What is the CDMF?
The CDMF is a not-for-profit corporation organized in the State of Wisconsin within the meaning of IRC 501(c)(3), legally separate from the Diocese of Madison (the “Diocese”), and operated exclusively for religious, charitable and educational purposes. Its principal function, generally, is to serve parishes, parish schools, parish members and other charitable endeavors within the Diocese. Further, the CDMF may assist in the development of long-range plans for the Diocese and its parishes, address funding options that can support many different charitable needs, and create a safe harbor for funds, which is now more important than ever.
Ultimately, the CDMF seeks to assist all involved in promoting the works of Christ through responsible Christian stewardship, for the preservation and promotion of the Catholic Church within the Diocese.
How does the CDMF serve the Diocese of Madison?
The CDMF creates, manages, and accepts donations to endowments and non-endowed funds (the latter option referred to as a “designated fund”) in a fashion that allows donors to specify particular charitable interests that will receive sustained support. In contrast to the endowment option, which offers a fund that is designed to be perpetual in its existence, the designated fund option offers donors a choice in the fund’s duration. Both options provide the donor with access to asset management services at competitive costs and to expert assistance and advice tailored to their specific investment needs and goals.
The CDMF makes distributions from endowed and designated fund accounts to the specified beneficiary(ies) or purpose(s) that serves the needs of the Catholic Church within our Diocese. Distributions will be made in accordance with a written agreement, which is in existence or will be signed at the time a contribution is made to the CDMF. The agreement generally calls for an annual distribution of 5% of the account’s corpus, based on a 12-quarter rolling average, and empowers the CDMF to make discretionary distributions under certain circumstances.
Who governs the CDMF?
An independent Board of Directors governs all operations and affairs of the CDMF. The current board members include the Bishop of Madison, the Vicar General of the Diocese of Madison, the Chancellor of the Diocese of Madison, and thirteen independent board members from throughout the Diocese representing different walks of life, professional experience and geographic area. Generally, the CDMF’s officers are elected by their peers and are not employees of or are affiliated with the Diocese.
Under the CDMF’s bylaws, four standing committees exist to assist with the CDMF’s functions: Executive Committee; Investment Committee; Development Committee; and Audit and Governance Committee.
What gifts may be accepted by the CDMF?
The CDMF may accept any gift, grant and/or bequest for the general purposes of the CDMF or entity within the Diocese using the CDMF. It may refuse gifts if they are incompatible with the ideals, objectives, programs or principles of the CDMF. Gifts of certain types of assets, such as real estate, may require additional review prior to acceptance.
Is there a minimum dollar amount required to work with the CDMF?
A minimum contribution of $25,000 is currently required to establish a new designated fund or endowment fund account. There is no minimum to contribute to an existing designated fund or endowment fund account. A contribution can be in the form of cash, securities or other appreciated property.
Can the Diocese of Madison ever claim assets from the CDMF, in all or in part?
No. The CDMF is a legally separate entity from the Diocese, so that its assets are wholly owned by and subject to the sole governance and management of the CDMF.
Similarly, assets held in a designated fund or an endowment fund account are managed so as not to be used in any way contrary to donor intentions or what is established in the underlying contribution agreement. The CDMF serves as a fiduciary in managing the fund assets. The designated fund or endowment agreement sets forth the beneficiary(ies) of the assets and how distributions may be made to them or for their benefit.
How are assets invested?
The CDMF maintains a professionally managed and broadly diversified investment portfolio under the professional management of U.S. Bank. As its investment manager, U.S. Bank invests the portfolio (made up of designated funds and endowed accounts) in accordance with the CDMF’s established objectives and guidelines. These include:
- Long-term focus on performance, which is expected to preserve the CDMF’s purchasing power and cover distribution needs.
- Proper diversification to reduce risk and achieve higher returns through all market cycles.
- Adherence to the socially responsible investing policies set forth by the U.S. Conference of Catholic Bishops.
Currently, the CDMF’s portfolio primarily follows a balanced investment approach, which calls for a target asset allocation of 60% stocks, 35% bonds and 5% short term investments. There may be deviation from this approach for designated funds, depending upon the goals set forth in the underlying contribution agreement.
A copy of the CDMF Investment Policy Statement (IPS) is available upon request by contacting the foundation at daun.maier@
How are securities selected?
The CDMF has reviewed and adopted within its investment objectives the governing principles as set forth by the United States Conference of Catholic Bishops on socially responsible investing. These principles and objectives instruct U.S. Bank, as the investment manager, when selecting securities.
From a practical perspective, the selection of securities incorporates the utilization of social screens to achieve CDMF’s investment objectives and support Catholic teaching. For example, social screens are used to prevent investment in companies affiliated with adult entertainment, contraception and abortifacient products, and embryonic stem cell research.
The selection of securities also incorporates the advice U.S. Bank obtains from separate money managers. Such managers are utilized to gain specialized investment focus in various asset classes.
Exchange traded funds are used judiciously, keeping with the CDMF’s policies and objectives, to gain exposure to certain stock indices at a low cost.
How is investment performance monitored?
The CDMF’s Investment Committee meets not less than quarterly and counsels the foundation board on its investment decisions. U.S. Bank provides ongoing reports and data to the Investment Committee and makes investment recommendations based on its assessment of market factors, including economic conditions, asset class valuations, and market sentiment.
Investment performance is compared against the following market indices and adjusted to reflect the proportionate weighting of the CDMF portfolio to such asset classes: S&P 500 (approx. 36%); Russell Midcap (approx. 9%); MSCI EAFE (approx. 9%); Russell 2000 (approx. 6%), Barclays Intermediate / Government Credit (approx. 35%) and T-Bill 3 month (approx. 5%).
On an annualized, net of fees basis, long term investment performance is expected to equal or exceed the benchmark to ensure appropriate growth of corpus and cover the CDMF’s distribution requirements.
Additional performance details are provided in the quarterly performance report.
What are the fees?
All fees related to the management of designated fund and endowed monies to the CDMF are paid from the assets held in the CDMF.
U.S. Bank charges a fee based on a tiered schedule. As the CDMF’s portfolio grows in size, the fee is expected to be reduced thereby leveraging the entire portfolio value. Currently, the overall fee is approximately 0.70%, with new gifts falling within the lowest tier of 0.50%. In the next few years as assets grow, it is expected that the overall fee will be closer to 0.50%.
When trading individual stocks or exchange traded funds, there is a cost of $0.05 per share to execute the trade. U.S. Bank charges no commission, loads or other transactions fees.
Separate money managers charge a fee of 0.35% for the investment advice provided to U.S. Bank. Such fee is assessed against only the portion of the CDMF portfolio that utilizes this additional investment service.
Exchange traded funds have an internal fee charged by the underlying manager. U.S. Bank does not receive any share of this fee. U.S. Bank uses only the institutional share class of funds and carefully monitors fees when selecting funds, looking for fund performance to justify fees.
The CDMF’s Investment Committee collaborating with the Audit and Governance Committee continuously monitors fees, in conjunction with portfolio size and performance. The current administration fee charged by the CDMF and applied to funds is 1% annually. The goal of the fee policy is to ensure attractive and fair administration costs while leveraging the entire portfolio value.
Unitized Accounting – pooling of investments
The CDMF’s investment portfolio is unitized thereby enabling contributions to be pooled (like a mutual fund) for the purpose of gaining economies of scale in investing and administration and achieving greater cost efficiencies.
From an administration standpoint, a unitized accounting system accounts for each donor’s contribution within the CDMF’s overall portfolio on the basis of units (or shares). Each contribution receives units representing its proportionate share of the portfolio. Units are valued monthly to adjust for income earned by the underlying securities held in the portfolio as well as changes in market value.