 3.36 3.76

Median 1.07 15.51 2.87 2.87

75th Percentile 0.92 13.51 2.27 2.23

90th Percentile 0.68 10.30 1.68 1.65

IPS Benchmark A 1.00 14.15 0.00 0.00

Public Pension Plan B 0.82 11.80 2.20 1.92

A (63)

A (67)

A (100) A (99)B (82)

B (85)

B (80) B (84)


20

5/28/2010

11

Alpha Sharpe Ratio Treynor Ratio

Ratio

Information Sortino Ratio

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

0.0

1.0

2.0

3.0




10th Percentile 1.65 0.02 0.22 0.70 0.82

25th Percentile 0.49 (0.10) (1.36) 0.15 0.18

Median (0.38) (0.16) (2.31) (0.16) (0.28)

75th Percentile (1.78) (0.25) (3.58) (0.55) (0.62)

90th Percentile (2.51) (0.30) (4.32) (0.82) (0.79)

IPS Benchmark A 0.00 (0.13) (1.84) 0.00 --

Public Pension Plan B 1.07 (0.03) (0.39) 0.49 0.79

A (37) A (36)

A (35)

A (37)

B (17) B (13)

B (13)

B (15) B (11)


21

Up Market Capture Down Market Capture

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0






Median 105.33 111.79



IPS Benchmark A 100.00 100.00

Public Pension Plan B 90.08 80.53

A (59) A (69)

B (74)

B (85)


22

5/28/2010

12

Uncertainty – What to Watch

Warning Sign of Trouble

More Trouble Ahead?

23


24

5/28/2010

13


25

Long-Term Growth vs. Spending Needs

• There are inherent conflicts between long-term desire to grow the Fund and

short-term spending needs.

$2,700,000

$2,800,000

$2,900,000

$3,000,000

$3,100,000

$3,200,000

$3,300,000

$3,400,000

2006 2007 2008 2009 2010

10% Increase from Current Level Remains at Current Level 10% Decrease from Current Level

$3,114,000

$3,011,000

$2,910,000

$3,300,000

$3,180,000

$3,115,000 $3,113,000

26

5/28/2010

14

2015 2020 2030 2050

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

No

min

al T

ota

l A

sset

s

10th Percentile25th PercentileMedian75th Percentile90th Percentile95th Percentile

$14,423,792$12,377,418$10,394,131$8,688,125$7,376,260$6,690,767

$17,684,168$14,646,268$11,719,394$9,092,971$7,200,973$6,484,211

$26,526,426$20,080,190$14,609,304$10,561,243$7,738,238$6,328,355

$53,961,136$35,046,818$22,549,475$14,485,715$9,509,591$7,337,704

2015 2020 2030 2050

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

No

min

al T

ota

l A

sset

s


$14,876,617$12,617,867$10,395,473$8,702,613$7,279,992$6,514,560

$18,418,841$14,990,598$11,876,326$9,127,032$7,224,129$6,216,677

$28,505,448$20,801,395$14,939,678$10,379,858$7,664,639$6,194,246

$60,518,537$38,189,037$23,756,813$14,743,069$9,518,187$7,091,708


Median Endowment Asset Allocation 50% Equity/40% Fixed Income/10% Alts

27

2015 2020 2030 2050

$0

$3,000,000

$6,000,000

$9,000,000

$12,000,000

$15,000,000

$18,000,000

$21,000,000

$24,000,000

$27,000,000

$30,000,000

Rea

l T

ota

l A

sset

s


$13,036,249$10,999,012$9,277,238$7,670,735$6,461,581$5,818,553

$14,423,163$11,854,620$9,416,950$7,316,363$5,740,642$5,162,467

$18,063,238$13,476,589$9,536,850$6,812,190$4,905,786$4,084,867

$25,123,388$15,904,192$9,954,658$6,393,572$3,964,939$3,119,289

2015 2020 2030 2050

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

Rea

l T

ota

l A

sset

s


$13,425,840$11,159,779$9,256,308$7,686,339$6,376,720$5,696,307

$15,226,687$12,157,673$9,547,650$7,351,643$5,688,977$4,978,373

$19,251,094$13,795,673$9,916,400$6,780,148$4,964,445$4,001,830

$27,932,420$17,069,859$10,490,472$6,432,330$4,065,461$3,006,644



28

5/28/2010

15

2015 2020 2030 2050

$0

$300,000

$600,000

$900,000

$1,200,000

$1,500,000

$1,800,000

$2,100,000

$2,400,000

$2,700,000

$3,000,000

No

min

al S

pen

din

g


$635,416$571,435$495,898$432,877$383,114$363,288

$823,330$683,367$560,358$450,976$366,192$323,219

$1,219,207$947,035$697,346$507,580$381,608$316,508

$2,605,615$1,655,775$1,106,609

$706,895$454,472$360,092

2015 2020 2030 2050

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

No

min

al S

pen

din

g


$649,470$574,772$500,153$433,656$379,238$354,177

$860,653$702,890$567,513$451,271$360,965$316,845

$1,304,304$988,386$720,291$506,986$380,400$307,851

$2,804,104$1,806,644$1,141,777

$726,874$451,899$347,895



29

Asset Mix Alternatives

Median Endowment/Foundation25%25%4%0%0%

16%0%8%0%

15%0%0%3%0%4%0%0%

100%

7.28%10.59%0.40%

50% Equity/40% Fixed/10% Alts10%0%5%0%0%

28%3%0%7%

12%28%0%0%0%0%7%0%

100%

7.15%9.98%0.42%

PortfolioComponentAbsolute ReturnBroad Domestic EquityCash EquivalentsCommoditiesDefensiveDomestic FixedEmerging Markets EquityGlobal (ex-US) EquityHigh YieldInternational EquityLarge CapLong DurationNon US FixedPrivate EquityReal EstateSmall/Mid CapTIPSTotals

10 Yr. Geometric Mean ReturnProjected Standard Deviation10 Yr. Simulated Sharpe Ratio


30

5/28/2010

16

• Underperforming endowments create pressure on

budgets/programs/staff

• Historically, there have been three principal ways to

address these shortfalls:

1) “Save” your way out of the shortfall

2) “Invest” your way out of the shortfall

3) “Fundraise” your way out of the shortfall

• Each solution presents unique challenges in today’s

economic climate

Bridging the Funding Gap

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Challenges associated with “Saving” your way out of

the shortfall:

1) Increasing tuition and cutting aid

• Potential for decreased enrollment

• Less revenue to support operations

2) Eliminating certain programs, sports teams, etc.

• Risk of alienating key, loyal alumni groups

• Potential loss of annual support from these groups

3) Cuts to staff

• Assigns heavier burden to those that remain


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5/28/2010

17

Challenges with the “Investing” your way out of the

shortfall:

1) U.S. and global economic data remain mixed

• How confident are we that recovery is close at hand?

2) Are we entering a period of below historical market returns?

• Adjustment in return expectations

• Impact on future spending ability

3) Can your institution afford to take on the extra risk?

• Where will the excess returns come from?

• How much risk can you afford to take?


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Challenges with the “Fundraising” your way out of the

shortfall:

1) 2008 has left many donors feeling “less” rich

• How much support can you expect?

• Increased donor focus on internal philanthropy

2) Increased competition for dollars

• Donors are being inundated with appeals

• How is your appeal different?

3) Are you coordinated in your approach?

• Annual/Principal/Major/Planned Giving


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5/28/2010

18

All is not lost

These challenges create new opportunities, especially in the

area of fundraising


35

Current challenges and concerns for your donors

1) Reduced values of stock portfolios

2) Reduced values of retirement plans

3) Reduced values of home or other real estate

4) Uncertainty about the future

5) Increased need for dependable lifetime income

6) Increased concern for family


36

5/28/2010

19

Current challenges and concerns for Institutions

1) Reduced budgets for salary and programs

2) Staff reductions/hiring freezes

3) Reduced values of endowment assets

4) Decreased values of charitable trusts, lead trusts and pooled

funds

5) Decreased values of gift annuity reserves

6) Fewer gifts of appreciated property

7) Increase in combined positions due to budgets


37

Opportunities created by these challenges

1) Needs for both donors and institutions continue – and increase!

2) Deferred gift plans are very popular

3) Integrated, combined gifts are on the rise

4) Great time to gather assets where donor is currently serving as

his/her own trustee


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5/28/2010

20

Approaching donors requires a new approach

1) Historically, donors give in four main ways

• Planned Gifts, Major Gifts, Annual Gifts and Initial Gifts

2) Each gift type is historically tracked, and staff is measured and

evaluated, according to type of gift

3) Communication between/among fundraising officers is typically

poor, as success and recognition for each is determined

individually, instead of collectively across the institution


39

Integration and coordination of fundraising activities is

critical to future success

Key steps to take

1) Realign goals and recognition metrics for all staff

• Embrace philosophy of “a gift is a gift is a gift”

2) Encourage communication and sharing of prospects among staff

• Focus more on securing gifts that where there are recognized

3) Educate all fundraising staff on basics of planned giving

• Current issues among donors make these gifts very appealing

• Never leave an ask without inquiring if a gift that pays lifetime

income would be appealing

4) Incorporate Board members and senior staff in large solicitations


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5/28/2010

21

Success story - $1 million gift annuity

Major gift officer (MGO) meets with 74 year-old donor• Donor has made over $5 million of major gifts over the past 10

years

• Donor indicates he cannot commit to $2 million outright gift request due to current environment

– Son has lost job, requiring parental support for family

• Rather that walking away, MGO asks if a gift that pays income for life would be appealing?

• Planned Giving Officer (PGO)meets with Donor to discuss benefits of a planned gift

• Donor establishes $1 million gift annuity

• MGO and PGO share credit for the gift


41

Success story - $400,000 gift annuity from unknown Revocable CRUT

Major gift officer (MGO) meets with 80 year-old donor• MGO learns that Donor created a $400,000 CRUT 3 years ago

with charity as revocable beneficiary, serving as his own trustee

• Donor indicates he cannot commit to any major gift requests as he is concerned about current income

• MGO informs planned giving officer (PGO) about the CRUT

• PGO meets with donor and learns that the donor is very troubled by the fluctuation is his income from the CRUT due to market activity

• PGO suggests converting the CRUT into a gift annuity

• Donor dissolves his CRUT, using proceeds to establish a $400,000 gift annuity

• MGO and PGO share credit for the gift


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5/28/2010

22

Success story - $3 million Lead Trust/$1 million Major GiftAnnual Fund Director (AFD) meets with Widow of donor

• Spouse had given $25,000 per year for the past 10 years

• Widow , age 64, tells AFD that she has received $5 million from sale of donor’s business

• AFD suggests a meeting with MGO, who asks for a major gift of $1 million

• Widow indicates that she doesn’t need current income from the proceeds of the sale, but wants to ensure the majority of the principal is passed to her children upon her death

• MGO speaks with planned giving officer (PGO) about a blended gift proposal

• PGO suggests a $3 million 20 year CLUT paying 6%, combined with an outright gift of $1 million

• AFD, MGO, PGO and University President propose gift plan to Widow, her children and advisors.

• Gift plan is agreed to. AFD, MGO and PGO share credit for the gifts


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Conclusions

• Integration and coordination of fundraising staff is critical

to achieving your institutional goals

• Changing your approach to recognition of gifts can yield

significant results

• If deferred giving is not a part of your fundraising

activities, it needs to be added to remain competitive

• Donors still possess the ability to make substantial gifts,

but need to be approached in creative ways that address

their needs and concerns


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