The Savvy Investor Endowments and Foundations section has an abundance of academic research materials, thought-leadership pieces, and white papers which focus on the unique management, governance, and investment-related issues inherent within university endowments, foundations, and non-profit institutions.
University endowments are typically supported by donations from alumni and used to partially fund the ongoing operational budget of a university. Similarly, foundations and non-profit institutions are supported by gifts or donations...
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Each of these types of institutions have an annual budget allocated to spending initiatives: maintenance, construction, salaries, community outreach activities, or other specific goals. The remainder of funds allocated to these institutions will then be invested in accordance with the investment policy that the trustees and the management committee of the organisation have developed over time.
These institutions do not operate like traditional investment funds, largely due to their long-term objectives and permanency associated with gifts, donations, or other contributions to the institution. These two factors allow the investment committees and chief investment officers of endowments, foundations, and non-profit institutions to adopt a long-term perspective with their investments. This means that they are not just able to better withstand short-term market volatility, but they are also more likely to capture the premium associated with long-term investments and the illiquidity premium that accompanies many investments in alternative assets.
Typically, many institutions choose to outsource all, or a portion of, the responsibility of investing their general fund. This is called the outsourced chief investment officer, or OCIO, model. OCIO firms that take on this responsibility on behalf of the endowment or foundation can operate on either a discretionary basis (possessing the discretion to actively invest the institution’s assets as per their investment policy) or a non-discretionary basis (advising the institution on how to go about investing their funds and providing recommendations on everything from specific funds or securities to tactical and strategic asset allocation strategies).
Due to the amount of assets held within endowments, foundations, and non-profit institutions, investment and alternative asset management firms are often interested in developing relationships with these foundations and institutions. By solidifying these relationships, a specific fund may be granted further consideration during an RFP (request for proposal) process or subsequent manager search conducted by either the investment committee or that committee’s advisor.
Endowments and Foundations pertain to:
- Producing a well-rounded and apt investment policy statement
- Responding to RFPs
- OCIO model
- Managing relationships with investment management consultants
- Liability-driven investment strategies
- Megatrends
- Socially responsible investing / environmental, social, and governance investing
