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September 27, 2022 | Non-Profits
What goes into managing and growing a successful endowment? There are many important elements such as a committed board and staff members, knowledgeable and stable leadership, and strong financials and reputation.
Having reliable policies is also a necessity. These documents not only form the basis for decision making and strategy, but also give your donors confidence in your stewardship of their legacy. The following are four policies every organization needs to manage and grow their endowment funds.
An investment policy specifies the goals that an endowment’s portfolio is trying to achieve; and the risks that it is willing to take to achieve them. While day-to-day investment decisions are usually left to a professional investment manager, the big picture decisions are up to the board of directors. Can your board answer these questions:
These are all important questions that should be answered in an investment policy. In addition, it gives the opportunity to include background information about your organization and the endowment to provide insight for the investment manager.
Here are four considerations when creating your investment policy.
A spending policy is concerned with one question in particular: how should we balance our level of spending to both support our mission today and grow the amount of support we can provide in the future?
Board members will try to make the best decision they can in this regard, considering the growth expectations of the portfolio and assuming inflation will reduce the purchasing power of an endowment’s assets over time. Best practice is to formalize a spending rule that, when calculated, provides a spending target or range of spending each year. The spending policy documents such a rule and the process for adjusting it over time.
Non-profits should have well defined procedures that provide a seamless gifting process for a donor. This process is more important for endowed gifts, since these tend to be larger, more complicated, and come from a wider variety of assets. A gift acceptance policy should include:
A gift acceptance policy is often front and center in discussions with donors and therefore plays a role in managing their expectations. Many organizations will post a copy of their policy on their website or make it easily accessible to interested donors.
Read more on the importance of a gift acceptance policy here.
Organizations have legal, stewardship, and record keeping obligations when it comes to endowments. The benefits are large, but there are costs to consider. As such, it’s recommended that organizations formalize policies for structuring and accepting endowed gifts via an endowment policy.
This can be a standalone policy or included within a gift agreement between a donor and the organization. Common items might include:
An endowment policy helps to ensure a donor’s intent is understood and recorded for posterity. For additional information on endowments, we share governance and legal structure, funding, and investment insights here.
There are many benefits to having these four policies but creating them is no easy task. Manning & Napier is here to help. Our policy templates and guidance can help your organization create policies suitable to your unique situation that enable your organization to achieve its mission.
We’re always available if you’d like to schedule a call with us to answer any questions or to help you determine if our mix of investment management, fundraising support, and board & staff educational resources are a fit for your organization.
Connect with usConsult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation. The information in this article is not intended as legal or tax advice.
Covering topics like board & staff education, fundraising, governance, investment considerations, and more.
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