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Well-meaning charitable board members usually gather quarterly to make decisions about how to invest millions of dollars. Often, they don’t have investment expertise or finance degrees. But, in a few hours, they make choices that could ensure the organization’s success—or ruin.

“Having sat on foundation committees and boards, I realize how much help they need,” says Martin Sims, president and CEO of Bull Wealth in Toronto.

“It’s typically just men and women sitting around a table who have other lives and areas of expertise,” he says. In his experience, they’re active or retired businesspeople who want to serve their communities. “They’re supposed to try and take care of their fiduciary duty, and of these pots of money that aren’t theirs.”

In 2013, Sims and his three partners analyzed how best to grow their firm, which provides independent due diligence research on investments and managers to clients. With more than $1.6 billion in assets under advisement, the firm was looking for another growth market in addition to its private client business. Though Bull Wealth already advised some institutions, they saw the chance to help charitable boards navigate investment decisions, and simultaneously grow their own practice. So they decided to rework the business to cater to those boards.

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They started remaking the firm nine months ago. Since then, Sims says they’ve implemented three major changes.

Martin Sims

Martin Sims

is president and CEO of Bull Wealth in Toronto. He and his three partners help charitable boards navigate investment decisions.

1 They hired Brad Offman, principal at Spire Philanthropy, which helps financial firms cater to charitable investors. The firm found him through a referral. Offman was senior vice-president of strategic philanthropy at Mackenzie for nearly a decade before starting Spire in the spring of 2014. While at Mackenzie, Offman had worked on projects with Bull Wealth. They initially hired him on a three-month contract to write a business plan.

“Brad came from the not-for-profit world,” explains Sims. “He’d also spent some time in the financial world, so he had a good base understanding of our business.”

For example, Offman helped them understand what conferences they should participate in, and spend money on. He also identified industry players, as well as websites Bull could use to find people working in foundations or sitting on boards. Under Offman’s guidance, Bull sponsored the Canadian Foundations and Endowments Forum in 2014. This year, they’ll participate in more conferences as expert speakers and sponsors. They also plan to launch an educational newsletter. After the business plan, Bull Wealth and Offman decided to work together long-term. Now, Offman provides Bull’s charitable clients with services, such as fundraiser training and endowment policy reviews.

“Bull looks after the investment and the fiduciary sides, and my firm provides the organization with some additional tools to help grow the endowment,” Offman says, adding Bull may be the only Canadian firm to offer both services.

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2 The firm bought portfolio allocation software from a Boston investment firm. It helps ensure portfolios are constructed with non-correlated asset classes to better withstand volatile markets, and that, in turn, not-for-profit board members are fulfilling fiduciary responsibilities, says Sims. The software runs both historical and forward-looking analyses on potential portfolios. A portfolio manager can use it to test a potential portfolio in more than 5,000 simulations of normal or turbulent market conditions, he explains. That way, clients will know the maximum drawdown within a certain percentile, and the worst-case scenario, says Sims.

3 Bull Wealth offered clients more alternative investment strategies. Foundations expect firms to offer alternative strategies that are built to provide long-term steady returns, says Offman. The firm didn’t have staff with hedge fund expertise, so it bought KCS Fund Strategies, a Canadian alternative investment research firm with which it had worked before, and brought co-founder Peter Klein on as CIO. In 2013, Bull Wealth helped a client place $60 million in a KCS-designed portfolio. They used seven hedging strategies of two funds each. The portfolio has been performing as planned, with a rate of return 5% above Treasury Bill yields, says Sims. It’s also stabilizing the client’s overall portfolio as markets become more volatile.

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New beginnings

After making the changes, Bull Wealth landed a foundation with more than $100 million in assets. With Offman’s research advice, the firm had known whom to approach for an introduction to the board. Using the new asset allocation software, the team showed the foundation how it could improve its portfolio. And the firm helped find a portfolio manager that was better suited to the job. Bull Wealth also oversaw the whole portfolio on a retainer.

Now, Bull Wealth regularly reports how the foundation’s managers are performing compared to benchmarks, and whether managers should be replaced. Bull Wealth also outlines the portfolio’s performance, and make rebalancing recommendations. “When [boards] get together […] at the end of every quarter they can spend those valuable minutes making decisions, rather than worrying about trying to pull together investment due diligence reports and interviewing managers,” he says.

Despite the recent changes, Bull Wealth has stayed profitable, says Sims, and may acquire a similar firm in future.

Currently the firm has 11 employees, including five portfolio managers. The partners, who are in their 40s, 50s and 60s, want to ensure there are people who can take over when they retire. If they don’t buy another firm, they plan to hire between one and five more people to conduct due diligence and research, and be responsible for business development.

As the firm moved in a new direction, some staff did leave. Most notable was Paul Gillis, senior vice-president of Bull Wealth’s pension consulting services, who left last May. Gillis became vice-president at Union Benefits.

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Charities in Canada

  • Canadians donated $10.6 billion to charities in 2010, an average of $446 per donor.
  • The top 25% of donors in Canada gave 83% of all donations.
  • Religious organizations received 40%, or $4.26 billion of the $10.6 billion donated in Canada, down from 46% in 2007.
  • Charities in Canada

  • Health organizations (excluding hospitals) received 15%, or $1.59 billion of all donations.
  • Community groups received 11%, or $116 billion, a 21% increase from 2007.

Source: Statistics Canada; all statistics for 2010 unless otherwise noted.

Looking back

While the firm is still working with institutional and private clients, it’s focusing on foundations and endowments, Sims says. The firm had considered expanding its work with pensions, but it would have had to compete against much larger investment managers with more resources.

“When we took a look back at the last four or five years, there hadn’t been a lot of success in growing that business,” Sims added. He notes there are fewer large competitors interested in foundations with $5 million to $100 million in assets.

Less than a year into Bull Wealth’s new focus, the firm has picked up four foundation and endowment clients.

Private clients are also benefitting from the firm’s increased capabilities. Now, Bull Wealth can help them invest in alternative investment strategies, like hedge funds.

“We’re building better portfolios. It’s not an us-versus-them thing in terms of the two strategic focuses,” Sims says. “They’re very complementary.”

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by Jessica Bruno, content editor of Advisor Group

Originally published in Advisor's Edge

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