ABOUT US
SERVICES
RESEARCH
CONTACT US
Investment Consulting with Residential and Senior Living
By: Ryan Murphy, Senior Consultant
Chief financial officers (CFOs) may face quarterly pressures in their debt coverage ratios but their endowed assets can assist. We found a well-designed investment policy statement (IPS) outlining the roles of investment managers, consultants and custodians is key.

Diversified, liquid and low-cost endowed investments should be made accessible to meet those needs. Separately managed accounts, and in some cases even mutual funds, can work contrary to client covenant duty. 

Unless instructed to-do-so, separately managed accounts do not factor in client debt covenants in buy and sell decision-making. In these cases investment managers realize gains and losses with little regard for debt coverage ratios. 

Mutual funds, with their commingled structure, offer some relief. However, should a CFO seek to realize gains in a mutual fund and keep the same fund going forward, the subsequent buy-in to the same mutual fund can cause pressures including delays and unnecessary fees at the trading-level. 

The rising popularity of exchange traded funds (ETFs) offer better control when experiencing gains and losses. Selling and buying the very same ETF within days does not incur the same pressures as with mutual funds. In the case of big-picture goals, such as potential property acquisitions, nimble and accessible assets in your endowed funds are welcome.

A custodian’s role, knowledgeable of the client’s trading objectives, is elevated to maintain investment exposures throughout the trading process.  

Subtle ideas such as automatic re-investment of dividends and income are no longer automatic and should be discussed as it relates to a specific investment strategy. Automatically re-invested annual income of just two percent over a few years can significantly erode a nice cost basis depending on the investment’s performance. Additionally, timely reporting from the custodian should detail unrealized gains and losses. CFOs need to know their gain/loss position.

The consultant’s asset allocation responsibilities are heightened with the potential correlation of investments and the client’s real estate business. Traditional allocations to real estate investment trusts (REITs) should be tempered. Since senior residential life is already in the real estate business, additional investments into REIT funds could further correlate endowed funds and the business as a whole. That said, a higher interest rate and a lower liquidity market environment are some cases where REITs should be avoided or less of an investment focus.

The proactive investment consultant should go further for the CFO. Often there are valid resident concerns that can tie-up a CFO’s time. In this scenario, we find an engaged investment consultant steps in and investigates resident-driven topics including investments and banking. Many times these concerns are well-founded and deserve a full review by the investment consultant; not the CFO. 
In summary, a well-worded IPS is necessary to detail not only the long-term performance goals but also the potential short-term pressures of covenant management. 

At DiMeo Schneider & Associates, L.L.C., we are skilled in investment policy creation and maintenance. Our investment consultants can minimize the distractions for CFOs and staff. DiMeo Schneider’s expert institutional research combined with our Wealth Office™ offers a  library of research and the capability to provide well-sourced  feedback for residential and committee inquiries. Investing the time to understand a client as well as their investment objective is imperative for today’s fiduciary.
For more information, please contact any of the professionals at DiMeo Schneider & Associates, L.L.C. 
While this article addresses generally held investment philosophies of DiMeo Schneider & Associates, L.L.C., it does not represent a specific investment recommendation for any individual client or prospective client. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Information has been obtained from a variety of sources believed to be reliable but not independently verified. Past performance does not indicate future performance.

This report is intended for the exclusive use of clients or prospective clients of DiMeo Schneider & Associates, L.L.C. Content is privileged and confidential. Any dissemination or distribution is strictly prohibited.  
Schedule an Appointment
Or Call 800.392.9998
Learn More About Us
Or View our Research
Chicago | Austin | Washington, DC | Boston
800.392.9998 | 312.853.1000
www.dimeoschneider.com
Manage your preferences | Opt out using TrueRemove™
Got this as a forward? Sign up to receive our future emails.
View this email online.
500 W. Madison Street Suite 1700
Chicago, IL | 60661 US
This email was sent to .
To continue receiving our emails, add us to your address book.
Subscribe to our email list.