Carowinds vs. Cedar Point
Written by Brandon Allen
Executive Director | Fortify Foundation
I don’t know about you, but I love roller coasters! Old ones, new ones, wooden ones, metal ones, ones that go upside down, side to side, corkscrew, you name it and I would be happy to ride it! As a kid, our closest theme park was Carowinds which borders South and North Carolina. It was the best place to be during summer break if you had asked me during my middle and high school years.
One year they opened up their latest and greatest ride which they named Top Gun. Back then they were a little more lenient when it came to finding seats on rides, so long as no one else was in that particular line. My friends and I took full advantage of it and managed to ride back to back 13 times without having to wait for the next set of cars to come up. That was truly my all-time favorite ride as it was the tallest and fastest ride I had ridden up to this point.
Then I was introduced to Cedar Point in Sandusky, OH. This particular theme park was Carowinds on steroids! Every ride was a bigger and faster version of what I had previously experienced. They consistently held records as having the best rides throughout the U.S. When they came out with Dragster, it was the tallest roller coaster in the world at 420 feet with speeds reaching 120 mph in a total ride time of 17 seconds. This may sound a little crazy but I waited in line for 2.5 hours to ride that 17-second ride for the first time. In the end, I can honestly say it was worth it! Going back to Carowinds was never the same after that first visit to Cedar Point. Every ride, while still enjoyable, paled in comparison.
So what’s the point of this information? Investments are a lot like roller coasters. It can most certainly be a wild ride of ups and downs with the hopes that there is more of the former rather than the latter.
Unfortunately, it’s the nature of these ups and downs that can often deter people from investing altogether. After all, we most certainly don’t want to take any chances of losing the hard-earned money that God has entrusted to us. As a Christian Foundation set up specifically to benefit Christian education, we completely understand! We want to help ensure every school gets the best benefit for their long-range fund. This is why it’s so important to have a professional investment strategy to maximize the potential of your returns and minimize the impact of potential loss. While there is no perfect formula that exists in all circumstances, the key is to set definitive parameters for both diversity and flexibility.
The stock market is typically the place of investment that can create the greatest returns. The problem is that it also can provide the greatest vulnerability as well. Fixed-income investments afford a more secure alternative but it doesn’t typically produce the greatest returns. Finding a good balance between these two can often be challenging in order to make the greatest progress in your portfolio. This doesn’t even account for other alternative investments such as private equity, global real estate, commodities, and other diversified funds. It’s kind of like going to a theme park, you may have a preferred ride but at the end of the day, it’s the combination of options that completes the experience and provides the greatest smiles (aka returns).
The beautiful thing about how our foundation sets up school funds is that we are focused on the long-term sustainability of your school. While there will most certainly be periods where investments are on the downturn, the nature of your fund doesn’t stop or end there. A short roller coaster can provide an immediate thrill but may make you feel cheated when it’s all over and done with. (By the way, this is why I am not a fan of state and local fairs that charge an arm and a leg for single rides). The longer the ride, the greater the opportunity for guaranteed returns. But here’s the thing, we must be in it for the long haul. That’s the wonderful thing about endowment funds! It provides a long-term strategy that experiences the ups and downs but ultimately ends up ahead.
The endowment world is nothing new. Colleges / Universities have been taking advantage of this sustainable strategy for decades. Here’s the thing, there is a natural correlation on both the size and length of the endowment creating greater growth returns. In other words, in this case, bigger is truly better! (unlike that king-size snicker bar that so easily impacts the waistline). The bigger the endowment the greater opportunity for returns and greater stability in the overall investment. Statistically, universities that have tens of billions of dollars in endowment have experienced a 10-year historical return of 9.4% in overall fund growth.* Not too shabby compared to the average portfolio. Some of this comes from the ability to create returns through those alternative investments that only larger accredited institutions can take advantage of.
Partnering with our foundation automatically starts your school’s fund with a high-level institutional strategy through a component fund. This allows your school to become a part of multi-million dollar investment strategy from inception. In other words, the decades and decades of building your own internal endowment to get to this point has already been accomplished. Historically, our investment strategy has created an 8%+ return in that same statistical period giving us a good competitive edge to even an Ivy League school! This is like moving from a Carowinds to a Cedar Point theme park. Again, bigger is better! Or you might have heard the phrase credited to Max De Pree, “we can accomplish more together than we can alone.”
But what about when the economy is no longer working in our favor? Apart from further diversification, we as a foundation have made sure to account for that in the overall spendable balance of your fund. Rather than taking the hit in any given year, we have set up your balance to be pulled from the previous 12 trailing quarters. In other words, once your fund reaches the 3-year mark, the spendable amount will be based on what has taken place prior to help ensure you get a solid consistent return even in the most difficult of investment times. Unfortunately, the Dragster at Cedar Point has officially closed since. In reference to our analogy, even though one roller coaster might be down, there are plenty of others to ensure an overall positive experience. This is the benefit of taking advantage of a larger institution like Fortify Foundation that specializes in endowment versus the local institution that serves your needs a la carte.
So what is your current strategy for the future? What efforts have you made to create further sustainability for your school? We would love to help develop a strategic plan that could benefit your school from now until Kingdom come!
*According to 2021 NACUBO-TIAA Study of Endowments