Three years ago, Eastern Illinois University Foundation took actions that steered it away from greater damage from the recession.
“We reduced our risk in the Foundation’s portfolio before the decline in the market in 2008,” explained Don Gher, who heads the Investment Committee of the Eastern Foundation. “We were being proactive and it worked for us.”
The recession did carve out 16 percent from the EIU Foundation’s investment income — a loss of several million dollars from an endowment now valued at $38 million. The Eastern Foundation provides thousands of dollars in scholarships and grants to Eastern students each year. It also provides private support for equipment and research efforts that might be a pipe dream without the support from foundation donors.
“Our foundation did much better than other university foundations across the country, including Yale and Harvard. Some lost 30 percent or more. We were happy we were not down that much. And now our investments are growing back,” Gher said.
Investment strategies for foundations is all about shifting investments to alternative investments without increasing risk. Gher, who has been involved in investment strategies for most of his life, likes to use an old motto to explain this need for balance: Bulls make money. Bears make money. Pigs get gored.
The investment effects of the recession dug deeply into investment income of the Charleston Area Charitable Foundation. In late 2007, the holdings of the CACF peaked at $10.2 million.
“During the following 18 months our portfolio decreased in value by about $2.8 million and we also made grants to Charleston area organizations of about $700,000. This brought the holdings of the Charitable Foundation down to a low of $6.7 million on February 28,2009,” said Mike Metzger, who handles the finances for the CACF.
Fortunately, the CACF has experienced a recovery over the past year — investments of $2.5 million bring the holdings up to $9.2 million, Metzger said.
“When our holdings declined during the recession it, of course, limited our funds available for distribution. The Foundation has typically focused our funding on long-term capital projects. As more and more local non-profit organizations face a budget crisis brought on by delayed and reduced state funding, it is likely that fewer long-term projects will be planned,” Metzger explained.
Foundations are doing better on investments than government entities. The CACF investment policy provides for up to 60 percent of holdings to be in stocks. A diversified investment portfolio is the goal.
Eastern’s Foundation has benefited from different assets like farmland that provide rental income, Gher said. Hedge funds also provide a certain percentage of the investment portfolio, he said.
The good news this week was the stock market reached an 18-month high. That means private foundation officials across the country can breathe a little easier.