I have the privilege of working with donors who want to be generous and who want to leave a lasting legacy for our community. One of the best ways that donors do this is through an investment in an endowment fund managed by the Community Foundation. An endowment is designed to help a nonprofit organization receive a reliable stream of income each year while allowing the growth of the fund’s assets to create even more income in the years ahead. The great news is that endowments work. Endowments create a permanent pool of capital to benefit a nonprofit and a community... forever.
The chart below gives an illustration of how an endowment at the Community Foundation might work:
If a donor or an organization invested $1 million in our aggressive portfolio on January 1, 2010 and withdrew the five percent under our spending policy each year, on December 31, 2020 that organization would have received $731,965 and that initial investment would now be worth $2,689,414. Of course, past performance does not guarantee future results, but the principles behind endowments remain true. Over a long investment horizon, endowments can provide a predictable stream of income to the community or to the nonprofit organizations that benefit, and the principal will grow over time to create even more income in the years ahead.
At the Community Foundation, that’s why we focus on endowment funds and that’s why our Board of Directors has created special incentives for local nonprofit organizations that want to strengthen their sustainability through endowment. If 2020 taught us anything, it taught us that we need to prepare in advance for the unexpected. When you’re in the midst of the crisis, it’s too late. The same holds true for nonprofit organizations. Those who plan for the future today will have significant advantages to those who don’t.
The Community Foundation believes in the purpose and priority of endowments so much that we incorporate an endowment mechanism in many of our strategic funds, such as the Compass Society. The challenges our community faces won’t go away overnight, and so we need to plan for how to address tomorrow’s challenges through today’s investments.
If you’d like to learn more about how you can support your favorite nonprofit organizations through the use of an endowment fund or if you want to invest in the Compass Society or another of our strategic endowments, I’d love to talk with you.