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Abstract: 

Slow overall economic growth may be the new normal for the foreseeable future, and the lower investment returns that come with slow growth make it more important than ever for foundation boards, donors, and executives to take stock of where they are going and how to get there. Four leading indicators are crucial to this effort—clarity of mission, intentions for expected life-span (i.e., longevity or spend-down), appropriate payout rates, and an investment policy reflecting these factors. Written by a philanthropic advisor who has run two significant foundations and served on the boards of many others, this article examines some of the fundamental financial principles and rules foundation officers and board members must understand in order to ensure that a foundation’s operations and investment policies are aligned with its mission and resources. Includes a comprehensive sixteen-point “Investment Policy Statement” checklist of issues and factors, ranging from foundation mission, division of responsibilities, investment objectives and spending policy to asset allocation targets and diversification, risk and liquidity levels, excise tax goals, proxy voting, and performance benchmarks.

Keywords: Foundation Boards; Spending Policy; Payout Rate; Investment Policy; Investment Policy Statement (IPS); Impact Investing

Affiliations:  1: Independent Philanthropic Advisor.