Snapshot of a Well-Managed Endowment

Support Over the Long Term

Well-managed endowments support the sustainability of an organization and can:

• Strengthen strategic plans to invest resources for growth.
• Provide protection from changes in donor behavior, demographics or attitudes by offering continued funding during times of donor attrition.
• Protect organizations during economic volatility by providing a relatively secure and reliable source of revenue.
• Foster creativity, innovation and boldness among leadership in meeting future costs and providing the flexibility to innovate.

Although a well-managed endowment potentially can provide investment returns that grow the fund and provide income for an organization’s programs and operations, it is important to remember that investments are subject to risk and market volatility.

Strong and Dedicated Leadership

A strong internal team is needed whether the organization manages the endowment in-house or engages the services of an Outsourced Chief Investment Officer (OCIO) like Glenmede. Leveraging over 65 years of experience, we believe there are several key

characteristics that define an effective and successful endowment team.

Investment Committee

Effective leadership starts with a strong investment committee, which is charged with investing an endowment’s assets to help sustain its long-term viability, typically in perpetuity. Among its other duties, the committee usually:

• Creates and maintains the Investment Policy Statement (IPS), which governs how the endowment’s assets should be invested.
• Develops an appropriate spending policy.
• Provides an annual report on the state of the endowment to the board.
• Selects investment managers and monitors their activity.

A strong investment committee has dedicated leaders with an effective chairperson who contributes to the committee’s success. An effective chairperson:

• Manages productive meetings
• Communicates effectively with members of the Board and staff
• Works closely with the investment manager(s) retained by the committee to identify areas of interest and specific concerns or questions for the committee to discuss

Committees should discuss the level of experience and investment knowledge members need to carry out their duties. Members should have an interest in understanding the organization’s long-term goals and funding needs. Research has shown that investment committees of five to nine members operate most efficiently, as this number allows for diverse thinking but is agile enough to make effective decisions.

Investment Manager Selection

Although some organizations elect to manage their investment assets in-house or with the help of an investment consultant, many investment committees often engage an asset manager or OCIO. The OCIO takes over the day-to-day management of an endowment pool so the organization can dedicate more attention to their strategy and mission. With an OCIO, accountability and fiduciary responsibilities can be clearly defined at the outset with the creation of the IPS, and offer  transparency into investments, including performance results and fees to help the organization fulfill its fiduciary duties.

Outsourcing an organization’s investment function to an asset manager can provide many benefits, including:

• Long-term portfolio performance and asset growth.
• Robust risk control and fee transparency.
• Flexibility to implement timely, tactical investment decisions.

How an Investment Committee Works with an OCIO

The investment committee should create a request for a proposal (RFP) for each OCIO candidate, review the RFP responses, select the finalist(s) and conduct the interview process. The ideal OCIO should be able to meet an organization’s short- and long-term needs as well as provide education on specific topics, such as mission-aligned investing or private investments.

Once the investment committee approves an OCIO provider, an organization is ready to begin. The committee should work to fulfill their responsibilities as delineated in the IPS, monitor the activity of the chosen OCIO, track progress and regularly revisit the process.

Donor Communications

It is important to inform donors when their contributions begin funding portions of the organization, and clearly articulate the benefits of supporting the endowment.

• Donors can demonstrate their commitment to an organization’s mission and vision by providing financial support to enable the organization’s stability.
• Depending on the type of gift, endowment contributions can generate tax benefits for the donor.
• Endowment assets that are responsibly invested and well stewarded can help a donor’s funds support an organization in perpetuity.

If an organization is working with an OCIO like Glenmede, we can provide donors, advisors and prospects with information about Glenmede to help them feel confident their philanthropic investments will be well managed. This process can manifest through written communications, personal consultations, educational workshops and targeted seminars.

Importance of Donor Development

In an unpredictable economic environment where donor dollars are stretched and many endowments are experiencing slow growth, a targeted giving strategy can make a difference. There are many kinds of planned gifts, including, but not limited to, bequests in a will or trust, beneficiary designations, charitable gift annuities, charitable remainder trusts and charitable lead trusts. Depending on an organization’s gift policy, your endowment may be able to accept different types of assets, including land, stock, art, real estate, business interests, life insurance and others.

An endowment’s fundraising efforts should focus on strengthening donor relationships, understanding the donor base, maintaining donor stewardship and developing additional gifts. Motivations behind gifting can vary among individuals and families, whether seeking to create a legacy, looking for endowment that reflect donors’ core values or incorporating planned giving into their estate plans.

Many organizations form a legacy society for donors who have indicated they will leave a gift to an organization in their will. A legacy society can help solidify a planned giving marketing strategy by giving donors the added incentive they need to leave a bequest to an organization. There is typically no minimum gift amount to join and planned or deferred gifts can be in the form of a will, life insurance policy, gift annuity or trust.

Depending on the scope of an organization’s planned giving options and the level of administration needed, it can be helpful to work with an outside advisor that can offer comprehensive administrative solutions to balance payout needs with the goal of benefiting the organization as gifts mature.