Why Endowment?
Written by Brandon Allen
Executive Director | Fortify Foundation
When we start to talk about investing, what comes to your mind? Maybe you automatically think of the name Wall Street. Perhaps hearing that term draws your mind to things like stock markets, bonds, and mutual funds. If you have talked to your personal financial advisor recently, it could be that 401k and IRA’s are what comes to mind. The conservative would always be drawn to the word ‘risk,’ whereas the risk-taker thinks of the word “opportunity.” Whatever comes to mind, we all know that investing is important! Proverbs 13:11 reminds us that wealth is not something that we should anticipate over night. It is something that we plan for. Just like anything else in life, we work hard with a specific goal in mind.
I will never forget the summer vacations we had growing up. It was our tradition to travel up to Ohio to visit my grandparents. Every year we could anticipate 2 things, good food (and lots of it), and at least one work project. My grandparents happen to be full-time crop farmers with several hundred acres of land. There was always something on their farm to keep us busy. As I sit back and consider the subject of investing, I realize that the farmer understands this principle better than most. They grasp the implications of Matthew 25 that they can not reap where they have not sown. There are seasons where crops are in abundance and then there are seasons where crops are scarce. Just because there is a season of abundance does not mean that farmers can finally sit back and relax any more than a scarce season means that they have to work that much harder the next season. The farmer continually plants and prepares each year with the goal of reaping in mind. They realize that some years will be better than others and they continue to press on.
As with anything else in life, investments have seasons of ups and downs. This is why we love the concept of endowment! It doesn’t focus on the year to year but rather plans for longevity. It allows our Christian schools to establish a permanent fund that helps achieve long-term capital growth. I am sure we all remember the wonderful economic year of 2008. What words come to mind? Crash. Crisis. Recession. Downturn. Depression. Not words that convey much positive thought.
If you had an investment portfolio, there might have even been times when your hair turned a little grayer or perhaps might have shed a little more. However, it was a learning experience for all of us. We can never rely on just the single moments in time when it comes to investing. If you were to look at the last 20 years as a measure, you still would have expected an approximate 10% conservative return on your money today.
This is why the concept of an endowment is so important. The return that you gain year over year would no longer just be based on the current market’s condition. With an endowment, we will base your spendable balance off of the previous 12 quarters to ensure that your returns are maximized and not as volatile as the market can sometimes be. This allows us to aggregate the benefits of investments over a longer period of time. Can you imagine if we could have applied that same technique to our personal investments? We might have saved a few more of those hairs along the way knowing that there would still be continued distributions regardless of how bad the market may be.
This is what an endowment creates for your school. Additionally, it makes sure that the focus is always on investment and future returns. If we are honest with ourselves, sometimes we struggle with this. Sometimes we might get a whiff of something going wrong and have a tendency to pull out too soon. After all, this is our money we are talking about.
Now just to help understand, I’m not talking about pulling out of a dead-end investment or perhaps even diversifying from a single investment. But we see the nature of adverse change and we tend to leave it altogether. During the 2008 economic crash, there were countless people who decided to cut their losses and pull out their monies.
I read one incident of a particular firm’s client who was adamant that they sell off what they had before the market completely tanked. It just so happened that in the next three weeks the market turned around, producing at 22.02% above his investment (Marotta, 2020). That’s no doubt a time where you wish you could go back and change your decision. Regardless of the fluctuations, an endowment lets us take advantage of those moments in time throughout the life of the fund.
What about donations? Each and every year there is always the worry about how much needs to be raised in order to sustain your current operating budget. On the individual school level, we are continually working to encourage past donors to continue to contribute all the while trying to gain new ones that will support our ministry. Once the money is received, how long does it typically take for that donation to be long forgotten? A week? Month? Year? Have you ever walked around a campus and seen names listed on the side of a building, the back of a pew, or perhaps even a park bench? Some of the great marketers of the past have figured out a way to help create a legacy of past donors.
But even then, the donations of the past may have helped fund a moment in time but are they able to contribute to the continued future? Are those same donations able to help when those projects need additional money to keep going? What if we were to take the same money and ensure a way that guarantees those contributions will continually contribute?
In the short term, we will still need donations to help with immediate projects but we also need donations that help sustain those projects. So, in essence, we have to fundraise again for the same thing twice! Imagine if that donation, or perhaps just a portion of that donation, was made to an endowment. It maximizes the amount and longevity of each donation received.
In other words, those donations made to your fund today will benefit your school from now until Kingdom come! When donors understand this, their typical donation amount will be larger compared to other charitable donations. Why? Because they know that they are contributing to the future of your institution forever. Talk about a change in mindset and opportunity!
This is what we are able to capture with an endowment. It may not fund all your needs today, but it will help fund those needs in the future. This is why Fortify exists. We want to see your school move from striving to thriving!