The investment objectives of most endowments and foundations are linked to a benchmark, according to the survey, with absolute return-oriented goals the least prevalent answer.
Endowment and foundation investors embrace volatility – 56 percent were willing to lose 5 percent of their portfolio value or greater to accomplish a return objective, versus 44 percent who were only willing to lose up to 5 percent of their portfolio values. According to CAPTRUST, ”most respondents (based on their asset allocation) would have historically experienced losses far greater than the expressed willingness to experience loss.”
Most endowments and foundations – 80 percent of the survey respondents – indicate that their target time horizon is indefinite “or at least the foreseeable future,” according to the report, with another 15 percent using no defined time horizon.
In a few cases, CAPTRUST received responses from different people representing the same organization, noting that disparity between these responses “suggests that committee members/respondents were not entirely aligned as it pertains to return objectives, risk tolerance and many governance issues.”
The survey also indicated that foundations and endowments may need help with certain governance issues, like fiduciary training for board and committee members, defining the roles of committees, and drafting spending policies separate from their investment policy statement.
The survey was conducted in December 2018 among more than 150 respondents, 54 percent of which were private foundations and endowments, and 46 percent public non-profits.