In April 2020, Cambridge Associates conducted a survey of our foundation clients to gauge sentiment about spending for the current year and to understand potential sources of flexibility and liquidity in light of the COVID-19 pandemic. This year has brought tremendous disruption and uncertainty, but foundations are approaching these challenges with responsive philanthropy and a long-term view, so they can support important causes in 2020 and beyond.
The “secret sauce” to long-term investment success is, in most cases, the governance that guides and oversees the investment program. Governance plays the special role of steering endowments toward long-term goals, through good times and bad. Good governance is a steady presence that does not get overly confident or discouraged by a single decision or caught up in the latest trend. Good governance is rewarding for the institution it serves and the investment committee members who participate.
It starts with an understanding of the roles and responsibilities of governance and an appreciation of the long-term goals of the investment program. Clear definitions help investment committee members, staff, and advisors understand and do their jobs effectively and establish an environment of accountability.
There is an art and a science to building an effective investment committee. Governance excels when a diverse group comes together with complementary contributions, a shared understanding of their role in the endowment’s long-term goals, and a spirit of debate and respect that makes the work enjoyable.
The work of successful investment committees are supported by disciplined processes and work habits. Their work is conducted in a respectful and welcoming culture, with strong leadership, clear expectations, and intellectual stimulation.
For non-profit institutions, the disruptions caused by the COVID-19 virus, and the speed by which these disruptions have materialized, create a perfect financial storm.
Annual distributions from the endowment are a source of supplemental operating revenue for most endowed institutions. An institution’s endowment spending policy provides a basis for the calculation of the annual distribution, serving as a bridge that links the long-term investment portfolio and the enterprise. The data and analysis in this report cover a variety of spending topics, including spending rule types, the endowment’s support of operations, and effective spending rates.
Investor approaches to mission-related investing (MRI) are as varied as the social and environmental outcomes they seek to achieve. Based on responses from 148 clients—54 of which are engaged in mission-related investing—this chart book explores trends in the structure, implementation, and governance of MRI programs; investor motivations and perceived challenges; and expectations for future growth in MRI investment activity.
Annual distributions from the endowment are a source of supplemental operating revenue for most endowed institutions, as an institution’s spending policy serves as a bridge that links the long-term investment portfolio and the enterprise. The data and analysis in this report cover a variety of spending topics including spending rule types, the endowment’s support of operations, and effective spending rates. This year’s report draws on a supplemental study Cambridge Associates conducted in April 2018 to dive deeper into some technical factors of spending policy, specifically focusing on spending from new endowment gifts.
For many pension plans, investment strategy is often structured with a liability-hedging portfolio and a growth portfolio, with the weight and composition of each determined by a strategic asset allocation or a de-risking glidepath. Within this overall structure, the construction and calibration of the liability-hedging portfolio is integral to effective pension asset management. This report focuses exclusively on the liability-hedging portfolio, delineating key considerations and best practices for single-employer defined benefit plans including those sponsored by corporations, health care institutions, non-profit organizations, and certain partnerships.