Question

Your nonprofit has a small endowment fund that is managed in-house by a financial manager. The endowment has not been generating consistent return to support your nonprofit’s programs. This was especially true as the financial crisis hit in 2008–2009, when your fund lost a substantial amount of its value. An initial investigation revealed that the endowment is primarily invested in a 90/10 split between stocks and bonds. Given that your nonprofit is small and has a small endowment, no statement of investment policy has been created, and the board has been busy soliciting operating funding for existing programs. You are the new executive director. What will you do to improve the performance of the endowment fund?

Answer 1

First I would like to draft a statement of policy for the endowment .

Also I would like the board to focus on strategically loaded programs and let the operating team manage the funding requirements and let the board review the same . Indulging wholly in the operating funding will divert the efforts of the concern from the more important points.

Also i would like to change the composition of the fund. Whole of the fund is mostly in stocks and thus our portfolio is exposed to high market risk and thus we have not been successful in providing the appropriate returns.So diluting some funds to debt and bonds will help us to gain limited but with lesser risks.