How should we manage a non-profit endowment?

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Prudent Practices for Investment Stewards

Dear Marotta,

I’ve been tasked with watching over the endowment for a non-profit and I am wondering what is an appropriate asset allocation for the investments?

Suddenly Managing Millions

Being a fiduciary is a serious responsibility that many board member lack the preparation or training to fulfill properly. Here are some resources which we recommend boards tasked with overseeing an endowment consider reading:

But perhaps the most helpful and practical guide is the “Prudent Practices for Investment Stewards” available at fi360.com. It contains very specific advice as well as general principles such as:

An investment strategy can fail by being too conservative as well as too aggressive. A Steward could adopt a very safe investment strategy by keeping a portfolio in cash, but then see the portfolio’s purchasing power whither under inflation. Or a Steward could implement a long-term growth strategy that overexposes a portfolio to equities, when a more conservative fixed-income strategy would have been sufficient to cover the identified goals and objectives.

Investment Stewards Booklet

The publication is available in two formats.  You can get paper copies for your board members for $30. Alternately, you can download a PDF version for free.

Finally, to quote the handbook: “An Investment Steward is required to prudently manage investment decisions, and should seek assistance from outside professional such as Investment Advisors and Investment Managers if the Steward lacks the requisite knowledge (assuming trust documents permits the delegation of investment responsibilities).”

Need help managing an endowment?

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818…)

One Response

  1. Frank McCraw
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    In addition, the CFA Institute Research Foundation has an excellent 107 page book, “A Primer for Investment Trustees,” which PDF or ebook may be downloaded for free at:

    http://www.cfapubs.org/toc/rf/2011/2011/1

    or it is offered for under $10 on Amazon.com at:

    http://www.amazon.com/Primer-Investment-Trustees-Jeffery-Bailey/dp/1934667331/ref=sr_1_1?ie=UTF8&s=books&qid=1297690206&sr=8-1

    This book should be required reading for anyone directly or indirectly engaged in investment fund oversight.