Frequently asked questions
Q. Who oversees Rotary's investments?
A. The RI Board of Directors and the Trustees of The Rotary Foundation are responsible for formulating investment policies, developing investment objectives, and establishing asset allocation strategies. The Foundation's Investment Committee reviews and monitors investment results, recommends changes to investment policies and structure, recommends and approves the hiring and termination of managers, and advises the Trustees on investment matters. RI Finance Committee members participate in Investment Committee meetings and make recommendations to the directors concerning changes to RI's investment policy or structure.
Rotary retains an independent investment consultant, NEPC, which provides comprehensive investment consulting services to RI and the Foundation. Rotary's investment staff is responsible for daily operations and compliance with investment policy statements on behalf of the RI Board and Foundation Trustees. Daily operations and compliance include implementing Board and Trustee decisions and manager appointments and terminations recommended and approved by the Investment Committee.
Q. Who manages Rotary's investments?
A. Rotary retains independent, professional investment managers to manage its financial assets. Their responsibilities include selecting individual securities, buying and selling securities through brokers, diversifying the fund within their particular market segments, and adhering to Rotary's investment policies. Rotary currently uses 21 investment managers to invest in 38 different investment products.
Q. What changes were made to Rotary's investment programs following the 2008-09 financial market crises?
A. Given the unprecedented scope of the investment losses triggered by that crash, Rotary decided to retain an investment consultant with more expertise in endowment and foundation funds. NEPC, a Boston-based investment consulting firm, was hired on 1 December 2009 to advise both RI and the Foundation on investment matters. NEPC recommended several changes to Rotary's investment program, including: new policy asset allocations to reduce equity risk and the volatility of returns, the addition of real assets, such as commodities, inflation-linked bonds, and global natural resource stocks, to provide protection against inflation, and the establishment of a funded operating reserve. These recommendations resulted in five manager terminations and eight manager appointments. For more information, see the Operating Reserves FAQ.
Q. Does Rotary have a socially responsible investment program?
A. The Trustees have considered socially responsible investing (the practice of making investment decisions on the basis of a company’s social as well as financial performance) numerous times during the past several years, and on each occasion have decided not to constrain Rotary's investment managers in this manner. Socially responsible investing imposes moral, ethical, or environmental constraints on the investment process in order to align an organization's investments with its mission.
Because Rotary comprises a diverse group of individuals from different cultures, agreeing on a mandate for an investment manager to adhere to may be difficult. Additionally, any mandate would be subject to interpretation by the investment manager, which might result in a failure to strictly follow the Trustees’ intention. Furthermore, such investments’ tangible benefits to society are difficult to measure.
Although The Rotary Foundation's investment program is not based on the principles of socially responsible investing, the Foundation does engage in a form of social responsibility through its investment strategy which is to grow assets in an appropriate manner for the purpose of fulfilling the Foundation's mission.
Q. Why aren’t the assets of the Annual Fund invested in “safe” securities given the three-year spending cycle?
A. While the primary objective of the Annual Fund is to fund the programs of The Rotary Foundation, an important secondary objective is to generate investment earnings to pay for the Foundation’s operating expenses (general administration and fund development). If the funds are invested only in “safe” securities, the Annual Fund would not be able to generate sufficient earnings to pay for the Foundation’s operating expenses, particularly in this low interest rate environment.
It is important to balance the risk of generating investment losses with the risk of not generating enough investment earnings to operate the Foundation. If we are unwilling to assume any risk in investing the Annual Fund assets, then the Foundation will need an alternative funding source for the Foundation’s operating expenses.
Where can I find more information on Rotary's investments?
A. Detailed documents are available on RI investments and Rotary Foundation investments. These include the investment policies for all funds, historical investment performance data, the Investment Advisory Committee charter, and a list of Rotary's investment managers.