Nearly half of respondents said they place greater value on positive risk-adjusted returns than on overall portfolio returns when evaluating investment success. Despite a heightened emphasis on risk management, 44 per cent of participants aren't confident that enough time is being spent assessing the impact of potential market shocks on the ability to spend or achieve their mission. Meanwhile, 49 per cent lack confidence that the investment committee has identified all key portfolio risks.

“Non-profits today face an increasingly challenging investment landscape. Many are taking steps to improve their risk-return balance through risk analysis and portfolio diversification,” said Mary Jane Bobyock, director of the SEI Institutional Group's non-profit advisory team.

“An increased level of due diligence and risk assessment is needed in managing these more complex investments. Our survey found that 48 per cent of non-profits are currently using or considering the use of an outsourcing provider to help manage the portfolio. The top two reasons given for using an outsourced approach are the ability to 'more promptly take advantage of market changes' and 'improve overall risk management,’” she said.

Many non-profits are looking to use the investment committee in a “more strategic manner,” SEI said. Areas of focus include: better aligning the portfolio with organizational spending needs ; better leveraging the committee in the organization's financial planning ; and building donor confidence in investment strategies .

Adding to the need for increased fiduciary oversight, SEI said, is the continued use of alternative investments by non-profits, with over half reported having 11 per cent or greater of the portfolio allocated to alternatives. Less a quarter had 10 per cent or less, while 18 per cent had none.