San Angelo Area Foundation
Long Term Investment Philosophy
The Foundation was created to provide perpetual income for endowments that benefit charities in the Concho Valley. Careful study was done to determine how best performing foundations invest funds in perpetuity. The board of directors of the San Angelo Area Foundation determined the best practice was to implement an investment policy that would encourage active investment management verses passive investment management.
Active investment management seeks to out-perform certain benchmarks with reasonable risk and expenses. Passive investment management seeks to replicate certain bench marks with minimum expenses. Said another way, do we want to be chasing returns, or do we want to be ahead of the return curve? Is the risk worth the reward?
The Foundation utilizes Mason Companies as its primary investment consultant and manager. Mason over 30 other community foundations in the United States and has a stellar reputation in advising foundations to acheive top quartile performance with a blend of institutional active investment management as well as passive investmenting in highly efficient markets. By constantly tracking and screening the performance and management of our funds, Mason has the ability to act quickly to respond to market needs. The Foundation's investment committee works with Mason, which recommends the following investment portfolio make-up in order to allow the Foundation to distribute 5% each year in grants. This philosophy allows the fund to grow during positive times and increases the fund value over time to protect the value of the investment against inflation and market down turns. At the bottom of this page is the current asset allocation for investments of the Foundation.
Clicking this link, you can see how an endowment fund has performed at the Foundation. The annualized investment return since 2003 has been over 7%.
This philosophy is a method constantly under review by the Foundation's board of directors and its investment committee to ensure the perpetual nature of its funds remains in tact while maximizing total return within the risk tolerance of the Foundation.
The Foundation is also able to work with other investment advisors desired by a donor, as well as the ability to customize an endowment portfolio with different asset allocations.
In achieving the Foundation's objectives, the Foundation's performance objective is to outperform the Policy Portfolio return at a comparable level of risk. This investment objective is expected to be achieved over the long term and is measured over rolling ten-year periods. Peer-relative performance comparisons will also be considered, especially when performance deviates meaningfully from market indexes.
The Foundation's objective is to minimize the long-term risk of diminishing the real value of foundation assets after expenses and the disbursements of grants. In pursuit of this objective, the Foundation will accept the short-term price volatility inherent in using investments, such as equities, which are more likely to achieve high long-term real returns. However, the Foundation will seek to mitigate some of these volatility risks through the implementation of a risk-managed active asset allocation strategy.
The Foundation holds a rebalancing authorization with our investment manager to rebalance the portfolio no less than monthly in order to maintain this allocation.