Staying calm amid market volatility

Navigating volatile markets: A checklist for endowments & foundations

As outsourced chief investment officers (“OCIOs”) for endowments and foundations, we build portfolios designed to support and maintain our clients’ real spending power while taking advantage of their long time horizons. While volatile periods aren’t easy to live through, our goal is to build portfolios to navigate a range of market environments.

Endowments & foundations governance checklist

A key part of our process is to periodically review and ensure our clients’ portfolios are prepared to withstand periods of prolonged volatility. Critical to this process is governance - we have created a checklist to help our non-profit clients revisit their guidelines and investment policies.

✓ Review and confirm your risk tolerance.

It’s easier to be a long-term investor when markets are generally trending up. It may be helpful to speak with your OCIO or consultant to understand what different stress scenarios (for example: persistent inflation, slowing growth) could mean for your portfolio. These discussions can help illustrate the potential implications for asset values, spending needs, and liquidity needs to gauge committee comfort with the portfolios’ positioning.

✓ Review and confirm your rebalancing policy.

Some endowments and foundations use calendar-based rebalance schedules, some use market-value based rebalance schedules, and some use a mix of the two. Regardless of your policy, it may be a good idea to review with your investment committee and either confirm comfort with the current policy or decide on a new plan for rebalancing in the event of continued market volatility. When markets sell off, emotions can run high, so having these discussions in advance may help ensure portfolios can be managed seamlessly during turbulent times.

✓ Review and confirm your spending policy.

Portfolio values, market performance, and realized inflation have all been volatile and changing over the last 18 months. If target spending is tied to the current portfolio value and/or inflation, depending on the time frame or valuation date used, you may be looking to spend a higher or lower amount in the coming months. In addition, in periods of higher inflation, grant recipients may ask for higher amounts to realize their objectives or organizational expenses may continue to tick up given higher wages and costs. Meeting spending needs may be further complicated in the event of a market sell-off if your portfolio has a significant allocation to illiquid investments. Reviewing your spending policy and discussing your expected spending needs may help in the event we continue to see prolonged volatility.

✓ Review and confirm your liquidity needs.

This brings us to liquidity and funding portfolio cash needs. Historically, liquidity needs can become a challenge for some institutions in the event of a sharp market sell-off. You could see margin calls, capital calls, increased need to fund operating expenses from the portfolio, and grant payments due at the same time the portfolio values are depressed. Plus, selling assets after a period of tough performance can lock in losses, making it harder for portfolios to recover. Reviewing in advance and ensuring the portfolio has enough easy-to-access liquidity to meet likely payments and discussing how you might fund those payments in the event of a market sell-off may be beneficial to prevent last minute discussions and decisions.


As long-term investors, endowments and foundations are often well-positioned to maintain their real spending power to enact their missions. Reviewing and planning for potential volatility through a series of simple, deliberate governance checks can help ensure these organizations and their supporting investment committees can continue to focus on their important missions.

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