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A focus on the purpose of the assets often includes a discussion of budgeting and cash flow, capital plans and the structure of outstanding debt. Identifying the time horizon for specific assets is also important in developing appropriate investment strategies. Foundations and endowments are typically viewed as long-term and perpetual assets and, as such, are often invested to maximize returns within reasonable risk tolerances. Our philosophy differs and stems from two key areas: the purpose of the assets and determining reasonable risks. For beneficiaries of a foundation or endowment, a significant decline in the portfolio will impair the value of distributions. When portfolios are constructed without considering the distinct purpose of the assets the ability to maximize distributions (not just returns) can be hindered. Designing investment strategies to align with an organization's purpose requires a keen understanding of:
Payout and disbursement policies, including any ramification of not achieving stated goals
Historical and expected distribution budgets
Donation history and future fund raising plans
Financial strength, risk budget and strategic plans of the affiliated organization
This understanding becomes the basis for asset allocation, investment policy development, risk management strategies, portfolio construction, and manager selection. Customized performance reporting provides tools to evaluate and oversee the progress towards realizing the purpose of your assets.