Friday, September 23, 2011
Alternative Investments – Are they right for your Organization?
Posted by Armanino Nonprofit Team
Alternative investments are complex investment vehicles not without risk. However alternative investments are also sometimes used as a tool to reduce investment risk through the golden rule of investing – Diversification. There are many types of alternative investments such as hedge funds, real estate holdings, partnerships, fund of funds and commodities. As an example, I have a large private school audit client that has both direct real estate holdings as well as investments in partnerships and limited liability companies. These investments offer a different type of return than traditional marketable securities but can also result in some complex issues. As an example, depending on the type of alternative investment your organization may hold will determine the proper way to account and value that investment. Alternative investments may be accounted for under three basic accounting methods: cost, equity or fair value. Alternative investments do not have a readily determinable fair value which can make valuing the investment challenging. In the case of the direct real estate holdings, your organization may use third-party appraisals to determine value whereas in the case of investing in a partnership your organization may obtain audited financial statements to determine value.
There are a variety of things to consider when deciding whether to invest in alternative investments and your organization’s investment committee needs to evaluate what is right for your organization. If you want to learn more about alternative investments, please join us for our Alterative Investments for Nonprofit webinar that will be held on Thursday, October 6th from 10:00am – 11:00am. Please use this link to register: http://www2.gotomeeting.com/register/144458666 or visit the “Upcoming Webinars” section of the blog to register. We hope to see you there!
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.