Every month, Foundation Advocate chooses one aspect of foundation investment performance to highlight.
This month we examined at ‘custom’ benchmarks.
Tall for a Jockey, Short for a NBA Player
One thing that has puzzled us is that every foundation that reports their investment performance (sadly there are only a handful that do) seems to beat their ‘target’ or ‘policy’ benchmark, much like the children from Lake Woebegone who are all above average.
For example the James B Duke Endowment (not to be confused with Duke University) noted in 2017 that it’s endowment out-performed its policy benchmark by 2.0% per year for the 10 year period. The Carnegie Corporation of New York also outperformed its target policy by a more modest 1.3% per year over the 10 year period. One might draw the conclusions that Duke’s 2.0% out-performance surpassed Carnegie’s. We don’t think that is necessarily the right conclusion.
There aren’t many foundations that publish their investment performance, and even fewer mention their targets. Two exceptions that serve as beacons of transparency are the Carnegie Corporation of New York and the James B Duke Endowment. One thing that we found interesting was the different approaches that they have taken in choosing benchmarks.
The Willie Nelson Approach
When asked about owning his own golf course, country music legend Willie Nelson said, “the best part is getting to set your own par. See that hole? It’s a par 8. Yesterday I birdied that sucker!”