Commonfund on the Road: Insights from our Seattle Roundtable

July 10, 2023 |
2 minute read
|

Commonfund OCIO recently hosted a roundtable luncheon in Seattle, WA, for local nonprofit leaders. During our time together, we discussed how institutions can attain intergenerational equity in their portfolios and even challenged the current norms on how to achieve this objective.

Our goal for hosting these roundtables is twofold: to share information, research and best practices, and to facilitate a meaningful dialogue and the exchange of ideas among participants.  

The discussion centered around four themes: 

1. Return Target

The conventional approach for many endowments is to set CPI+5% (i.e., inflation plus a spending/distribution percentage) as a return target. Often, there may be other unique variables for organizations which can influence their return targets and those should also be considered. One example is higher education institutions may consider using the Higher Education Pricing Index (HEPI) - an inflation index designed specifically to track the main cost drivers in higher education. This inflation measure more accurately reflects the change in cost inputs for these institutions than the Consumer Price Index.   

2. Risk profile

While the definition of risk can be specific to each institution, the greatest risk is “not meeting an organization’s mission” and should thereby inform the level of risk an institution is willing or able to accept. The conversation ranged from the perceived safety of investing in a single asset class (i.e., cash) to ensuring the portfolio is well diversified to achieve real purchasing power.  

3. Private Equity

Commonfund research has found that investments in private equity strategies can be used to explain relative performance differences among institutions. Allocation to this asset class and access to top managers matters, as the discrepancy between top and bottom performing managers is most prevalent in private vs. public investment strategies.  

4. Spending Policy

Arguably one of the most underrated tools contributing to parity among generations, is an institution's spending formula – i.e., choosing the methodology for the spending formula rather than focusing solely on the spending rate. For many, the most pertinent risk related to the endowment is spending volatility, or the change in the spend dollars from one year to the next, – which has a direct impact on the consistency of the financial support provided to the institution. Spending policy should not only influence strategic asset allocation but should also be thought of as another important policy decision for endowment investing alongside diversification.

This productive discussion re-enforced the importance of engaging committees on these and other important topics as they strive to increase the potential of preserving real purchasing power of a long term portfolio. 

These concepts are covered in further detail in the video, Playing to Win 

Interested in being a part of the conversation? If you would like to attend our next discussion, being held in Portland, OR on September 27th, 2023, or another upcoming regional roundtable, please fill in the form below.  

 

 

Michael Guido

Author

Michael Guido

Managing Director

Zoë Brizzolara

Author

Zoë Brizzolara

Director

Jennifer Seidler

Author

Jennifer Seidler

Director

Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.

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Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.