- Investment management for a nonprofit usually covers more than the portfolio. A typical engagement often includes reserve and investment policy, portfolio management, committee-level reporting, and board education.
- Three things tend to set the work apart from investing for an individual: nobody involved owns the money, oversight sits with volunteers who rotate, and the portfolio serves an operating organization with its own budget and fiscal year.
- In most arrangements the board approves the investment policy and retains fiduciary authority, the committee monitors results against it, the advisor works within it, and the custodian holds the assets.
- The ongoing work tends to follow a set rhythm: a quarterly report measured against the policy, and a fuller annual review of reserve targets and spending assumptions.
- How much of this is included, and how the advisor is paid, varies by firm. The advisory fee is generally only one layer of the total cost, and a firm’s Form ADV Part 2 sets out its maximum fees and whether any compensation comes from a source other than its clients.
What Nonprofit Investing Actually Involves
Nonprofit investing is the ongoing work of deciding what each pool of reserves is meant to do, setting a policy that governs how those funds are invested, and reviewing results on a schedule the board and finance committee can maintain. It also means granting an advisor a defined level of authority, whether discretionary as an outsourced chief investment officer or non-discretionary.
Committee membership changes as terms end, and portions of the money may carry donor, legal, or board-designated restrictions, so most of this work is set in writing and governed through a reserve policy, investment policy statement, and additional documentation.
This article covers how nonprofit investing differs from investing for yourself, who is responsible for what, what the ongoing relationship with an advisor looks like, and how advisors are paid.
What Makes Nonprofit Investing Different Than Investing for Yourself
Nonprofit investing differs from other forms of investing largely because objectives, risk tolerance, and spending needs belong to the organization and not to any individual on the committee. Three things account for nearly all of the difference:
- The funds are not anyone’s own money: Nonprofit stewards have a legal and ethical responsibility to manage and invest their funds prudently, which makes the standard a defensible process rather than a result. Where funds are held for charitable purposes, that duty is codified in the Uniform Prudent Management of Institutional Funds Act, which also limits an organization to fees that are appropriate and reasonable. That applies across all three layers, meaning the advisor’s fee, fund expense ratios, and custody and transaction costs. Portions of the money may be restricted by a donor, by law, or by the board before any strategy question is reached, and the limits the board sets on risk are written into the policy as binding restrictions rather than intentions.
- Oversight sits with volunteers who rotate: Volunteers responsible for oversight frequently turn over and have limited time to focus on any one area, so there is no single memory holding why a policy was written as it was. Documentation and onboarding carry the continuity instead. Reporting is built for oversight rather than detail, and a static benchmark named in the policy keeps results measured the same way each quarter rather than changing after a disappointing one.
- The portfolio belongs to an operating organization: Nonprofits have an indefinite time period associated with investing and spending their dollars, and how much risk they can take comes from the reliability and diversity of revenue rather than anyone’s personal circumstances. Willingness is a group judgment, and a short risk tolerance survey can help by giving everyone an equal say. Reserve targets move with the operating position rather than with the markets, so a weak fundraising year or a strong conference changes them. Results also land in audited financial statements, where a realized loss can turn positive net income negative.
“Nonprofit investing differs from other forms of investing largely because objectives, risk tolerance, and spending needs belong to the organization and not to any individual on the committee.”
The Role of the Investment Committee and Board Fiduciaries
An investment committee reviews results against the investment policy each quarter, confirms the portfolio is operating within the guidelines that policy sets, and brings recommendations and material issues to the full board. It also checks that each reserve pool is still doing the job it was funded to do, meets with the advisor, and recommends policy changes when the organization’s circumstances shift. Final authority stays with the board, which approves the policy and holds ultimate fiduciary responsibility.
Carrying that out consistently is where committees tend to run into trouble. Members serve part time and often without an investment background, turnover takes the reasoning behind past decisions with it, and a group meeting quarterly may not be positioned to act between meetings. Prudence is demonstrated through process for that reason: a documented policy, a consistent review cadence, and records showing why decisions were reached. Those policies support the board’s fiduciary and governance responsibilities by providing documentation that sets direction and assigns roles. An advisor who works at board level can support that process, often through reporting and fiduciary education built around the committee.
Sample Governance Policies
Raffa publishes a sample reserve policy and a sample investment policy statement for nonprofits and associations. Each is fully editable so you can adapt it to your organization’s structure and objectives.
Who Is Responsible for What: Board, Committee, Advisor, and Custodian
Responsibility generally divides four ways: the board approves the investment policy and holds fiduciary authority, the committee monitors results against it, the advisor works within it through ongoing investment management, and the custodian holds the assets. The table below sets out a common division.
| Role | What They Own |
|---|---|
| Board | Approves the Investment Policy Statement, sets risk tolerance and spending parameters, and retains ultimate fiduciary authority |
| Investment or Finance Committee | Recommends policy to the board, monitors performance against the IPS, and escalates issues between board meetings |
| Investment Advisor (OCIO) | Executes day-to-day portfolio decisions within IPS parameters, reports results, and flags drift from policy |
| Custodian | Holds assets, executes trades directed by the advisor, and provides independent statements and safekeeping |
An unassigned responsibility tends to fall to whoever happens to be paying attention, which is difficult to sustain across turnover.
What to Expect When Working With a Nonprofit-Focused Investment Advisor
While an investment advisor is primarily responsible for managing an organization’s investments, advisors focused on nonprofits often also assist with governance policy creation, reporting that aligns with the investment policy statement, providing fiduciary education and board member onboarding, as well as other services tailored to the organization. The services tend to extend beyond a standard advisor engagement, where the focus is purely on the investments.
The difference often shows up in conversations outside portfolio management: whether reserve segmentation is a conversation the advisor initiates, whether the reporting is built for a finance committee reviewing it the night before a meeting, and whether the advisor is accustomed to a board approval process.
“The services tend to extend beyond a standard advisor engagement, where the focus is purely on the investments.”
Raffa was founded in 2005 to serve nonprofit organizations and membership associations with volunteer leadership, committee-based governance, and policy-driven investment programs. Reserve and investment policy review is part of nonprofit investment consulting onboarding for every new client relationship.
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The Ongoing Relationship: Reporting, Review, and Committee Continuity
Most of the year in an investment management relationship is spent in reporting and review rather than in changing the portfolio. Quarterly reporting sets the rhythm, and the deeper annual review is often where strategy is reassessed against the investment policy: whether reserve targets still hold, whether spending assumptions have changed, and whether the organization’s plans have moved since the policy was written.
Board education tends to work better as an ongoing practice than as an onboarding step, due to the level of turnover. Sessions held separately from performance reviews can give all members enough background and confidence to participate, which is why Raffa treats board education and fiduciary training as part of the engagement.
Continuity rests on both the documented policy and the reasoning behind it: why an allocation was chosen, what the committee set aside, and what has already been tried. Recording that in a short memo when a decision is made gives future members something to read rather than reconstruct.
How Nonprofit Investment Advisors Are Paid
Investment advisors are generally compensated through a few avenues. A fee-only advisor receives direct compensation only from the client. Others may receive additional compensation through commissions on securities, funds, or insurance sales.
The advisory fee is generally only one layer of cost. A nonprofit portfolio may be subject to expenses outside of the advisory fee, including fees paid to the funds themselves, fees paid to the custodian, and other miscellaneous expenses. It is important to get a full understanding of not only how your advisor will be paid, but whether all of their direct revenue comes directly from clients, and what other expenses may apply to your portfolio outside of your fee. Where UPMIFA applies, it states that an institution may incur only costs that are appropriate and reasonable.
Every registered investment advisor files a Form ADV Part 2 setting out its maximum fee schedule, compensation arrangements, and conflicts of interest. It can be requested from the firm or retrieved through the SEC advisor lookup.
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Nonprofit investing is its own discipline. The portfolio decisions matter, and they sit on a governance structure that shapes whether they hold up through committee turnover, a difficult market, and a year that does not go to plan. A policy the board has adopted, an advisor whose authority is defined in writing, a record of why decisions were reached, and reporting tied back to that policy tend to hold up better than a strategy that lives in the knowledge of whoever is currently on the committee.
If this raised questions about whether your policy still reflects your plans, how your committee keeps its footing through turnover, or how your advisor is compensated, our investment services for nonprofits and associations cover each of them, and one of our advisors would be available to assist.
Frequently Asked Questions: Nonprofit Investing
What is an OCIO, and does Raffa work as an OCIO for nonprofits?
An outsourced chief investment officer, also referred to as an Outsourced CIO or OCIO, is an advisor granted discretionary authority to make portfolio decisions within the limits the investment policy sets. Raffa serves in both capacities, as an OCIO with discretionary authority and in a non-discretionary role, based on each nonprofit client’s preference. Our guide on discretionary versus non-discretionary management covers what to consider when determining which approach is right for your organization.
Can a nonprofit invest its reserve funds?
Yes, a nonprofit can invest its reserve funds subject to state law, any donor or contractual restrictions, and the organization’s own board-approved reserve policy and investment policy statement. The more useful question is often which portion has a long enough time horizon to be invested for growth. Our guide on when to move cash into an investment portfolio covers how to make that call.
What does an investment committee do at a nonprofit?
An investment committee generally monitors the portfolio against the investment policy, meets with the nonprofit investment advisor, and brings recommendations to the board, which typically retains final authority. Smaller organizations often assign this work to the finance committee.
What is a nonprofit’s fiduciary duty when it comes to investments?
A nonprofit’s fiduciary duty as it relates to investments tends to be placed on its board members, who are required to act with care, loyalty, and prudence. In practice, this means following a documented process rather than reaching any particular return. Where funds are held for charitable purposes, the Uniform Prudent Management of Institutional Funds Act also sets out factors that must be considered.
How often should a nonprofit investment policy statement be reviewed?
An annual review of a nonprofit’s investment policy statement is common practice and generally recommended. It helps to document what triggers an off-cycle review, such as a leadership change or a major gift.
About the Author
Dennis Gogarty, CFP®
President & Co-Founder
Dennis Gogarty, CFP®, is President and Co-Founder of Raffa Investment Advisers, a firm he purpose-built to serve nonprofit organizations and membership associations. For more than 20 years, he has advised nonprofits and associations on fiduciary-focused reserve strategy, investment policy development, asset allocation, and governance best practices. Raffa currently serves more than 188 nonprofit clients nationwide (as of June 30, 2026)¹. Dennis is a frequent speaker for nonprofit and association audiences and has presented for numerous organizations including the Council on Foundations, AICPA, BoardSource, and the American Society of Association Executives (ASAE).
¹ Client count is as of June 30, 2026, and reflects the number of nonprofit clients for which Raffa provides portfolio management, retirement plan advisory, or ongoing investment consulting services. Client count is based on unaudited internal recordkeeping and custodial data from Charles Schwab & Co., Inc.
Disclosures:
Raffa Investment Advisers is a registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.
This article is for educational purposes only and should not be construed as personalized investment, legal, or tax advice. References to UPMIFA and fiduciary obligations are general in nature; organizations should consult legal counsel on how state law applies to their funds. All investments involve risk, including the possible loss of principal.
Information about Raffa’s services, fees, compensation arrangements, and conflicts of interest is available in our Form ADV Part 2A and 2B at adviserinfo.sec.gov or on request.