“The highest use of capital is not to make more money, but to make money do more for the betterment of life,” argued Henry Ford. Although he was not talking specifically about the investments that a family foundation’s endowment makes, his comment is equally applied to this process. Investing the assets of a family philanthropy can be both a challenging and rewarding experience, and is probably best thought of not only in terms of assets, but also in terms of what those increased assets can accomplish.
As someone who has established or is about to establish a family foundation, you may be familiar with and skilled at thinking about your own investment goals and strategies. If you have served on boards of other nonprofits or corporations, you may also know what it takes to oversee management of an institution’s portfolio and assets.
As a trustee of your family’s foundation, however, you will encounter very special circumstances related to your investments. You and your board will make important investment strategy decisions about funding a legal entity that is regulated by the Internal Revenue Service (IRS) and state agencies. You and your board will assume legal and ethical duties of obedience, loyalty, and care to the foundation. Those duties require you to adhere to the foundation’s charter and mission, avoid self-dealing and conflicts of interest, keep the foundation’s best interests in mind, and act as a “prudent investor” on behalf of the foundation.
You will also be acting within the environment of your family: siblings, children, in-laws, and new generations. You will need to train family members who may not be knowledgeable about their fiduciary responsibilities with regard to the foundation.
Finally, you will need a strategy that allows you to carry out your hopes and dreams for the foundation.
Resources in this area will help you tackle these challenges for the benefit of your foundation, your family, and the communities you care about.
What are the duties of a trustee with regard to a foundation’s investments? What does it mean to be a steward of charitable assets?
Developing Investment Strategy
How should foundation assets be invested and managed?