Why an Endowment? Risks + Rewards
Contributing to an endowment, or to some similar kind of long-term investment fund, can accomplish things that other kinds of support can’t. That’s the good news. But such contributions also place extra demands on both grantmaker and grantee, and not all of those demands are obvious or well understood.
The clearest difference between endowment contributions and other kinds of grantmaking is that endowments are meant to generate income that carries on long after the contributions are made. Thus endowments give a grantmaker the opportunity to support years of activity by making one or two early contributions.
That’s their most noticeable benefit. Less noticeable, though, are the extra responsibilities and risks that go with endowment support. These can be managed and limited, and endowments can be a powerful way to pursue long-term goals — but only if both grantees and grantmakers understand and address the associated financial and management issues well before the endowment is created.
Takeaways are critical, bite-sized resources either excerpted from our guides or written by Candid Learning for Funders using the guide's research data or themes post-publication. Attribution is given if the takeaway is a quotation.
This takeaway was derived from Providing for the Long Term.
