Endowments and foundations have bounced back from the market lows they faced in 2008 -- but will they have to bounce back from 2016?

Non-profits have an opportunity to smooth the way now for whatever rough roads the next year will bring, according to Mercer, a New York-based talent, investment, health and retirement consultant.

“It’s still too early to tell if people will need to come back from 2015 and 2016,” says Travis Pruit, a senior consultant and U.S. proposition leader for Mercer’s endowment and foundation services. “At this point, we don’t see the same kinds of excesses that occurred before 2008 and it doesn’t feel like we’ve stumbled on one big risk, but any time you get volatility, people start to re-evaluate.”

Investment committees should establish their behavioral risk tolerance, or "comfort level," according to Mercer, because in a low-interest rate environment, conservative allocations heavy in fixed income can’t generate the 7 percent to 8 percent average return that an endowment or foundation typically relies on.

“This is a more challenging environment where basic returns will be lower; committees should be thinking about whether they need to be more aggressive or more cautious,” Pruit says. “We counsel clients to be mindful that we believe in globally diversified portfolios that spread out the risk and return factors. That also means we’ll own some things that aren’t market correlated.”

While the rest of the investment universe seems to be casting a critical eye at hedge funds and other liquid alternatives, Mercer believes there is still a place for them within the portfolios of endowments and foundations.