Foundation endowments represent a significant amount of capital that can be utilized for charitable purposes. Major foundations like the Bill & Melinda Gates Foundation, Ford Foundation, and Rockefeller Foundation collectively manage hundreds of billions in endowment assets. In order to preserve their endowments in perpetuity, foundation investment managers must carefully invest these funds to generate continued growth. This requires foundations to employ skilled investment professionals and strategically allocate across various asset classes. Understanding how major foundations invest provides useful insights for other charitable endowments seeking prudent long-term growth.
Largest foundation endowments globally
The largest foundation endowments in the world are concentrated within the United States. According to the 2021 NACUBO-TIAA Study of Endowments, the Bill & Melinda Gates Foundation managed the biggest endowment globally at $50.7 billion. Other major U.S. foundations with multi-billion dollar endowments include the Ford Foundation ($16.0 billion), Lilly Endowment ($17.2 billion), W.K. Kellogg Foundation ($9.8 billion), Robert Wood Johnson Foundation ($12.9 billion), and J. Paul Getty Trust ($8.1 billion). While smaller in size, notable endowments outside the U.S. include the Wellcome Trust in the UK ($42.3 billion) and Volkswagen Foundation in Germany ($9.8 billion).
Asset allocation of large foundation endowments
The asset allocation of these sizable endowments tends to be diversified across traditional stocks and bonds as well as alternative investments like private equity, real assets, hedge funds, and venture capital. According to the 2021 NACUBO-TIAA Study, major foundation asset allocation was 35% public equities, 20% fixed income, 31% alternatives, and 14% cash/other. Compared to educational endowments, foundation endowments had higher alternatives exposure and lower equity exposure. These allocations aim to prudently grow assets over a perpetual time horizon while funding annual grantmaking budgets.
Leading foundation investment managers
Many prominent foundations outsource chief investment officer (CIO) responsibilities and day-to-day management of their endowments to external investment management firms. Top foundation investment managers include Cambridge Associates which manages $485 billion in foundation assets, Investure which manages $21 billion for foundations like the Ford Foundation, and outsourced CIOs like SEI and Vanguard. These managers construct customized portfolios aligned to each foundation’s specific risk tolerances, return objectives, spending policies, and impact goals.
Investment priorities of foundation managers
Foundation investment managers seek to generate robust risk-adjusted returns to support charitable initiatives in perpetuity while preserving capital. Key priorities include portfolio diversification, managing illiquidity, mitigating downside risks, and aligning investments with programmatic mission if applicable. Understanding factors like grant payout rates, administrative expenses, and inflation are critical to building durable portfolios. Leading managers employ best practices like rebalancing, spending rules, and impact screens to construct optimal foundation endowment portfolios.
Major foundation endowments represent crucial pools of charitable capital overseen by skilled investment managers. Prudent oversight by outsourced CIOs helps foundations effectively steward their assets to fund critical programming and grants for decades to come.