Investment considerations for endowments and foundations in 2023
It’s important to understand how different scenarios affect your portfolio and overall mission.
Plotting a course through volatile markets
This year has ushered in a combination of interconnected challenges for investors, from geopolitical conflicts to high inflation, supply chain problems to financial market volatility.
Inflation in some developed countries has exceeded 10%, levels not seen in decades. In response, central banks have steadily – and rapidly – increased interest rates to their highest levels in several years.
At the same time, Russia’s invasion of Ukraine has shaken equity markets, with global indexes falling by as much as 25% during 2022 as investors adopted a ‘risk off’ approach. Economic sanctions as well as energy and food supply issues have exacerbated investor concerns, particularly in Europe.
According to Mercer’s survey of endowments and foundations, half of respondents cited higher inflation as one of their two main investment challenges for the next three years. This was second only to concerns about low expected investment returns. In addition, 39% said they were not sure or did not believe that their portfolios were prepared for a market downturn.
If your portfolio has experienced investment losses, it’s easy to be pessimistic and focus on the worst outcomes. While it is prudent to be prepared for worst-case scenarios and ensure that these short-term headwinds don’t affect your organization’s overall mission and spending plans, it is also important not to be caught flat footed and instead ensure that you are positioned to capitalize on compelling opportunities.
To do this, you’ll need information – and plenty of it. Without a clear path over the coming months and years, it is best to explore different scenarios and how they may affect your portfolio, its liquidity, and the ability of your investments to support your organization’s mission and objectives.
We have identified four important strategic issues currently facing E&Fs. In this paper, we introduce approaches to navigate through them to achieve long-term success, while managing short-term disruptions.
Rather than make snap decisions based on market movements, endowments and foundations should take time to assess their strategy, model different scenarios, and ensure they have as much relevant information as possible so they can act when the time is right.
Four areas of consideration for endowments and foundations
Plotting a course through volatile markets
Global Not for Profit Investment Survey findings*
Allocating to alternatives
65% see diversifying away from traditional asset classes as their greatest opportunity over the next three years.
Seeking expert advice
55% of survey participants say they're using external expertise to help navigate this complexity.
Sustainable investments
39% of survey participants believe meeting their ESG investing goals means compromising on returns.
Related solutions
Related insights
Before you access this page, please read and accept the terms and legal notices below.
You’re about to enter a website intended for sophisticated, institutional investors and the information contained herein is not intended for investors who are not qualified purchasers as defined in the US Investment Company Act of 1940. Information about Mercer strategies is provided for informational purposes only and does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities, or an offer, invitation or solicitation of any specific products or the investment management services of Mercer, or an offer or invitation to enter into any portfolio management mandate with Mercer.
Mercer makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. Any person unable to accept these terms and conditions should not proceed any further. Mercer reserves the right to suspend or withdraw access to any page(s) included on this website without notice at any time and accepts no liability if, for any reason, these pages are unavailable at any time or for any period.