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Episcopal Diocese of Maine |
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Episcopal Diocese of Maine |
Trustees of Diocesan Funds
In 1849, the Maine Legislature incorporated the Trustees of Diocesan Funds to hold, manage, and distribute assets for the benefit of the Episcopal Church in Maine.
The Trustees of Diocesan Funds manage investments valued at approximately $23 million. Approximately 90 percent of these investments were left by will, trust and deed to the Trustees and designated for the benefit of individual congregations. The balance of the assets held by the Trustees is of congregation's funds, placed with the Trustees for custody and professional management.
The current funds are invested in the Diocesan Trustees' Equity Fund and Diocesan Trustees' Fixed Income Fund, with the overall allocation of assets currently at approximately 60 percent in the Equity Fund and 40 percent in the Fixed Income Fund. Both funds are invested in accordance with the Trustees' investment policy. Investments in firms whose principal business involves gambling or the production of weapons are excluded, as are investments in tobacco and alcohol stocks. Other social screens are considered and used from time to time. The Fixed Income Fund is invested 90 percent in "laddered" U.S. Treasury Notes with an average maturity of 5.3 years. The benchmark used by the Trustees is the Shearson Lehman Intermediate Government Bond Fund median. For both the Equity Fund and the Fixed Income Fund, the funds' current yields and overall performance have been competitive with the benchmarks.
With 310 individual accounts invested in the two funds, the Trustees are expense-conscious. Custody and fund accounting is provided by Columbia Management Group, a Bank of America Company (formerly Fleet Bank). Management of the equity fund is divided among three managers, H. M. Payson and Head and Associates (both of which are Portland, Maine based investment management firms), and Welch & Forbes, a Boston based equity manager. Payson is a value driven manager, Head, a value and growth manager and Welch & Forbes, a growth manager. The fixed income is self administered and incurs no management fees. These equity management services were engaged after competitive proposals to the Trustees. The entire operation has an expense total of forty basis points or .40%. The Trustees periodically put the investment management and custody of assets out to bid to ensure the best advice, service and competitive pricing.
How Can the Turstees of Diocesan Funds Help You?
The investment management services of the Trustees of Diocesan Funds are available to all parishes and missions within the Episcopal Diocese of Maine. A congregation may choose and change its investment mix between the Fixed Income Fund and the Equity Fund. There is no load or sales charge, only the direct expenses of advisory and accounting services as described above. In recent years, numerous parishes in the Diocese of Maine have placed investments with the Trustees. In this litigious and complicated world, the proper emphasis for parishes seems better placed on gaining financial assets rather than on managing them. Effective investment management requires professionalism and continuity. Most congregations have rotating vestries. Managing endowments is quite different from individual investing in mutual funds or brokerage experience. Even if a congregation has members with investment committee experience, their interest and time are often subject to change. There must be a willingness to "stay the course," follow a determined investment policy, and to be responsible for all investment decisions, those that work well, as well as those that do not.
It is very easy to establish an account with the Diocesan Trustees. To set up a new account, there is a minimum investment of $1,000. There is no minimum amount for additions after an account has been established. The congregations can make the decisions concerning allocation of assets between the Equity Fund and the Fixed Income Fund. The Trustees request that when a new account is established that the congregation provide directions concerning allocation of assets between the Fixed Income Fund and the Equity Fund. If no direction is provided, then a default allocation will be applied (usually 60 percent of the assets invested in the Equity Fund and 40 percent in the Fixed Income Fund, which is what the Trustees believe and recommend is a sound long-term asset mix for endowment funds). In addition, the Trustees request directions as to whether the congregation wishes to receive quarterly distributions of income from the account or to have the income added to the principal and reinvested within the account. Currently, quarterly income distributions are made from 80 percent of the account, with the income reinvested in 20 percent of the accounts. The custodian provides a quarterly statement for accounts under management with the Trustees.
Additions to accounts may be made as of the beginning of each month. Withdrawls will processed at the end of any month. Checks for withdrawals (unless the account is being closed) will be mailed within 3 to 5 working days of month end. In order to obtain accurate fund balances, closing an account requires a waiting period after month end (approximately 14 days).
The Trustees of Diocesan Funds are a body incorporated under the laws of the State "to take and hold real and personal estate contributed for parochial endowments or other church purposes," including the support of the Episcopate. They "manage and dispose of the same in accordance with the terms of the several gifts, grants or endowments" and "keep an account with each endowment or gift comprising the fund, and shall report their actions in managing the fund and the condition of the fund, to the convention of the diocese annually."
Trustees of Diocesan Funds: Attentive stewards of church treasure
A small group of people with financial expertise meets quietly each month at the Diocese of Maine office in Portland. While, at seven, their number is small, their task is large: to manage more than 200 trust accounts that belong to Episcopal congregations in Maine and to hold in trust property and financial assets belonging to mission congregations.
The Trustees offer several services to Maine congregations which include overseeing the professional management of designated funds, assisting parishes in borrowing against their funds, and providing financial advice to congregations.
William Clark of St. Dunstan’s, Ellsworth, serves as president of the Trustees. "A single parish may have five or ten different funds in trust. Though there is no requirement for parishes to use this service, the Trustees were often named in a founder’s will," he explained. "This is a good professional service that provides more income at a lower cost because of the pooled nature of the endowment. There is no other way to bring good management to a small fund, of say, $1,000, and no fund is too small for us to consider." Although many members of the Trustees are retired or current financial professionals, their role is one of stewardship rather than direct management.
Every three years the investment management and custodial relationships are intensley reviewed through a long and thoughtful process. "We send RFP’s (request for proposals) to established Northeast firms with experience in handling endowment funds; that are of a certain size, not a one-person shop; that have demonstrated that they do what they do well; and that have excellent references," said Clark. Diocesan Treasurer Ken Barrett of St. George’s, York Harbor, added, "This is a very competitive business, and the Diocese of Maine is a plum to these firms."
Presently three companies each manage a third of the equities in the diocesan pool: H.M. Payson and Head & Associates, both of Portland; and Welch & Forbes of Boston. Fleet Bank has been selected as the custodian institution. "By having three managers with different styles, we get a more diversified portfolio. Also, this is a low-cost operation," said Clark. "Annual management and custody fees are .4%." Another portion of diocesan funds fall into the category of fixed income. These are divided into long- and short-term maturities and primarily held in U.S. Treasury Bonds. In addition to providing assistance in money management, the Trustees offer the opportunity for congregations to borrow against their endowment held in trust by the diocese by issuing loans at very favorable rates.
All mission properties are owned by the Trustees and some additional real property. Barrett explained, "Dioceses don’t love real estate the way they used to. Today we are much more flexible in terms of real estate action than in the past. We are inclined to listen to the concerns of a church and welcome the opportunity to talk with the leadership of any congregation."
William S. Clark
, Ellsworth, Maine has been a Trustee since 1990 and the President of the Trustees of Diocesan Funds since 1999. He is a parishioner at St. Dunstan’s in Ellsworth, where he has served on the Vestry and as a Warden. Mr. Clark is a principal of Wind River Capital Management, and has been working in the investment business since 1963. He is well known for his world-wide flying adventures as a private pilot. He is a graduate of Yale University and Yale Law School.Jean T. Wilkinson, Cumberland, Maine received a Bachelor’s degree in Economics from Wellesley College and a Masters degree in Education from the University of Southern Maine. Her employment career has been primarily in finance, beginning as an Investment Analyst for Scudder Stevens and Clark in Boston and most recently as a vice President and Relationship Manager in the Private Clients Group of Fleet Bank of Maine, a position from which she retired in June 2000. Mrs. Wilkinson joined the Trustees of Diocesan Funds in 1989, and she has a long history of community volunteering. In addition to being a communicant of the Church of St. Mary the Virgin in Falmouth, she has twice served as Vestry member and in its Christian Education programs. She has also served as Chair of the Boards of Blue Cross Blue Shield of Maine, now anthem Blue Cross Blue Shield on whose Quality Management Oversight Committee she continues to serve, as well as having served as Chair of the University of New England, on whose Executive and other Committees she continues to serve. She also serves currently on the Boards of the Maine Department of Environmental Protection, Maine Humanities Council, Maine College of Art, Chewonki Foundation, and North Yarmouth Academy.
Nathaniel V. Henshaw, Brunswick, Maine is President of CEI Ventures, Inc., a for profit subsidiary of Coastal Enterprises, Inc. Mr. Henshaw founded CVI in 1993 to manage the Coastal Ventures Limited Partnership and to direct the investment of venture capital into progressive Maine companies. He successfully raised $5.5 million for this small community development venture capital fund and is in the process of raising $20 million for the new fund. Prior to his current position, he served as a Loan and Investment Officer at Coastal Enterprises, Inc. He has also worked for other venture capital firms, such as Intersouth Partners L.P.; Kitty Hawk Capital Ltd.; and Chemical Venture Capital Corporation (now J.P. Morgan Partners). He holds a M.B.A. from Duke University Fuqua School of Business and a B.A. in Economics from Duke University. He sits on the boards of several CVLP and CVILLC portfolio companies as well as several voluntary civic and religious boards; Mr. Henshaw is a parishioner of St. Paul’s Church in Brunswick.
Kenneth E. Barrett, Kittery Point, Maine has been a Trustee since 1994 and the Treasurer of the Diocese since 1999. A retired executive from the heavy machinery manufacturing sector, he is a graduate of the U.S. Coast Guard Academy and an AMP alumnus of the Harvard Business School. He serves St. George's Church in York Harbor as a member of the Finance and Stewardship Committees. In addition to his work with the church, he is Treasurer of Strawberry Banke Museum in Portsmouth N.H. and a trustee of the Thompson Endowment Funds.
Lawrence E. Dwight, Kennebunk, Maine has served in the investment community since 1960, the last six years with Morgan Stanley in Portland. He is presently Vice-Chairman of the Maine Municipal Bond Bank. Previously, he was Chairman of the Finance Authority of Maine and is also active on committees in his home town. He is a parishioner of St. David’s in Kennebunk, where he has served in a variety of lay leadership roles.
Betsey McCandless, Portland, Maine is a parishioner at St. Luke's Cathedral and for several years taught in the Sunday School program. She has been a partner at McCandless Epstein & O'Donovan L.L.P. since the firm, which restricts its practice to trust and estate matters was founded in 1992. She received a B.A. from Franklin & Marshall College in 1977 and a J.D. in 1982 from Hofstra Universtiy School of Law, where she was an associate editor of the Hofstra Law Review. Betsey moved to Maine in 1985 from New York City to raise her three children. She is Fellow of the American College of Trust and Estate Counsel and Chair of the Maine Supreme Judicial Court's Advisory Committee on Probate Rules. She served as Vice Chair of the Board of the University of Maine Foundation and frequently lectures on charitable giving, estate administration and estate and gift tax matters.
Deborah F. Hammond, Cumberland Foreside, Maine, received a Bachelor's degree in Music from Grove City College (Penn.) and a Master's degree in Music Education from the University of Colorado at Boulder. She taught in Portland and South Portland schools for several years, and recently retired from the Portland Symphony Orchestra, where she was director of marketing and of development. She is president of the board of trustees of Gould Academy, Bethel, Maine, and a corporator of Maine Medical Center. Ms. Hammond is a parishioner of S. Mary the Virgin Church in Falmouth, where she is serving a second term on the vestry, and is chair of the stewardship and communication committees. She is a member of the stewardship committee for the Diocese of Maine.
The Rt. Rev. Chilton R. Knudsen, D.D, Bishop of Maine. Bishop Knudsen was consecrated the 8th Bishop of Maine on March 28, 1998. Her ordained ministry began in 1980, and includes service in parish ministry and as Canon to the Ordinary for the Bishop of Chicago. She has been a member and officer of many Boards of Directors, particularly those advocating for environmental stewardship, healthcare delivery and clergy personnel issues. She is presently a Senior Trustee of the Church Pension Group, Chair of its Benefits Policy Committee and advisor to the Committee on the Stewardship of Abundance. She and her husband Michael live in Bath.
Laurie O. Kazilionis, Portland, Maine joined the Diocese of Maine in February of 1993. She is currently the Director of Finance with responsiblity for accounting, network administration and facility management. Prior to joining the diocese, Laurie was an accounting supervisor for Hannaford Brothers, a Fortune 500 supermarketing company.
Additional information about the Diocesan Trustees, including
performance and financial statements,
can be obtained by contacting:
Laurie Kazilionis, Director of Finance
Episcopal Diocese of Maine
143 State St.
Portland, ME 04101
207-772-1953 ext. 30
Fax: 207-773-0095
return to the Diocese of Maine Home Page
It has been the policy of the Trustees to remit to all beneficiaries the actual income earned by the invested funds. Each quarter the dividends earned by the stocks held in the Pooled Equity Fund were allocated to each beneficiary and paid. Likewise, the interest earned by the bonds in the Fixed Income Fund was distributed. The benefit of this policy is that the principal amount of the invested funds is never invaded. The principal value will rise and fall with time, but only in relation to the movements of the securities markets. The payout policy has not had any impact on the value of the invested funds.
The effect of the present policy of paying out only the dividend income from the Pooled Equity Fund is that our investment advisors, in attempting to maximize the cash available for distribution, are driven to stocks which pay high dividends. This eliminates companies which do not pay dividends and those with very low dividend rates which, almost by definition, are the high growth rate companies. Companies which pay high dividends generally have low growth rate which means that the principal amount of our invested funds will grow more slowly than would occur if the money managers were free of this constraint.
A total return policy, sometimes referred to as a spending rule, is an alternative which has been adopted by many non-profit trustees as a solution to this dilemma. Under this plan, a fixed percentage of the principal amount of the invested funds is paid out periodically. The funds paid out are derived from a combination of the dividends earned plus the capital appreciation occurring. This frees the money managers to consider both dividends and growth rate when making buying decisions. The laws of the state of Maine, along with many other states, were amended in the mid nineteen nineties to clearly authorize the use of total return policies.
In the future, the payout from the Pooled Equity Fund will utilize a total return policy. The ratio established at this time will be 4.0% of the average value of the Equity Fund over the last twelve quarters. This ratio is prudent in light of current market conditions, but may be subject to change at some time in the future. The Fixed Income Fund will continue to pay out the actual interest earned by the bonds in the Fund.
The Trustees recommend an asset allocation for invested funds of 60% equities and 40% fixed income. However, not all beneficiaries find that to be most advantageous for their objectives. By keeping the payout policies of the two Funds separate, we are able to accommodate individual asset allocation desires.
The impact of the change is that those having funds invested in the Pooled Equity Fund will see a return on those funds which is higher than we have been able to pay in recent years. The return on fixed income investments will remain unchanged.
The new policy will go into effect with the payment for the first quarter of the calendar year 2003.
If you have questions, please contact Laurie Kazilionis, Diocesan Financial Officer at ext. 30 or lkaz@diomaine.org.
Sincerely,
Mr. William Clark
President, Trustees of Diocesan Funds
and
The Trustees of Diocesan Funds
Ms. Ann Donaghy
Mr. Nathaniel Henshaw
Ms. Jean Wilkinson
Mr. Kenneth Barrett
Mr. Lawrence Dwight
The Rt. Rev. Chilton Knudsen
cc: Treasurer
