Asset Allocation

Asset allocation is the centerpiece of the investment policy statement (IPS). Develop strategic allocations and be sure to capture the rebalance needs in the IPS. In Exponent Philanthropy’s 2016 Foundation Operations and Management Report the following average percentages of asset allocation are based on foundations that reported investment portfolio allocations in FY14.

  • Domestic stocks - 48%
  • Fixed income (e.g. bonds) – 21%
  • Foreign stocks – 13%
  • Alternative investment (e.g. hedge funds, commodities, private equity) – 10%
  • Cash/cash equivalent – 6%
  • Other – 2%

Resources

Allocating Your AssetsUpdated by Okabena

Creating a Strategy and Plan for Your Foundation's Investing: Developing and Using an IPS

Debunking 4 Myths About Hedge Funds

Hedge Fund of Funds

Quilt Charts Make the Case for Diversification

The Case for Private Equity

Real Estate

Wise to Be Mindful, Unwise to Be Fearful

Lessons Learned From the 2008-2009 Global Financial Crisis

What Are Alternative Investments?

Rebalancing

Foundations can take different approaches to rebalancing the portfolio, whether driven by the market, performance, or the calendar.

  • Calendar or periodic rebalancing at specified times (monthly, quarterly, or annually)—Rebalancing can be set to return to a specific target allocation each time, or to an allowable range within a set tolerance limit (the latter option provides more flexibility and discretion to outside investment managers, if you are using them).
  • Rebalancing whenever the asset mix drifts to the edge of a specified range—Again, this can be set to return to an allocation or to an allowable range within a set tolerance limit.
  • Allowing the asset mix to drift, and rebalancing at the discretion of the investment manager

Resources

Rebalancing MethodologyUpdated by Bernstein

Stress Test Your Portfolio

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Market Outlook 

Many online resources exist to help you track assets within a portfolio. In addition to tracking individual stocks or bonds, you might want to understand better what the finance professionals look for when they review market data. 

Resources

Learn more about how the professionals interpret financial market data

The Virtuous Cycle of Building and Spending Assets

Investment Experts Look Back, Ahead

 

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