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Three Lessons Learned From a Decade of Reserve Investing Research

The best practices surrounding saving and investing in your reserves

Launched in 2012, the annual Study on Nonprofit Investing (SONI) for associations asked organizations about their reserves and how those investments performed. The goal was to provide timely, relevant, actionable data to help associations verify their investment policies were “normal” and that their investment fees/performance returns were in line with other, similar organizations. To date, more than 2,000 nonprofit organizations have participated in SONI.

Over the past decade, SONI, conducted by Raffa Investment Advisers, has provided valuable insights. We’ve learned that fees matter, policy guidelines that instill discipline to decision-making are wise, and having objective benchmarks hold all those involved in the management of the portfolio accountable for results. RIA dug deeper into the results to expand on a few key takeaways learned over the years.

Amounts Held in Reserves Vary

One of the key questions SONI looks to answer is, “How much do associations hold in reserve?” Most years, the median results show that associations keep about 10 months of budgeted expenses. Although that can be a helpful reference for what’s normal, what we’ve found more interesting is the broad range of responses we receive. SONI data continually shows that associations can hold anywhere from three-plus years of budgeted expenses in reserve to next to nothing. This highlights how each association is unique and may experience distinct and unexpected circumstances that could affect long-term financial health. That which may be too little for one association to hold in reserve could be more than enough for another, even within the same budget size.

Please select this link to read the complete article from ASAE's Center for Association Leadership.

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