Most endowments and foundations had prepared for a market downturn following the record-long bull market, but the closure of universities and loss of revenue (from room and board, tuition, etc.) because of the pandemic and quarantine have created previously unforeseen pressures. University endowments must face the question of how to manage their endowments if they are forced to give more of their funds in light of revenue losses.
Universities are taking precautions against the projected revenue shortfall. One example is Harvard, which started implementing salary freezes, a hiring freeze and was deferring or canceling all discretionary spending.
Foundations have been asked to step up and support societal needs more than they otherwise would. Even with all of these challenges, many managers of endowments and foundations feel their asset pools are safe.
Andy Daly, Managing Director, says that endowments should think about different asset allocations depending on the restriction levels of donated funds in their asset pools. "In the financial crisis (of 2008), sure there were some issues, but nobody's been prepared for something like this," he said.
On having separate asset allocation, he said, "Nobody's really thought about it before, so I think people are going to possibly rethink how they're investing these assets. I think organizationally for a lot of folks whether it's an OCIO or investment adviser it's going to be a headache. You have to document everything differently; you have to have the infrastructure to be able to report it differently."Read the Full Article
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An OCIO is an outsourced chief investment officer.