There are five items to think about when creating your own endowment in addition to the above:
- How much is needed to start an endowment? This is perhaps the most common question and depends on a whole raft of factors such as the amount of capital needed to fund your organization annually, are there any other sources of income to the organization or ongoing income into the endowment (i.e. corporate profits, fundraising), what is the investment profile of the endowment fund, what is the growth/vision of the organization etc.
- What is your risk appetite? And seek out an investment manager who can offer suitable strategies (in terms of historical return and risk)
- Will the endowment be set up within your existing nonprofit organization or will it be a separate organization?
- What are the tax implications and legal implications of setting up an endowment? Speak to your legal advisor, accountant and tax advisor on the most suitable way to structure your endowment.
- What is the public facing rational for your endowment? Some potential funders will question your need for additional funding if you already have a particularly large endowment. Turn it into a positive to show financial stability, professionalism, etc. As with your foundation, proper governance is required, and again a legal obligation in many countries, for the management of your endowment. The Board needs to be a mix of individuals who have experience of the investment side, but also a passion for your cause. You also need to consider transition questions and the legacy of your endowment should the founder no longer be around to ensure the continuation of its intended use.