Endowment Funds in the Time of COVID-19
Vice President of Finance & Philanthropic Services
What a difference a few weeks make. Last month, many of us were going to work, shopping and visiting loved ones as usual; today many of us are working remotely, self-isolating and social distancing to protect ourselves and one another from COVID-19. As employers make difficult staffing and business decisions, their employees — our fellow community members — are struggling to meet basic needs. Dubuque felt the loss of the first COVID-19 death in Iowa. The crisis has slowed the pace of life and forced us to consider the things that matter most.
Complicating matters, stock market indexes plunged nearly 30% from mid-February to mid-March, prompting questions from our donors and fundholders: "How does this affect my funds and ability to make grants? Can I use my fund distribution to help during the pandemic?"
The crisis certainly is affecting endowed assets. But it's important to remember that this situation is temporary, and endowments, by design, last forever.
Compared with other investments impacted by COVID-19, endowments are unique. They can withstand short-term market volatility, because of their infinite time horizon. For more than a decade, global markets have been generally on the rise, but there have been declines similar to the one we are experiencing now, such as in late-2018. We have experience managing investments in such an environment, and our investment manager, Mason Investment Advisory Services, is closely monitoring the market and making small adjustments as appropriate.
When we hired Mason Investment Services in 2018, we updated our investment policy to better prepare for times like this. The policy has helped us:
- Establish a strategic asset allocation that is expected to achieve long-term returns.
- Diversify the portfolio by asset class and strategy to improve the likelihood of increasing returns under different economic and market conditions.
- Maintain that strategic asset allocation within established ranges through rigorous monitoring and regular rebalancing.
- Avoid the temptation to market time or change strategy based on current conditions or near-term outlook.
Your quarterly statement will show a drop from last quarter. Remember, though, we calculate endowment payouts on a rolling 12-quarter average, which has a smoothing effect on the amount available for annual payouts. The value of your endowment will not dip as drastically as the market, and any decrease in your available payout for 2021 will be even smaller.
Your endowment fund will remain, as always, to provide support when our community needs it most. If you have not already requested your 2020 endowment distribution, you may choose to be conservative with your request this year.
We treasure our relationship with you, as a donor and leader. If you have thoughts and questions or you find yourself searching for new ways to help as this pandemic continues, please reach out and talk with your fund advisor.
Community Foundation staff, board, and investment managers are determined to see our endowments continue serving our region – forever.