Equities. Fixed notes. Quasi-endowments.
Financial investing jargon may at first sound out of place in the diocese’s spiritual lexicon of social outreach, Scripture and sacraments. These fiscal terms, however, are very important to keeping ministries vibrant and thriving in the Islands.
The diocesan finance council and its investment committee manage the Diocesan Securities Investment Portfolio, a cache that comprises about 15 percent of the funds used for local programs and ministries. This portfolio of stocks, bonds and other market assets provides the potential for additional financial returns to supplement the diocese’s standing resources.
“We really try to establish a reasonable asset mix,” said diocesan finance officer Lisa Sakamoto. “It’s the prudent thing to do, to sustain itself over time.”
The Securities Investment Portfolio totals about $31 million. That amount is calculated from two separate funds. About two-thirds of the $31 million comes from a revolving fund that strictly benefits the diocese’s 66 parishes and 30 schools. The other third is diocesan assets.
According to Sakamoto, some of the diocese’s available investment funds accumulated from donations that were stewarded wisely over the years. Jim Severson, chairman of the finance council’s investment committee, also noted that sales of land previously owned by the diocese has helped to bolster the cache.
Investing these funds in the market prevents them from becoming simply finite resources. Severson said the diocese has struck a productive balance in maintaining the base amount in its portfolio while also taking the initiative for financial growth.
“If you view the total investments of the diocese, you will find that income and gains from both physical properties, as well as from its investment portfolio, are an integral part of our financial strength,” Severson said.
The portfolio is what is called a “quasi-endowment” fund. It was established by the diocese with the intention of being retained and invested. There is no restriction on maintaining the principal — unlike a regular endowment — but the finance council continually ensures that the funds are being invested and expended appropriately.
Joining Severson on the investment committee are two other finance council members: Paul DeVille and Sister Davilyn Ah Chick of the Sisters of St. Francis of the Neumann Communities. Ex-officio diocesan representatives assisting them are director of real estate Marlene DeCosta, vicar general Father Gary Secor and finance officer Sakamoto.
Policies reviewed regularly
Severson said the investment committee meets quarterly. In these meetings, they, along with an outside group of investment consultants selected by the diocese, review the performance of the portfolio. They discuss how stocks and equities are faring, the market’s effect on bonds or “fixed notes” and the rate of returns.
Their observations and recommendations are presented to the bishop, who is the ultimate decision-maker for the diocese’s investments.
The committee also reviews and updates its objectives and guidelines regularly. This policy statement details everything from the minimum and maximum amounts to be invested in various assets, to the kinds of securities and transactions prohibited by the diocese.
One of the most crucial points in the document is the requirement that the diocese not invest in any company “whose major product, source of revenue or social actions are morally unacceptable to the teachings of the Roman Catholic Church.” This includes any goods or services related to abortion, contraception, stem cell research or assisted suicide.
Severson said that, because of the mercurial nature of financial markets, the diocese constantly needs to review its Investment Policy Statement (or IPS) in order to preserve its integrity.
“The IPS is a dynamic, living document, which can and does change from time to time to reflect the ever-changing investment environment in which we find ourselves,” Severson said. “We have recommended a number of changes to our IPS over the past few years.”
The IPS and the governance structure of checks and balances upheld by the investment committee and its consultants have kept the rate of return in the diocesan portfolio at a reasonable level. Sakamoto said the ideal return on each investment would be 5 percent of the amount invested. It is a prudent objective, considering the sometimes-extravagant expectations that come with stock market risk and reward.
“Our goal is not to beat the market,” Sakamoto said.
Any additional income from these investments goes directly toward programs in social ministry, religious education and other diocesan initiatives. When put together with the diocese’s other resources from parish assessments, rentals, fees, grants and donations, the portfolio provides another level of financial security for ministries to continue into the future.
“We rely on our portfolio to balance our budget, so we can preserve the work that we do as witnesses to Jesus,” said Sakamoto.
