Providing for the Long Term

In this guide grant makers discuss the opportunities and pitfalls of supporting endowments and alternatives to endowments. When the goal is to help strong organizations make longer-term programmatic plans and diversify their sources of funding, endowments can be helpful. But they're far from foolproof. This guide offers some thoughts on how to avoid the most common mistakes and get the most from endowment grant making.

HIGHLIGHTS

• Understanding the rewards and risks involved
• Deciding if a grantee is ready
• Figuring out how large an endowment is need
• Determining how it will be managed

SAMPLE QUOTES

"We knew, early on, that an endowment for one of our stronger grantees was likely to accomplish something really important and timely, both for us and for them. And we were right. But if we had understood how much work [creating the endowment] was going to entail, and how many technical and organizational issues we were going to have to face along the way, we would have prepared for it very differently. And in hindsight, I'd have to say, we would have gotten much more out of the endowment, much sooner, with that kind of information and preparation."

— A grant maker reflecting on her first experience with an endowment

"Launching an endowment campaign when an organization isn't ready can be really dangerous. That can't be emphasized enough. You've got to weigh the impact of any capital campaign, whether for an endowment or a facility, on the whole organization - on its program, its finances, and its infrastructure. It's all such a delicate balance."

— A grantee speaking from experience about starting an endowment

"They came to us for an endowment, and eventually they probably need one. But when we gave them a small grant to study the fundraising potential [for an endowment], it wasn't clear they could raise enough money just yet. Gradually, as we looked at the options with some really good advisers, we designed this 'reserve fund.' And along the way, they learned volumes about what might be possible down the road - and so did I."

— A grant maker considering several endowment options chooses to make a working-capital reserve grant

OTHER TOOLS ON THIS SUBJECT:

A Primer For Endowment Grantmakers
Barry D. Gaberman, Senior Vice President, Ford Foundation
The inspiration for our guide, this primer offers an indepth look at endowment strategies used at the Ford Foundation over the 1990s to assist and enhance the work of nonprofit organizations. [PDF - 51 pages]

Investment Management for Endowed Institutions
Laurence B. Siegel, Director, Policy Research, Investment Division, Ford Foundation
A guide to investment decision making and asset allocation for organizations with funds intended to be used over an extended period of time or preserved and grown for future use. [PDF - 30 pages]