The Trustees of Diocesan Funds in the Diocese of Maine (“Trustees”) manage financial assets contributed for parish, mission, Diocese, Episcopate, and Diocese-related organization endowments in accordance with the terms of the gifts or grants. Additionally, the Constitution of the Diocese requires that all mission properties be held by the Trustees.
The Trustees were incorporated in 1849 under the Private and Special Laws of Maine “to take and hold real and personal estate contributed for parochial endowments or other church purposes,” including the support and or salary of the Episcopate. The Trustees “manage and dispose of the same in accordance with the terms of the several gifts, grants or endowments” and “keep an account with each endowment or gift comprising the fund and shall report their actions in managing the fund and the condition of the fund to the convention of the diocese annually.” Private and Special Laws of Maine, 1849, amended most recently in 1994.
The Trustees, as an entity created by statute, functions independent of the Bishop, the Diocese and the Convention. It is comprised of seven Trustees plus the Bishop of the Diocese of Maine. According to the By-Laws of the Trustees, there are three qualifications considered necessary and desirable in the appointment of a Trustee: (a) to be a communicant in good standing, no more than one of whom can be a canonically resident priest or deacon of the Diocese of Maine; (b) to indicate a sincere willingness to assume the fiduciary responsibilities incumbent upon a Trustee; and (c) to have had experience in investment management or with endowed funds. The current Trustees are Frank Governali (president), Nathaniel V. Henshaw, James Kitler, Elizabeth T. McCandless, the Rev. Timothy A. Boggs, John Watson, Carlos Mello, Nicholas H. Penfield and the Rt. Rev. Thomas J. Brown. Brief biographies of the Trustees are included below.
The Trustees manage financial assets with a market value on August 31, 2023, of $36,929,466. Approximately 58% of these assets are for the benefit of specific congregations or Diocesan organizations, either because the congregation or Diocesan organization received a bequest under a will in care of the Trustees, received a lifetime gift in care of the Trustees or chose to place the congregation’s or Diocesan organization’s assets with the Trustees. The balance of the assets was received either by bequest or lifetime gift for the benefit of the Trustees, Bishop or Diocese and are administered pursuant to the discretion of the Trustees, Bishop, or Diocesan Council. All of the assets are held in either restricted or unrestricted funds pursuant to the donor’s wishes.
Asset Management
Funds are invested in either the Trustees’ pooled Equity Fund (approximately 71% at August 31, 2023) or the Trustees’ pooled Fixed Income Fund (approximately 29%). Both pooled Funds are invested in accordance with the Trustees’ Statement of Investment Objectives and Guidelines.
One of the Trustees’ investment managers, AllianceBernstein, provides monthly performance information for both the pooled Equity Fund and the pooled Fixed Income Fund. The report for the period January 1, 2023 through August 31, 2023, and the summary report for the period September 1, 2022 through August 31, 2023 are included with this Report.
The pooled Fixed Income Fund is an investment manager directed pooled bond fund managed by AllianceBernstein of Boston, Massachusetts.
Management of the pooled Equity Fund is divided among three investment management firms: Welch & Forbes LLC of Boston, Massachusetts, H.M. Payson & Co. of Portland, Maine, and AllianceBernstein of Boston, Massachusetts.
A portion of the pooled Equity Fund (21.7% of the total Fund, $5.66 million market value at August 31, 2023) is managed by H.M. Payson utilizing ESG criteria. ESG uses Environmental, Social and Corporate Governance factors in measuring the sustainability and ethical impact of investments in companies. In addition, AllianceBernstein also utilizes ESG principles in managing its portion of the Trustees’ equity portfolio.
The Trustees oversee 711 separate sub-accounts invested in the two pooled funds. Custody services are provided by U.S. Trust, Bank of America Private Wealth Management. Fund reporting services are provided by Stellar Technology Solutions, LLC. The Trustees periodically put the investment management, custody, and fund accounting services out to bid to ensure the best advice, the best service, and competitive pricing.
Statement of Investment Objectives and Guidelines
This statement of investment objectives and policies governs the investment management of the assets transferred to the Trustees of Diocesan Funds. The Diocesan Funds support the mission of the Episcopal Diocese of Maine and its member parishes. The assets of the Diocesan Funds may include special purpose funds, gifts or bequests to individual parishes, gifts or bequests to the Diocese for the benefit of individual parishes, or any other assets designated to be managed by the Trustees.
INVESTMENT OBJECTIVES
The overall financial management objectives of the Trustees are:
1. To provide a stable income stream that will grow at least as fast as inflation, as measured by the Consumer Price Index.
2. To preserve the purchasing power of the invested capital over the long term.
3. To avoid risks that might jeopardize the achievement of the two preceding objectives.
4. To support an investment objective to last in perpetuity.
5. To provide investment strategies that fit each portfolio that makes up the total Diocesan funds, with investment strategies that support the cash/liquidity needs of the specific portfolio.
ASSET MIX
It is the conviction of the Trustees, based on historic performance, that the way to accomplish these investment objectives over the long term is by investing in common stocks which will provide an average total return (principal appreciation plus dividend income) in excess of inflation. However, the Trustees recognize that various circumstances, including the need to maximize current income, even at the risk of jeopardizing the perseveration of long-term income/purchasing power, or near-term liabilities, may require some funds to be invested with a shorter investment term. Accordingly, two separate investment vehicles have been established – a Pooled Equity Fund and a Pooled Fixed Income Fund.
POOLED EQUITY FUND INVESTMENT GUIDELINES
1. 5% to 8% of the equity portfolio maximum in any one company
2. 30% of the equity portfolio maximum in any one sector
3. Convertible Corporate Bonds and Preferred Stocks are an acceptable equity substitute
4. Maximum allocation of 30% in Foreign stocks, and 10% in emerging markets
POOLED FIXED INCOME INVESTMENT GUIDELINES
The fixed income portfolio shall utilize bonds that are similar to the Barclays Aggregate Index with respect to average duration and credit quality. Both funds and/or bond ladders can be utilized.
CASH
Should be invested in interest earning vehicles, which may include Money Market Funds, repurchase agreements secured by U.S. Government or Agency obligations, and other instruments related to senior debt rated “AA” or better.
UNACCEPTABLE INVESTMENTS
Cryptocurrency, Non-fungible tokens (NFT’s), venture capital, investments not denominated in U.S. Currency.
PERFORMANCE STANDARDS
Performance will be measured, at least annually, by comparison with the Standard & Poor’s 500, the Russell 2000 Index, the Russell Midcap Index Barclay’s International Treasury Bond, the MSCI EAFE for developed foreign markets, the MSCI Emerging Markets benchmark as well as the All Country World Index (ACWI).
SOCIAL INVESTING
The Trustees recognize the actions of the National Church and the Diocese of Maine at its 1992 Convention in encouraging investment of endowment funds for the benefit of society in addressing issues of “social justice”. Such investments shall be characterized “Alternative Investments” in the report of the Joint Advisory Council on Alternative Investments, June 11, 1990, for the National Church.
The following guidelines shall apply:
1. The endowment fund shall be sufficiently broad in purpose so as to permit application of the business judgment rule in making such investment
2. The beneficiary of such endowment shall specifically request such an investment in writing with the express approval of the Rector, Wardens, Treasurer and Vestry in writing
3. Investment shall be made only through intermediaries with the ability to perform due diligence and monitoring of the investment. An example would be the New Hampshire Community Loan Fund. In Maine, the Genesis Fund with the oversight of Coastal Enterprises, Inc.
4. Investments through such intermediaries shall also provide diversification, not single projects
5. No more than 5% of an endowment shall be made in Alternate Investments
6. Equity investments shall not be made in Alternate Investments
7. Alternative Investments shall be made in the form of loans not to exceed 5 years in length
8. The rate of interest shall be agreed and requested by the beneficiary in their request for such Alternate Investment.
The trustees recognize Alternate Investments are not within the scope of usual endowment investment policies. Such investments are more properly mission-related in the theology of stewardship as expressed in the Gospel and endorsed by the Episcopal Church and the Diocese of Maine. It is in response to this call of our Church that these guidelines and opportunity for such investment is prepared.
LOAN POLICY
The Trustees of Diocesan Funds are authorized from time to time to grant loans for parish or Diocesan proposes to a parish or to the Diocese against the individual account of the parish or the Diocese at a market rate of interest to be set by the Trustees. For accounting purposes, the loan will not be part of the pooled funds, but will be a liability on the individual parish or Diocese account, and interest on the loan will accrue to the individual account.
SOCIALLY RESPONSIBLE INVESTMENTS
When appropriate, the Trustees shall consider investments that promote peace, protect the environment, advance equality and foster sustainable development. Investment in companies that meet positive standards of corporate responsibility in a transparent manner and provide products or services that improve the quality of life should be undertaken when prudent.
The Corporate Social Responsibility Committee, a subcommittee of the Executive Council of the National Church, establishes directives for socially responsible investments. Their directives are largely guided by recommendations from the ICCR (Interfaith Center on Corporate Responsibility) with respect to shareholder activism and other socially responsible investment issues. The Committee’s policy was most recently update in November of 2013.
Based on the portfolio restrictions adopted by the Executive Council, the Trustees of Diocesan Funds do not invest in any company among the top five defense contractors, any company among the top 50 defense contractors that receives more than 50% of its revenues from military contracts, or in companies that manufacture or sell tobacco products.
DISTRIBUTION POLICY
The payout from the Pooled Equity Fund will utilize a Total Return Policy. (A Total Return Policy, sometimes referred to as a spending rule, is a distribution policy alternative which has been adopted by many non-profit trustees as a solution to the high dividend/low growth rate vs. low dividend/high growth rate investment dilemma faced by investment advisors. Under this plan, a fixed percentage of the principal amount of the invested funds is paid out periodically. The funds paid out are derived from a combination of the dividends earned plus the capital appreciation occurring. This frees the investment advisors to consider both dividends and growth rate when making investment selections. The laws of the State of Maine, along with other states, were amended in the 1990’s to clearly authorize the use of Total Return Policies.) The ratio is 5.0% (4.75% beginning January 1, 2013) of the average value of the Pooled Equity Fund over the last 12 quarters. This ratio is prudent in light of current market conditions but is subject to change at the discretion of the Trustees. The Fixed Income Fund will pay out the actual interest earned by the investments in the Fund. The Trustees recommend an asset allocation for invested funds of 60% equities and 40% fixed income. However, beneficiaries can change this allocation upon written direction to the Trustees. By keeping the payout policies of the two Funds separate, the Trustees are able to accommodate individual fund asset allocation choices.
Availability of Services
The services provided by the Trustees of Diocesan Funds are available to all parishes, missions, and related organizations of the Episcopal Diocese of Maine. For unrestricted assets owned by a congregation, the congregation may choose and change its investment mix between the pooled Fixed Income Fund and the pooled Equity Fund. There is no load or sales charge, only the direct expenses of investment management, custody, and fund accounting services. Individuals who wish to include bequests in their wills to benefit individual congregations may discuss the details of establishing endowments or restricted use donations with the Trustees at no cost to the individual or the congregation. Donations of stock to the Bishop, Diocese, or an individual congregation can be made through the Trustees.
How to Establish an Account
A minimum investment of $1,000 is necessary to establish a new account with the Trustees with no minimum amount required for additions. Congregations can decide the allocation of their assets between the pooled Equity Fund and the pooled Fixed Income Fund. When a new account is established, the Trustees request that a congregation provide direction concerning allocation of assets between the two Funds. If no direction is provided, a default allocation will be applied — currently, 60% of the assets will be invested in the pooled Equity Fund and 40% in the pooled Fixed Income Fund. In addition, the Trustees ask whether the congregation wishes to receive quarterly distributions of income from the account or wishes to have the income added to the principal and reinvested within the account. Currently, quarterly distributions from the pooled Fixed Income Fund are based on actual interest received and quarterly distributions from the pooled Equity Fund are determined on a Total Return basis using a twelve-quarter average market value methodology at a 4.75% annual distribution rate.
Diocesan Revolving Loan Fund
The Trustees hold endowments in the Bishop’s Discretionary Fund with a value at August 31, 2023 of approximately $2.9 million. The Diocesan Revolving Loan Fund program calls for the use of no more than $250,000 of the Bishop’s Discretionary Fund endowment assets to create a Diocesan Revolving Loan Fund. This Fund provides for the financing of maintenance, repair, and upgrade of real assets to Diocesan organizations, i.e. parishes, missions, and related church organizations, for no more than five years in amounts not to exceed $25,000. The Diocesan Revolving Loan Fund is administered and monitored by the Trustees as an asset management function of the Bishop’s Discretionary Fund endowments. At August 31, 2023 there were currently two loans outstanding.
Current Trustees
Trustees are elected by Diocesan Convention to four-year terms. Trustees are limited to two consecutive four-year terms.
Frank Governali (2023-2027) St. Alban’s, Cape Elizabeth, is a Chartered Financial Analyst who covered the global telecommunication sector for several firms over 21 years, retiring from Goldman, Sachs & Co. as a Partner/Managing Director in 2005. Mr. Governali graduated from Dartmouth College in 1977, and received his MBA in Finance from NYU in 1979. He has served on the Cape Elizabeth Town Council, Education Foundation, local library building Committee, and sits on the boards of the Gulf of Maine Research Institute, Great Schools Partnership, and CEI Ventures, as well as a local business startup, Constant Energy Capital.
The Rev. Timothy A. Boggs (2022-2026) Current Vice President/Treasurer, recently retired as Rector of St. Alban’s Episcopal Church in Cape Elizabeth. Rev. Boggs was educated at public schools in Lake Bluff and Lake Forest, Illinois and the University of Wisconsin, Georgetown University, and the General Theological Seminary of the Episcopal Church in New York City. He received his Master of Divinity degree cum laude. His ordained ministry began as Associate Rector of St. Alban’s Parish in Washington, D. C. He then served as the Canon Provost of Washington National Cathedral. Prior to ordination, Rev. Boggs served for twenty years as a senior vice president of Time Warner, Inc. Previously, he was on the professional staff of the U. S. House of Representatives. Rev. Boggs is an active member of St. Francis by the Sea in Blue Hill.
Nathaniel V. Henshaw, Secretary (2022-2026) is President of CEI Ventures, Inc., a for profit subsidiary of Coastal Enterprises, Inc. Mr. Henshaw founded CVI in 1993 to manage the Coastal Ventures Limited Partnership and to direct the investment of venture capital into progressive Maine companies. He manages five social venture capital funds with combined initial capitalization of over $65 million and investments in 75 private companies. Prior to his current position, he served as a Loan and Investment Officer at Coastal Enterprises, Inc. He has also worked for other venture capital firms, such as Intersouth Partners L.P.; Kitty Hawk Capital Lt., and Chemical Venture Capital Corporation (now J.P. Morgan Partners). He holds an MBA from Duke University Fuqua School of Business and a B.A in Economics from Duke University. He sits on the boards of several Coastal Ventures, CVLP and CVILLC portfolio companies as well as several voluntary civic and religious boards. Mr. Henshaw is a parishioner of St. Paul’s Church in Brunswick.
Elizabeth T. McCandless, (2021-2025), attends the Cathedral Church of St. Luke in Portland. Betsey is a trust and estate lawyer practicing in Portland. She is a Fellow of the American College of Trust and Estate Counsel (ACTEC) and previously served on the Board of Hospice of Southern Maine, as Chair of the Maine Supreme Judicial Court’s Advisory Committee on Probate Rules, and as Vice Chair of the Board of the University of Maine Foundation. Betsey is currently a Trustee of the Portland Museum of Art and serves on the Executive Committee, the Collections Committee and the Governance Committee. She also serves as a member of the Finance Committee of the Hospice of Southern Maine. She frequently lectures on charitable giving, estate administration, trust administration, estate planning and tax matters.
Elizabeth McMullan, (2023-2027), participates fulling in the worship life and ministry of the Parish of St. Mary and St. Jude in Northeast Harbor. Liz has a strong background in financial management and oversight. She has a BA in Economics (Simmons University) and an MBA from Harvard Business School. Her strong background in financial management includes over 35 years in corporate employee benefits with oversight of $200 million in pension and employee 401K benefits. Liz has worked in the public sector, serving for 7 years as Director of Finance Division of the Maine Public Utilities Commission (MPUC), and 6 years as Commissioner. Liz has served as board member and volunteer with numerous organizations, including the Seal Cove Auto Museum, Wendell Gilley Museum, Maine Seacoast Mission, Harbor Club, and the Advisory Council of the School of Policy and International Affairs, University of Maine. She has been active in local outreach through the Town of Bar Harbor, Safe Family Exchange, Downeast Horizons, Big Brothers Big Sisters, Jackson Lab, Seal Harbor Improvement Society, University of Maine Foundation, and the Governor’s Council on Physical Fitness and Sport.
Carlos Mello, (2022-2026), has over thirty-five years of banking, lending, investment, finance and accounting experience. In addition to his role as FAME’s Acting CEO, he has served as the Chief Risk Officer at the agency. Prior to joining FAME, Carlos served as the President and CEO of Prudential Bank & Trust, FSB, and held other leadership positions at Prudential. He also held senior vice president and managing director positions at People’s United Bank. Carlos is a certified financial planner and has held investment representative, investment advisor, and securities principal licenses. He is a former certified public accountant and received his B. S. in accounting from Boston College. Carlos currently serves as chair of the CEI Ventures Board of Directors and is an active member of the Episcopal Diocese of Maine, serving as Trustee of Diocesan Fund and formerly as Senior Warden at St. Thomas’ Episcopal Church in Camden, Maine. Carlos and his wife live in Camden and are the parents of three adult children.
Nicholas H. Penfield, President (2022-2026) is a Vice President at TD Bank, N.A. Nick has spent his career spanning over 25 years at TD serving in various capacities in Risk Management, Operations and Lending. Nick was a Board Member and Treasurer of the Portland Community Free Clinic. Nick previously chaired the Endowment Committee at the Cathedral Church of St. Luke’s in Portland, and also served on the Vestry, Finance Committee and as Secretary. Nick received his B.A. from Denison University in 1992 and resides in Harborside, Maine.
The Rt. Rev. Thomas J. Brown, Tenth Bishop of Maine.
Download the full 2023 Report of the Trustees to Diocesan Convention here.
Additional information about the Diocesan Trustees can be obtained upon request here.