A Custodial Fund
A Custodial Fund allows an agency to pool a portion or all of its assets with the JCFC’s investment pool. The charitable organization entrusts the JCFC with the long-term management of its funds while retaining ownership of the monies. Unlike an endowment fund, a Custodial Fund is owned by the organization and can be withdrawn at any time (subject to notice periods). The purpose of establishing a custodial fund is to benefit from the JCFC’s investment expertise and management capacity. This type of fund is designed to meet organizations’ needs for the investment management of reserve funds and self-administered endowment funds.
- Size and/or resources can constrain investment opportunities. Participation in the pooled fund is an opportunity to pursue improved investment opportunities and to minimize costs.
- Organizations retain full ownership of invested assets.
- All fund holders and organizations investing in our pooled funds earn identical total time-weighted returns.
- Fund management fees are paid directly by the pool and thus shared on a pro rata basis amongst all the funds in the JCFC pool.
- A nominal administrative fee is charged, payable annually. Fees are negotiated according to the particulars of participation and are generally the greater of $500 or 0.5% per year of the capital amount of the fund as at June 30th of each year. This fee is small compared to the costs associated with running a private foundation or trust. Quarterly fund statements for the fund and for its sub-funds (if any), detailed record keeping, cheque-writing, and regular communication are included in the annual administrative fee. Contact the JCFC office for specific information about the fees that would apply to your organization’s fund.
- Liquidity considerations: the total investment pool is valued on a quarterly basis. There is no extra charge for cheque writing, and funds held at the JCFC can be withdrawn without penalty or extra charge (subject to notice periods). As a general rule withdrawals of $10,000 or less from the managed fund shall be permitted not more than once every three months upon thirty days written notice. Withdrawals of more than $10,000 are subject to sixty days written notice. Withdrawals of more than $100,000 are subject to ninety days written notice. These restrictions may be waived under exceptional circumstances, which shall be subject to approval by the Treasurer of JCFC. Approval shall not be unreasonably withheld, but if extra charges are incurred as a result of early withdrawals, they will be passed on to the organization.
An Endowment Fund
Permanent endowments provide an ongoing source of annual revenue to the charitable organization. Donors may contribute to organizational endowments through the JCFC or by contacting the organization directly.
Endowments receive a prorated share of the income earned by the JCFC pooled investment funds. The fees for organizational endowments are the same as the fees charged for all permanent endowments and consist of a prorated share of the administrative expenses incurred in the operation of the Foundation. The JCFC is committed to keeping expenses low in order to direct as much income as possible to our fund holders to be used for good works. Administrative expenses have consistently been less than 1.8% of the capital of the Foundation.
Things To Consider Before Establishing A Charitable Organization Fund With The JCFC:
- The funds managed by the JCFC are pooled and invested in a diverse range of asset classes with the aim of protecting the real value of the funds entrusted to us over time, generating an optimum stream of distributions to beneficiaries, and supporting the Foundation’s day-to-day operations. Safety of principal is paramount, but depending on the performance of the JCFC’s investment portfolio, there could be periods of low or even negative returns. The JCFC’s average return for 10 years ended June 30, 2015 was 5.9%.
- Endowment funds become the property of the JCFC – the principal cannot be returned to the organization.
- Establishing a permanent organizational endowment with the JCFC will appeal to some of your donors because monies in the fund cannot be reallocated by future boards for other purposes. Some donors are willing to give larger gifts when they know their gifts will be held by a foundation committed to following the terms set out by donors in their fund agreements.
- In years of high performance, the JCFC will, at the direction of the board as advised by the investment committee, allocate a portion of the prorated income that is due to each endowment fund to the capital of that fund in order to preserve the granting power of the endowment against inflation. In years of high performance, each fund will still receive its prorated share of the pooled investment income; however, the amount available for distribution will be reduced and the amount held as capital in each fund will be increased.