Ron: I hear some rumblings over here. Massey you tend to be a vocal member of the 3rd generation. Speak up. All ideas are welcome.
Corinne: I think we need to forgo this whole holy grail of perpetuity thing and focus on making change. In order to make a difference and serve them better we need to be innovative and opportunistic with our grant making and we need to do that now.
Ron: Thanks, Massey. We’ll start with the issue of going big now as opposed to targeting perpetuity and Kat I’d like to ask you first can you talk about the arguments for and against giving while living.
Kat: There’s a part of that argument that has to do with the financials. How do you structure it, what kind of return is that foundation endowment going to get and how long is that going to last. And I think some of my colleagues from Threshold and other folks in the room can answer that. But there are a whole set of issues that aren’t related to the financials that have to do with whether or not spending now will create more social impact and have to do actually with some issues the family is going to have to wrestle with like the degree of control and who has that control. So you have some families that very intentionally decided that they were going to sunset that foundation at a certain point to ensure that there was control over how those resources were spent. There are other foundations who are tackling broad issues that a lot of people think there’s always going to need to be a player somehow. That’s going to need to vote whether its poverty alleviation or civil rights. They are kind of evergreen issues and in that case some of these foundations have decided one way of another we have to have an agent working on those and by not sun setting we are going to ensure that someone is going to fight that fight beyond the living founders. And that can also help those in the foundation think more long term. So there’s no absolute right/wrong answer to the question of perpetuity but those are some of the issues that families face when they’re trying to determine whether or not to sunset or plan for perpetuity.
Ron: Teresa, tell us how you advise clients who have targeted perpetuity but they’re also targeting mission alignment. How do you reconcile the tension between those two objectives?
Teresa: It’s really a fine balance. It’s an exercise that we have coined as the tug of war. Dealing with how do you maintain perpetuity and these sort of lofty return expectations for these foundations to meet their operations and grant making budgets as well as focus more on mission alignment and in some cases move even further down what we call the spectrum of impact into those ideas that are more impact oriented first and maybe not necessarily market rate of return. This tug of war exercise is pretty interesting and it happened directly with one of our foundation clients. In one corner we had our impact strategist who has advanced degrees in environmental management. In the other corner sparring off with him was our director of asset allocations strategies who has advanced degrees in financial engineering and an FRM. So really what the exercise was is to come together piece by piece over the portfolio and evaluate whether or not we could move more of those pieces toward impact or not. But there were some non-negotiables. Those non-negotiables were about do we maintain the fundamental characteristics of the portfolio, the risk and return aspects, the upside downside kind of capture of markets and then also in line of do we have the asset class diversification and exposures that we were intending to have? And piece by piece they would go through and try to evaluate well can we move this slice? And if we could, because we both had conviction in the strategies and solutions that were present there, as well as this mission alignment, as well as its asset class characteristics the non-negotiables were met make a switch or you know make that allocation changes. In some cases we couldn’t meet all those non-negotiables and in that particular aspect we would go back and reevaluate whether or not a switch could be made. Again this is more of a marathon than a sprint but in a lot of cases we were actually able to migrate a significant amount of the portfolio over in alignment without actually interrupting the fundamental characteristics.