For many, the term ‘investment risk’ can carry negative connotations. However, higher investment returns are only possible by taking on greater risk. Foundations investing in the long term are able to withstand more risk, and can therefore manage and leverage risk as an opportunity for growth.
In this virtual event, we partnered with Mercer to explore what kind of investment risks foundations and not-for-profits are facing, how they can embrace risk to elevate their long-term investment strategy and the intersection with mission-aligned investing.
The panel included:
- Event moderator Danielle Walker-Palmour, Director, Friends Provident Foundation
- Ben Smith, Head of Social Investment, Esmée Fairbairn
- Elaina Elzinga, Principal in Investments, Wellcome Trust
- Texas Hemmaplardh, Co-Head of US Endowments, Mercer
Here’s a quick summary of the key takeaways from each panellist:
- Taking greater risk generally results in higher investment return over time, therefore not-for-profit investors should align the level of risk in their asset allocation structure to the investment time horizon.
- There is a great opportunity for ‘perpetual capital portfolios to wholeheartedly but carefully and deliberately embrace risk.’
- Mercer’s new 2022 investment survey helps not-for-profits benchmark themselves against other organisations in terms of how they view market trends, asset allocation and risk.
- Historically, Esmee Fairbairn’s endowment has had the sole aim of generating financial returns to enable grant-making; however, in recent years it has moved towards mission-aligned investing.
- Social investment is an ‘impact-first approach’. Impact investing is ‘creating financial returns in lockstep with societal and environmental returns.’ ESG investing is ‘finance-first, but paying some regard to impact.’
- The way risk and return is considered is dependent on the investment area, whether it’s a social investment, impact investment or ESG investing.
- There’s a need to ‘transition to a new approach to finance which recognises the impact of money rather than solely chasing financial returns.’
- Wellcome Trust’s investment portfolio of £38 billion is invested to ‘maximise risk-adjusted returns over the long-term’ with £16 billion committed over the next decade to address infectious disease, mental health and global heating.
- Seventy-five per cent of Wellcome’s investment portfolio is in public and private equities, and achieves high returns by embracing a high level of risk.
- Wellcome don’t have any strategic asset allocation, which brings cultural benefits and allows them to ‘think on a bottom-up basis.’
- Wellcome manages investment risk by diversifying its asset base and keeping an eye on liquidity and inflation rates.
- While not an impact investor, Wellcome strongly consider ESG and sustainability in their investing.
- Last year they launched their roadmap to get their investment portfolio to net-zero by 2050.
Watch the full recording of the event here:
This event was produced in partnership with Mercer. If you would like to discuss this topic in more detail or your broader investment portfolio, and how Mercer may help, please contact Rebecca.firstname.lastname@example.org
Annmarie McQueen is the Marketing, Advertising, and Events Manager at Alliance.