This article originally appeared at Advisor’s sister publication, Canadian Business.
For 25 years, Malcolm Burrows has been helping charities and foundations with investing, governance issues and everything in between. While it may seem as though giving hasn’t changed much over that time, the way charities grow their assets looks nothing like it used to.
Burrows got his start in the communications department at the University of Toronto; he’d wanted to be a journalist but found a job in public relations for the university’s foundation, then just getting off the ground. That put him on the front lines of fundraising. Endowments, he soon recognized, were a growth industry. With a family history of charitable work—his mother ran two United Way agencies—he realized philanthropy was his calling.
It was a simpler time. Two decades ago, 100% of a foundation’s assets would be invested in fixed income, says Burrows. As bond yields began to fall, stocks were added. There was a point when a 60% to 40% bond-to-stock balance was common, but since the last recession the asset mix has flipped. Now it’s common to see 65% of a foundation’s funds in equities, and that could continue creeping up, says Burrows, who served as the director of gift planning at both the Princess Margaret Hospital and SickKids foundations.
While equities can provide greater rewards, they add more risk to a portfolio. During the 2008 market crash, many charities lost money. Because of a rule that stated a charity cannot distribute any of its principal for 10 years, many couldn’t dole out money in those down years. That law changed in 2010; now foundations with $100,000 in assets can pay out up to 3.5% of their funds per year, regardless of performance—but most don’t want to eat into their capital.
Read the full story at Canadian Business.