By relying simply on stated fees, such as management fee or advisory fee, foundation trustees may be underestimating the full impact of the aggregate investment expenses because as there may be other components of investment costs that are not explicitly stated as fees. In the 1990s, when portfolio performance was beating the S&P 500, it... Read More
Program related investments (PRIs) count toward a foundation’s distribution requirement as long as they meet the following criteria: They serve a charitable purpose—A PRI’s primary function must be to further the foundation’s charitable purpose. Income or appreciation of property is not a significant purpose—An investor solely interested in profit would not make an investment on... Read More
Some foundations (along with other institutional investors, such as pension plans, sovereign wealth funds and endowments, and ultra-high-net-worth individual investors) are increasingly moving away from the traditional 60–40 asset allocation model, meaning 60% allocation to equities and 40% to fixed-income assets. Investors are moving away because, quite often in recent years, their return objectives have... Read More
Fiduciaries should avoid the following Investment practices: Not adhering to the investment policy statement—This is one of the most common mistakes cited by investment advisors to foundations. Self-dealing—Foundation insiders cannot direct investment decisions and/or revenues to self, relatives, close friends, or colleagues. Paying a family member to serve as an investment advisor—Doing so makes it... Read More
The field of behavioral finance has been a hot one of late as researchers define precisely the biases we all tend to exhibit as investors. How did behavioral finance originate? About 50 years ago, finance earned widespread respect as an academic discipline firmly grounded in economic models based on the rational behavior of humans. Over... Read More
Even small foundation boards can benefit from developing an investment committee with just a few members so it is clear who is leading the charge. Board members who understand investing make natural choices for an investment committee; however, they should serve alongside less experienced board members. (Be sure more than one experienced person is on... Read More