Endowments and foundations face a dual mandate: preserving and growing capital over the long term while meeting short-term liquidity needs to fund operations, grants or distributions. This is increasingly challenging in today’s complex investment environment. Most endowments and foundations are meant to last into perpetuity, requiring investment strategies that preserve and grow capital over the long term. This long-term time horizon allows them the opportunity to take on more risk in their asset allocations than other institutional investment portfolios, but they cannot afford to completely ignore market volatility. Striking a balance between the dual mandate may be difficult at times, especially in a volatile environment.

Navigating market volatility, potential regulatory risk, and geopolitical risks require endowments and foundations to not only manage their portfolios to meet long-term objectives but also to understand how potential changes/risks may impact their investment strategy from both a short-term and long-term perspective. From a market perspective, understanding your risk exposure and stress testing your portfolio is very important in the overall decision-making process. Stress testing the portfolio may provide key decision makers with insight into how bad a situation can potentially be based on certain market conditions. One part of the stress testing is to analyze the liquidity under different market conditions. It is important to understand how liquid your portfolio is and how easily you can meet your liquidity needs if unforeseen market events occur. Now is a good time to focus on the basic investment principles at the core of the investment strategy for an endowment and foundation.

This whitepaper provides a guide for Healthcare CEOs and Boards on balancing liquidity and growth.

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