[Mark_Hager_Forum_Moderator]

Hire professionals? This has at least got to be in the discussion.

I like to manage investment of my own household money. I think I do okay, and I resist all the marketing calls to hire somebody to do it for me. My father-in-law, who has a lot more money than I ever will, DOES hire people to manage his household money. Could I do substantially better if I hired somebody to invest and manage my money? Maybe. Probably. But I’m cheap.

A couple examples make me think nonprofits also can benefit from hiring money people to invest their money (if they’re not cheap).

I’m amid a contract to do some research for the Council on Foundations. One project is to study compensation in grantmaking foundations. I found more than 50 people with salaries over $1 million. More than half of those people have the word “investment” in their job title. The highest several salaries are investment officers. In many cases, investment officers out-earn the foundation president. The nonprofit sector’s money (private foundation corpuses) hires professionals to manage its growth.

The other example is Harvard. That famous $53+ billion endowment throws off $2+ billion each year to fund one-third of Harvard’s operations. They have an office called the Harvard Management Company that’s staffed by serious money people who work daily to maximize the endowment’s value.

I manage my own household money because “it’s not rocket science.” On the other hand, rocket scientists have a lot better chance of getting to the moon than I do.

[Mark_Hager_Forum_Moderator]

This is a nice question. I wonder if the lack of response means that salaries indeed are the one overriding issue here. What else might even be a serious consideration? Rents?

And on the other side of the coin, inflation might drive down some revenues, like contributions from the average donor.

[Mark_Hager_Forum_Moderator]

I think this is a big point. Nonprofits that are willing to make standard investment risks (along the lines that people typically do with their retirement savings) make good returns over time. Nonprofits unwilling to invest more aggressively are stuck around 1% and won’t keep up with inflation.

[Mark_Hager_Forum_Moderator]

Wade: I’d love to hear more about this. Being responsible with money is laudable, but sticking it in a mattress isn’t good stewardship. You’ve found boards really reluctant to invest?

[Mark_Hager_Forum_Moderator]

Thanks to Ruth for posting up that old summary of arguments about endowment building. It has had a lot of staying power since it was first written in 2006… people keep finding it and writing me about it. Since it is just about pros and cons, it stays reasonably current. People show it to their boards when they are debating whether to build it or not. If somebody is strongly on the YES build endowment or NO don’t build endowment side, they might benefit from some introspection about whether to pile up investment capital or not. It’s the internal debate and discussion with others that’s important, I think.

Me? I think that if an organization has the means, then endowment or quasi-endowment is a real asset.