As we move through an unprecedented year, we encourage nonprofits, endowment organizations, and foundations to revisit plans for their investment programs. With this in mind, we have put together a list of five timely best practices that could help your organization prepare for the road ahead.

1. Use cash positioning as a source of liquidity for opportunistic investments.

  • After a long period of record-low market volatility, the global pandemic and subsequent global shutdown/reopening have created historic levels of volatility. Some of this is a function of a structural shift in the underlying fundamentals, but some of it is an acceleration of preexisting trends. In our view, a rising tide doesn’t float all boats, this time.
  • We believe it’s important to stay invested over the long term. That doesn’t mean portfolios shouldn’t be adjusted over time, accordingly. With regard to cash currently held on the sidelines, we recommend seeking opportunities that may surface in the current market environment to deploy this capital tactically.
2. Rebalance to tactical benchmarks – walk, don’t run.
  • We believe now is the time to rebalance to tactical benchmarks in a methodical way. With prices moving significantly as a result of the market drawdown this year, many institutional investors have seen percentage declines of their equity allocation.
  • If portfolio changes are being made in the middle of unprecedented market volatility, those decisions might be made solely based on price. That’s not a disciplined, repeatable investment process, in our view.
3. Reexamine Energy sector and security exposure across portfolios.
  • Much in the same way that we did not expect a global pandemic, neither did we expect to see oil trade at a negative value in 2020. Over the past decade, Energy has been one of the most volatile sectors of the market as it reacts to — and recovers from — a frequent overabundance of supply relative to demand.
  • With this volatility comes the question: Is the volatility appropriate for institutional investment programs and at what levels of risk tolerance? While there is no right answer, we believe it is worth examining on a holistic portfolio level and within each underlying manager in the portfolio. With the volatility in the Energy sector, it is increasingly important to know what you own.
4. Stay “active” within fixed income – you get what you pay for!
  • Given the nuances within the fixed income universe, it is traditionally a very inefficient asset class and has historically favored active management and alpha generation for fixed income managers. The likelihood of this holding true has increased, in our view, as a significant decrease in yield on US Treasuries could push many investors to search for yield into the corporate and other credit-oriented fixed income markets, where astute credit analysis is essential.
  • We recommend focusing on managers with scale and off-benchmark experience. Scale is a key focus, with the economics of trading costs and liquidity favoring large asset bases. Off-benchmark experience allows both for the use of fixed income sectors in the portfolio that are not easily accessible to most investors and for greater diversification.
5. Use this as a time to revisit the role of alternatives in portfolios.
  • In our view, private investments are the epitome of active management, but there are also a wide range of strategies and potential return outcomes. It is important to understand the goal or objective you’re trying to achieve with an alternatives allocation: Is it simply generating outsized returns relative to public markets, or is it providing ballast, defensiveness, and anti-correlation to the rest of the portfolio?
  • When and where practical, we recommend exploring the use of alternative investments in a portfolio.
For more information, contact Henri Cancio-Fitzgerald at
About Us

The Endowment & Foundation National Practice Group builds on our long-standing commitment to philanthropy and is focused on endowments, private and public foundations, and nonprofit organizations. We seek to help these organizations address their distinct investment, distribution and capital preservation challenges.