The synod is sending an overture to the 2008 General Assembly asking that the General Assembly Council (GAC) of the Presbyterian Church (U.S.A.) be allowed to invest its money outside of the foundation. The foundation opposes that idea, according to its chief executive officer, Robert Leech; it could have significant financial implications.
The council has about $445 million invested with the foundation, according to Jan DeVries, executive of the Synod of the Southwest. What’s at stake in this overture is from $70 million to $105 million in the council’s short-term investments with the foundation — investments that potentially could be shifted to a private investment firm, she said.
Currently that can’t happen, because a directive from the 1986 General Assembly requires that all council funds be invested with the foundation. That’s what the synod wants to change, asking in Overture 85 that the assembly amend the 1986 directive to give the council the same flexibility in investing that the other five agencies of the General Assembly already possess.
DeVries told the General Assembly Council’s executive committee on April 23 that the foundation’s returns have been well below what’s available in the private financial market. The synod, for example, moved $1.3 million from the foundation’s New Covenant growth funds to Smith Barney, and in 2007 earned a 10.67 percent return, compared to the 5.09 percent return published for the foundation.
“Twice the amount of money for the mission of Jesus Christ makes a big difference” in the synod, DeVries said. And the council has much more money to invest, she said, so what’s at stake is significantly higher. Even a 1 percent increase in return could produce an additional $700,000 to $1 million a year the council could use for mission, she said.
DeVries stressed that “this overture is not intended to be an attack on the Presbyterian Foundation,” although she acknowledged that “there are some moments in which it feels that way.”
But the intent “is really to maximize the money that’s available to GAC to do the mission of the whole church and to put the GAC in the same position as the other agencies of the PC(USA).”
Leech told the executive committee, however, that the overture is of concern both to him and to the leadership of the foundation’s board of trustees.
“This overture was a surprise to us, candidly,” Leech said. “We were kind of blind-sided.”
Leech told the committee that only three of the denomination’s 16 synods invest outside of the foundation, 12 invest with the foundation, and one synod does not have any money available to invest. He also said 78 percent of presbyteries invest with the foundation, as do many congregations, and the foundation is “financially sound.”
Leech said he did not know whether or not the synods that invest with other firms are earning a better rate of return than the foundation is paying. “We have not been provided with a list” showing whether that’s accurate or not. But DeVries said some synods do not place all their investments with the foundation. For example, the Synod of the Trinity shifted a chunk of its investments to the Hershey Trust, she said, to achieve “a significantly higher return.”
Leech, however, said the rate on return on investment isn’t the only factor that should be considered. “The absolute best performance at the lowest cost has not been the goal of the assembly,” Leech said, pointing out other factors affect the foundation’s investment strategy, such as meeting socially-responsible investment goals as determined by the PC(USA)’s Mission Responsibility Through Investment program.
Also, “we’re concerned about the example to the church that this overture brings,” Leech said. If the assembly decides the council can invest outside the foundation, others may say, “Why can’t we do that?” he said – and that makes it harder to defend the idea “that people should invest with the church.”
Council member Frank Adams, for example, said that his congregation has money both with the foundation and the Presbyterian Investment and Loan Program (PILP), and said, “Yield is not everything for the church.”
But DeVries said the 1986 directive limiting the council to investing with the foundation was passed in a much different environment — at the time of reunion of the northern and southern branches of the Presbyterian church, when the foundation had just been spun off as a separate entity, and the assembly wanted to assure the success of the new foundation.
After DeVries and Leech made their presentations, the council’s executive committee voted to refer the matter to the council’s Stewardship Committee, to decide what action — if any — to recommend to the full council later this week.
And DeVries said the synod would be willing to consider withdrawing the overture if certain conditions were met, or taking some other approach that would not require the assembly to vote the overture up or down. One approach, she suggested, would be a joint referral “with instruction” to the assembly from the council and from the foundation’s board, which would present to the assembly a suggested plan of action.
According to DeVries, the instructions the synod would suggest presenting to the assembly would include:
– Identifying a single portfolio manager who would handle the council’s investment funds with the foundation;
– Developing strategies for increasing the council’s return on investments, while still complying with any General Assembly guidelines for investing;
– Specifying what kinds of reports the foundation would have to provide the council, and how often those reports would be made, so the council would better be able to track the return on its investments;
– Requiring the executive committees of the foundation and the council to report back to the assembly in 2010, and to provide a report by the end of 2009, so the synod could either submit the overture again in 2010 if it chose or “applaud the resolution,” if things are worked out.
