Foundations are mandated with the task of maintaining the foundation assets and with the income to finance the purpose of the foundation as set down in the articles of association. In the period of ongoing low interest rates which has lasted for years this is not easy. Low-risk investments generate little income, while opportunity-oriented investment forms such as shares have a considerably higher risk. Even so, over the last few years almost one foundation in three has shifted some of its capital in asset classes which generate more income – and which are thus fundamentally more risky. This is the result of a survey carried out among foundations with high assets by the audit company PwC.
Professional Asset Management Essential
The structuring of an optimized investment portfolio with a balanced risk-return profile requires extensive expertise. It is for this reason that foundations frequently mandate specialized financial service providers with this task – for example, BW-Bank. "For decades we have had pronounced expertise in holistic support of foundations and Germany-wide are one of the leading providers in the area," stated Mirjam Schwink, Head of Foundation Management at BW-Bank.
"For us holistic also means that we accompany foundations from a strategic perspective and on a long-term basis," explains Schwink. Together with her team, she supports roughly 720 foundations of various sizes. Foundation Management at BW-Bank maintains personal contact to the foundation committees and establishes the connection to the Asset Management experts at BW-Bank. These are the ones who make the investment decisions within the context of a foundation-specific asset management concept. "In this respect it should be noted that the selection of investment forms must be aligned to the investment guidelines of the individual foundations," explains Michael Freudigmann, responsible for supporting foundation assets in Wealth Management at BW-Bank. The guidelines could stipulate, for example, that the foundation assets may be invested only in sustainable investments.
"Guard Rails" for Suitable Investment Decisions
Roughly two thirds of German foundations have guidelines which prescribe a framework for investing the foundation assets. For example, these "guard rails" can provide specifications about the return to be achieved or the investment risk which can be tolerated. "On the basis of the investment guidelines, we then consider and decide on a long-term basis with a time horizon of five to ten years," says foundation expert Schwink.
Schwink and her colleague Freudigmann confirm the results of the PwC study. "Over the last five years, most foundations have fine-tuned their investment guidelines, aligning them to the requirements of the capital market," emphasizes Schwink. More than ever, the alignment of the individual asset concept requires intensive dialogue with the foundation committees. This starts as early as the first meeting. "We listen very carefully to find out the requirements and specifications of the foundation as well as the wishes of those responsible in terms of return and risk," explains Schwink. As the cooperation develops, Foundation Manager Schwink and investment specialist Freudigmann then meet up with the contacts of the foundation in order to work out and implement suitable strategies.
Top Marks for Individual Solutions
The foundation specialists at BW-Bank have investment solutions for all requirements. "With the broad diversification of the assets across various asset classes it is possible to manage the risk-return profile of the foundation portfolio in such a way that the foundation objectives of capital retention and appropriate return are achieved, even in the period of low-interest rates," explains Freudigmann. This a special expertise which the BW-Bank team has demonstrated reliably over many years, and for which the bank regularly obtains top marks in respected industry tests.
For example, in 2017 BW-Bank 2017 received the award "Top Provider" from the specialist magazine FUCHSBRIEFE, and that for the fifth time since 2011, at the same time being ranked No. 1 among 55 international providers. The jury highlighted the "extremely solid" and "convincing" performance of BW-Bank, highlighting in particular the service range. "We are very happy about this success," states Mirjam Schwink. "At one and the same time it is confirmation and motivation to continue giving our best for our foundation customers."