The Caissa team regularly speaks with clients and attends industry conferences to stay abreast of trends in the institutional allocator space. Clients frequently ask us if there are insights we can share based on our collective observations and touchpoints within the space. This particular overview is to recap some of the recently observed best practices for a successful endowment or foundation.

The Importance of Staying the Course
A prevailing response to the question “what makes a successful endowment or foundation” almost always includes some variation of staying the course. The investment committee and often the IPS help to establish the North Star for the organization, attempting to avoid the zigging and zagging in strategy that can be corrosive to returns. Having committee members with fresh perspective is certainly helpful but so is preserving the institutional memory by staggering the committee with longer term members.
The importance of staying the course also was raised by a group of investment managers at a recent E&F conference. When the investment managers were posed with the same question about what makes their organization successful, again the theme of strong governance models and steadfast strategy came up. Several investment managers and consultants referenced their private ownership structure as allowing them to more easily stay the course without having to answer to outside parties. Their ability to control their own destinies is ultimately what allowed them to stay the course.
Maintaining a Level of Independence
Another recurring theme is the importance of an organization maintaining a level of independence. Within the E&F space, there is perhaps too much emphasis on peer comparisons with certain universities often referenced as the benchmark. This is very dangerous for a variety of reasons. One, it encourages short term thinking and behavior which often runs in contrast to the important notion of staying the course. Two, there are potentially unseen advantages that one organization has that drives their action. However, unbeknownst to you, your organization does not have those same advantages. An example that was raised at a recent conference was investing in venture capital. A chart demonstrating dispersion within typical “endowment model” asset classes was reviewed. Venture capital showed the greatest dispersion between top and bottom performers. The presenter suggested that if you can’t access the top half of performing funds in venture capital, perhaps you should forget the asset class. Another example of hidden potential advantages an organization may have, and why you shouldn’t assume the activity would be just as good for your organization, is co-investing. Often times, E&Fs that do direct and co-investments do so because they have internal advantages, such as an extensive network and appropriate internal resources to handle these types of investments. It is not primarily for discounted fees, so an organization shouldn’t assume they would be just as suitable for this type of investment simply because they would also like discounted fees. Don’t follow peers when you can be leveraging your realistic core competencies instead.
Forward Thinking
Endowments & foundations are long-term investors so it’s important that their investment framework very actively considers the impact of transformative ideas and the impact of technology on traditional industries. This is not to suggest that endowments and foundations should be holding bitcoin instead of cash, or investing in artificial intelligence aligned companies. However, they should be educating themselves on those topics and positing these very ideas to their managers, to make sure that they are taking these broader trends and disruptions into account within their own investment framework.