Endowments
Endowments are perpetual and while similar to other long-term funds, each specific endowment fund is constrained by its own particular purpose and needs.
The starting point for assessing each endowment's risk is a cash flow forecast based on the organization's spending policy. As such, endowments should be the last institutions to suffer from the timing pressures generated by short-term investment performance. If they do suffer, then investment and spending strategies have not been properly integrated. Endowments demand a unique investment strategy that integrates the organization's spending policy with a prudent long-term Investment Policy Statement.
The Brightworth Global Investment Solution provides structured flexibility within each asset class to reduce correlated risk and enhance returns over the long term. Performance reporting is benchmarked and done at the portfolio, asset class and individual manager level to ensure accountability and transparency throughout the relationship.
Features of successful spending policies include:
- Allows for flexibility in spending without changing the investment portfolio mix.
- The rate of growth of the endowment should be subject to control, through the investment mix and/or the spending rate.
- Should not jeopardize the perpetual operation of the endowment such as current over-spending at the expense of the future.
- Should provide for the required degree of spending stability.
- Should be simple and easy to understand.
