Endowments, foundations & charity investment solutions
Ensuring sustainable philanthropy
Each not-for-profit organisation is unique in its mission and approach, as should be your investment portfolio. Your investments should work to provide long-term growth while reflecting what your organisation stands for. This requires a bespoke approach to investment to help ensure that there are no nasty surprises lurking, which can either disrupt your mission or damage your organisation’s reputation.
Embracing and embedding sustainable investment principles into your investment strategy has the potential to help mitigate these risks, while ensuring that you have an eye out for the best long-term investment opportunities.
We believe a sustainable investment approach has the potential to create and preserve long-term capital, align with your organisation’s mission, and help you achieve your objectives. Download our Sustainable Investing Declaration for more about how we approach ESG investing.
Align your portfolio with your missionBy aligning your portfolio with your mission, you clearly demonstrate your commitment and financial support to areas important to your organisation. This involves assessing asset managers, strategies and providers to ensure they are aligned with your objectives.
Identify superior investment outcomesYou may be looking to achieve higher investment returns to help realise your mission and objectives while still maintaining an acceptable level of risk. This strategy also needs to be cost-efficient to help ensure your investments can deliver even more for your mission.
Broad expertise and experienceYou need the right expertise at the right time to navigate complex markets. Because you can’t tackle every issue at once, identifying which areas to prioritise is paramount. Doing so instils confidence in the long-term direction of your portfolio.
Service standardsWhen bringing in advisors and external experts, you need to make sure your portfolio is being monitored with due care. This allows you to focus your time and resources where they’re needed most.
FlexibilityYour portfolio needs the ability to adapt to changing circumstances. This flexibility means you won’t be caught off guard by adverse events and remain ready to take advantage of potential opportunities.
- 1 1. Review your investment objectives
- 2 2. Review your strategy against your goals
- 3 3. Source quality managers and strategies
You should carefully review your objectives and beliefs and assess whether they have changed and how they can be documented. Below are some questions to help guide your review:
- What is your timeframe for investment?
- What return do you need?
- How much do you need to spend?
- At what point does a less favourable market environment impact your ability to grow your capital?
- What are your sustainability goals?
- What positive impacts do you want your investments to have?
- Who are your stakeholders and what do they need? For example, is reporting required?
Align investment strategy with your objectives and beliefs. You should consider having a broad opportunity set available across the full range of asset classes. Traditional asset classes may not deliver the same returns in the future.
Consider how your strategy helps you achieve these goals and assess options if your current strategy doesn't help you achieve them. What strategic asset allocation helps you get the sustainable return you need, allows you to spend at the rate you need and fits with your risk appetite? How can you ensure your investments make a positive impact and are sustainable?
- Is your manager serving you well?
- What do you want to discuss or decide at the board/committee/management team level?
- Are there other ways to invest that may allow you more time to focus on your core mission?
- Do you want more control over your investment decisions?
- Is there sufficient expertise in place to make investment decisions?
Put a pro-active review process in place addressing the above points so that important changes can be implemented when needed.
Advice in action for a large UK charitable trust
It’s not surprising that our clients want to spend more time on their core activities, but investment challenges can get in the way.
One large charitable trust we worked with in the UK wanted to build a longer-term strategy, incorporating sustainability and the ability to fund its grants at the core of the trust’s mission. The trust’s investments lacked diversification and were exposed to potentially significant risk from falling asset prices.
Meanwhile, the trustee board needed to manage the operational aspects of its investments, but its in-house team lacked the resources and expertise to do so.
We worked with the trustee board to develop a clear strategy supporting a sustainable level of grants each year while also seeking to retain the real value of trust assets over the long-term. Together, we implemented a robust, diversified sustainable investment strategy, in- line with the trust’s mission, while helping to reduce risk and position the trust to access potential opportunities.
The strategy was implemented using Mercer’s Investment Solutions platform, which provides access to a wide range of asset classes, including private markets. The new portfolio provided exposure, in a cost-effective manner, to more than 20 asset managers with investment strategies rated highly by Mercer.
Common questions from endowment, foundation and charity investors
The appointment of an outsourced CIO (OCIO), also known as a fiduciary manager, entails the full or partial outsourcing of your organisation’s investment function to a specialist third party provider. Typically, this will make most sense when you have resource-constraints and wish to focus on other things. When delegating certain investment tasks to a third party, you will typically retain some level of fiduciary responsibility and maintain control over strategic asset allocation decisions.
When providing its services, the OCIO should look to understand your organisation and its needs, and have the implementation expertise to execute your strategy quickly, efficiently and in a risk-controlled manner. This is usually done through the pooling of assets, and so enable you to enjoy the benefits of economies of scale through lower fees as well as access to high quality managers.
Although it’s extremely difficult to predict where the next economic shock will come from, it’s important that your portfolio is designed to react to market changes - including being adequately diversified across asset classes and managers. Achieving the right level of diversification requires expertise.
Our research and strategy team of more than 200 dedicated professionals1 constantly monitors our rated fund managers and global financial markets to help you navigate the investment world.
We have been helping clients across the globe integrate ESG2 considerations within their portfolios since 2004. This includes integration, stewardship, thematic investment and screening. We can help you construct a portfolio and strategy to support your organisation’s wider goals.
From an organisational perspective, we seek to embed sustainability across our advice and implementation work. We are a signatory to the United Nations’ Principles for Responsible Investment, and our Sustainable Investment Policy are freely available for you to access to understand more about how we operate in this field.
A commitment to diversity and inclusion is part of our social responsibility as a global company. Diversity is one of our core values and our work in this area centres on a commitment to employees, our clients, and the communities in which we operate.
Our manager research team embeds cognitive diversity into every strategy that they research. However, asset owners have different criteria around identity diversity and we work with them to identify what is most important to them when selecting managers, so they are well placed to help your organisation address this important global issue.
Fiduciary management /OCIOFor 15 years, Mercer has provided fiduciary management services to a range of institutional investors – from pension schemes to endowments, foundations, insurers and wealth managers. Our flexibility, global intellectual capital and manager research help us to deliver for clients.
Investment consultingMercer Investment Consulting is a leader in the UK market. Our investment consultants are equipped with extensive and in-depth global research, intellectual capital and specialist solutions.
Sustainable investmentDrawing on two decades of experience, we offer research, advice, tools and solutions to help you wherever you are on your sustainable investing journey.
Alternative investmentsLeveraging our existing relationships with hundreds of asset managers around the world, we can help you identify and source new investment strategies, opportunities, ideas and innovations across private markets and hedge funds.
Strategic and asset manager researchBecome a member of the MercerInsight® Community today to get access to strategic research from hundreds of thought leaders around the world, including Mercer and third-party publishers. It’s complimentary and easy to join.
Managing investment riskOur Mercer Sentinel team can help you conduct due diligence and mitigate operational risks across your portfolios and strategies. We assess asset managers, custodians and other service providers to help you deliver on your governance objectives.
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US $16.45 trillion in global assets under advisement1
US $345 billion in global assets under management2
More than 12,400 investment strategies rated3
More than 7,000 asset managers rated4
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- As of 30 June 2022
- ESG investing refers to environmental, social, and governance considerations that may have a material impact on financial performance, and therefore are taken into account, alongside other economic and financial metrics, in assessing the risk and return potential of an investment. Thematic investing involves investing with a goal, at least in part, to achieve an impact on an environmental, social, or governance issue, alongside generating return and mitigating risk. As always, the decision whether to invest in ESG-themed options, like all options, must be made pursuant to a prudent process with the objective of advancing the financial interest of the plan and its
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