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Marsha Cowan, CEO of the Jewish Foundation

Howard Morry
photo by Rhonda Spivak


by Rhonda Spivak, May 2, 2013

The Jewish Foundation of Manitoba  is now distributing 3.5% per annum to the beneficiaries of its endowment funds.

Further, in answer to inquiries made by the Winnipeg Jewish Review, CEO of the Jewish Foundation Marsha Cowan has written that, "Although we can’t predict the future of the investment market, we foresee the Foundation maintaining an annual distribution rate at 3.5% over the next two to three years at least. This is the minimum distribution rate currently mandated by the Canada Revenue Agency."

In an interview in her office, Cowan told the Winnipeg Jewish Review that Jewish Foundation, whose investment committee chair is Howard Morry, received a 9% rate of return on its investments for 2012. This number has not yet been published since the Jewish Foundation's 2012 Annual Report is not yet out.

Additionally, the Jewish Foundation in answer to inquiries made by the Winnipeg Jewish Review indicated that "During 2012 the Board of Directors approved a recommendation from our Investment Review Committee to move from an “active” to a “passive” investment philosophy." (Editor's note: more detail on this is given below). 


[Questions were sent by the Winnipeg Jewish Review on April 17, 2013 and answers received  April 22, 2013.]

SPIVAK: Question 1. I have been hearing from a number of different sources within the community that the Jewish Foundation is now paying 3.5% interest to the beneficiaries of its funds in the Foundation this year. My understanding is that last year this amount was 4%. ( Cowan was asked to confirm the numbers for the last several years.)

COWAN: Answer 1: JFM is currently distributing 3.5% per annum to the beneficiaries of its endowment funds. In November 2012, we sent a letter advising of this change to Fund Administrators of permanently designated funds, organizational endowment funds, donor-advised funds, and field-of-interest funds.

SPIVAK: Question 2. I wanted to ask if you could explain the reason that 3.5% is now being paid and whether this was something that the Foundation anticipated?

COWAN: Answer 2. The dual objective of a community foundation such as JFM is to (both) distribute income and grow its endowment funds. These objectives are by nature in conflict, especially in a challenging market environment which has been, and is currently, volatile. The objective regarding the annual distribution of income is to provide as predictable and reliable a cash flow as possible to our beneficiaries from year to year so that they can plan their budgets. Indeed, there were community foundations in Canada that ceased to distribute for a year or so after the 2008 crash. JFM took the perspective that it was vital to “be there” for the community during periods of flat or negative market returns and maintained a distribution.

The growth objective reflects the fact that JFM’s mandate is over the long term. It is our absolute responsibility today to ensure the long-term growth of JFM for the benefit of future generations. If the distribution rate is too high for the market conditions, it is certain such growth will be impaired.

Therefore, the Board has determined that a distribution rate of 3.5% for 2013 reflects the best balance to address both the short- and long-term objectives of a reliable annual income distribution and continual growth. It is not as much as we would like to distribute, but for the time being it is the best course of action (and is still above one-year market rates).

SPIVAK: Question 3: Also, do you foresee that next year the Foundation will be paying 3.5 % or could reduce this?

SPIVAK: QUESTION 4. Does the Foundation foresee having to cut expenses in the next year in order to ensure the rate it pays out doesn't go below 3.5? (If so, could you elaborate on the types of expenses that could be cut? Would this potentially mean a restructuring and/ or reduction in number of staff?)


COWAN: ANSWER 4: The appropriate level of resources for a given asset base is a delicate balance of providing a sufficient level of excellent stewardship and service to the constituents of JFM; its donors and beneficiaries. Again, JFM is here for the long term – and over the long term there have been more positive markets than negative markets. At times it is difficult to be optimistic when we are living through a negative or “sideways” period as we are now.

We do not foresee having to restructure in terms of staffing during the next year to maintain a 3.5% distribution rate. Notwithstanding, JFM has already reduced its expenses in a significant fashion – not because it was required to maintain its distribution rate – but simply because it was appropriate to do so. The Foundation recently completed a two-year due diligence review of its investment management processes.

During 2012 the Board of Directors approved a recommendation from our Investment Review Committee to move from an “active” to a “passive” investment philosophy. (The words “active” and “passive” have nuanced meanings in the investment community and you are encouraged to learn more about what these words mean in an investment context.) This approach will prove more consistent with our long-term investment objectives and will result in significant savings in management fees.

Editor's note: I asked an individual who has an MBA in Finance to write to the WJR to explain the difference between active and passive as an investment strategy.The following is the response I have received from the individual:

The meaning depends on the context, but generally as follows:

Active management is when they research individual stocks and bonds and make specific investment choices. They may give money to an active manager that comes up with a customized portfolio and makes changes through time based on their assessment of what makes sense. They are trying to beat the bond or stock market through active decisions.

Passive usually means they invest to track an index or overall market. They may invest some amount in an exchange traded fund that tracks the TSX index, Dow Jones Index and/or a bond index. They are not making calls on individual securities, but investing passively to just track an index. A tsx index fund will own all the securities in the TSX index in the same proportion as they are held in the index. In your RRSP, you might own a TSX tracking fund.
When you are passive, you are just trying to track an index [or indices], but not trying to beat it through active management.
A passive investing strategy generally results in lower management fees









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Rhonda Spivak, Editor

Publisher: Spivak's Jewish Review Ltd.

Opinions expressed in letters to the editor or articles by contributing writers are not necessarily endorsed by Winnipeg Jewish Review.