Endowments and foundations often feel challenged in their ability to generate sufficient returns to satisfy their cashflow needs. Indeed, over the past two decades, such investors have faced a series of market stress events, including the bursting of the tech bubble, the global financial crisis (GFC), the COVID-19 pandemic and most recently the geopolitical conflict in Eastern Europe. Liquidity events often occur during times of increased market volatility. It can be difficult to trade certain asset classes, access funds, rebalance portfolios and meet cash flow requirements. Each event provides a reminder about the importance of liquidity management.
This paper aims to explore the common cashflow challenges encountered by endowments and foundations, and the key factors considered when planning their investment strategy. Further, we discuss how endowments can proactively prepare to address liquidity issues despite the uncertainty as to when and how they might actually occur. At a minimum, we believe that it is essential for endowments to perform regular “health checks” on their portfolio’s liquidity and spending frameworks.
Key themes discussed in the paper:
| Title | File Type | File Size |
|---|---|---|
| Liquidity management and spending frameworks for endowments in times of stress | 1.5 MB |
