Type: Article

Executive Summary

• Holdings transparency is essential to TIFF’s equity investment process.
• Security-level holdings reveal portfolio factor exposures.
• They allow TIFF to isolate managers’ idiosyncratic stock risk from factor risk, illuminating manager value-add.
• Granular holdings data enables precise portfolio construction and risk management.
• TIFF utilizes these elements in portfolio construction, risk management and manager selection.

Overview

For the marketable equity allocations, one of the most important portfolio analysis views is provided by security-level holdings. For most of our marketable equity managers, TIFF receives security-level detail, meaning what stock is held and at what size. This information is in addition to traditional exposure reports most managers provide. This level of detail allows TIFF to have a more robust and accurate view of our portfolio and to manage our exposures appropriately. The multi-dimensional, timely detail inherent in holdings is critical to TIFF’s risk management and equity portfolio construction approach.

Why are holdings so important? There are three key reasons:

1. Granularity & Specificity: Holdings tell us the magnitude and sources of exposures at the most granular possible level.
2. Idiosyncratic Risk Identification: Active managers’ specific stock views are the primary source of value in TIFF portfolios. The only way to identify and measure the individual risk and impact of these individual positions net of their generic factor exposures is to know the positions in detail.
3. Actionable Risk Management: Knowing detailed manager holdings enables TIFF to manage portfolio risk with passive exposures and hedges with more efficacy and precision, and with less chance of overlooking an important exposure or of inadvertently offsetting managers’ specific stock views. Tracking the performance of individual stocks allows us to track these factor exposures in near-real time without having to rely on manager updates.

1. Granularity & Specificity

Security-level holdings allow us to understand our exposures, both magnitude and sources, at the most granular level possible. TIFF works with its managers to get holdings level data beyond the traditional exposure returns, allowing TIFF a better understanding of those exposures. Granularity below the summary level matters, sometimes very much.

Active equity managers will generally provide summaries of portfolio exposures at the regional level (e.g., US, EAFE, EM) or sector level (e.g., healthcare, IT). They may bucket market capitalization in broad categories (e.g., mega, large, small cap). To the extent they track style factors, the information they share is generally qualitative (e.g., “overweight growth”). Style factors are security-specific characteristics, such as Value (price:book), Profitability (profit:revenue) or Momentum, that help explain risk and return of a stock.

Case Study: Sector Distinctions that Matter

These kinds of industry-level distinctions are significant more often than not.

• Healthcare comprises both large cap value-like pharmaceuticals (J&J, Pfizer), and small cap volatile biotech. It is one thing to have no net exposure to either industry and a very different thing to report no net healthcare exposure while being 5% overweight biotech and 5% underweight pharma.
• Both software and semiconductors are components of IT, recently displaying dramatically different behaviors.

Case Study: Style Factor Decomposition

For style factors, granularity illuminates how a given factor is arising. Style factors are defined on a spectrum comparing a given portfolio’s exposure to the average exposure of the full equity investing universe. A style such as a Profitability overweight can arise via larger holdings in stocks that are more profitable than average or, instead, via underweights to unprofitable stocks. These are very different portfolio constructions that look the same at the qualitative “overweight Profitability” level.

2. Idiosyncratic Risk Identification

TIFF primarily aims to add value by identifying and investing with active managers that take idiosyncratic risk, risk over and above the factor risk inherent in their portfolios. A number of such TIFF managers take a “fundamental” approach, characterized by concentrated portfolios of stocks with relatively long-term investment theses (i.e., not high-frequency trading strategies), each of which is selected to deliver outperformance vs. similar stocks with similar factor profiles. The only way to understand the portfolio’s sources of idiosyncratic risk and their performance is to analyze these at the individual stock level.

Even among very similar stocks the differences in ex-ante risk and ex-post performance can often be dramatic. Although Nvidia and Analog Devices are both larger cap semiconductor designers, there has been a massive difference between these stocks over the past few years. This year, there has been extreme dispersion between AI “winners” and “losers” within the software industry.

Absent holdings data, it is very difficult to tell how effectively fundamental managers are taking idiosyncratic risk. While they will generally manage to self-selected benchmarks such as the S&P 500 (SPX), or even much more specific ones such as the NASDAQ Biotechnology Index (NBI), they will generally take on factor risks with respect to these benchmarks. Without knowing their factor-driven performance we cannot identify their idiosyncratic performance. Even if a manager were to report total idiosyncratic performance, we are very interested in the details. Did a manager rely on a single Nvidia-like outperformer? Or did they generate idiosyncratic alpha across their portfolio?

Longer term, the factor postures and idiosyncratic risk efficacy of our managers are critical to understanding whether a manager is adding value and whether we maintain, upsize or redeem our positions.

3. Actionable Risk Management

The detail we get from holdings only really matters if it is actionable. We use this information to fine-tune our portfolio factor exposures through a few techniques including:

• passive ETF exposure
• custom baskets of individual stocks, designed to offset any unwanted factor exposures at an equally granular and timely level. Knowing our managers’ intentional idiosyncratic risk-generating stock selections, we exclude any such overweighted stocks from our custom factor hedges to avoid inadvertently negating managers’ views.

Where Holdings-Level Doesn’t Matter

We are equally careful not to overuse holdings information. Alongside fundamental managers, we intentionally allocate to “systematic” managers (including multi-manager portfolios). These strategies are characterized by much more diversified portfolios with many more individual stocks and are also often characterized by higher-frequency trading strategies. Many systematic managers are not seeking to generate idiosyncratic risk via fundamental stock analysis but rather via proprietary strategies that take advantage of factor-like characteristics that are different from the common factors that we concentrate on in our factor analysis.

Knowing the holdings of these strategies does not help us; but, critically, we know that these managers carefully manage their traditional factor exposures. That means that if they say they are managing to a benchmark such as SPX or NBI, we can count on them to match the factor exposures of that benchmark. We can then confidently use the benchmark’s holdings as a proxy in our holdings-based factor analysis. We can also confidently ascribe all their performance vs. that benchmark to idiosyncratic risk. In this way, we appropriately combine holdings detail across different types of managers in our analyses and portfolio management.

Holdings-Level Detail Matters

Holdings detail is central to our equity portfolio management. Whether via fundamental manager individual stock holdings or very reliable proxies for systematic managers, we rely on it and would feel partially blind without it — to the extent that this information is a prerequisite for inclusion in our portfolios. We use it to efficiently and effectively construct portfolios with only the factor exposures we seek, minimizing unwanted, unproductive factor risk. In doing so, we allocate more of our risk budget to productive idiosyncratic risk, the area where our managers differentiate themselves and add value.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• Private foundations are sustaining payout levels well above the 5% minimum, supported by recent strong market performance.
• However, forward-looking return expectations are moderating, while multi-year grant commitments remain elevated.
• This is forcing foundations to reassess the strategic questions around short-term grantmaking and long-term sustainability of the foundation assets.
• TIFF analysis highlights long-term purchasing power erosion, not short-term liquidity, is the major risk for foundations.
• Foundations should periodically reassess and scenario test portfolio return expectations and grantmaking plans and flexibility to ensure sustained long-term mission capacity.

The Current Environment: Capacity Has Expanded, But So Have Commitments

Recent data from the 2025 Report on Private Philanthropy indicates that private foundations paid out approximately 7.1% of assets in 2024, well above the statutory 5% minimum requirement.1 At the same time, many foundations continue to emphasize multi-year, targeted grant commitments that extend support and obligations several years forward.

This environment has been shaped by several years of strong public market returns. Asset growth has supported elevated grantmaking and, in many cases, longer-dated commitments. Boards appropriately leaned into mission impact.

However, forward-looking capital market assumptions are more measured than the realized returns of the recent past. For boards and investment committees, the key question is not whether foundations can afford elevated spending today, but whether it is sustainable across a full market cycle.

Structural Trade-Off: Real Return vs. Spending

At its core, sustainability is a function of basic arithmetic. For a foundation to preserve its purchasing power over time, the portfolio’s long-term return must cover both the spending rate and inflation. However, if spending plus inflation exceeds the portfolio’s long-term return, purchasing power will erode over time.

This erosion can be difficult to detect in certain environments, particularly during steady or rising markets. In these conditions, the impact may appear modest. Portfolios may continue to grow in nominal terms, while their real value (e.g., adjusted for inflation), and therefore future grantmaking power, slowly declines.

The dynamic becomes more consequential when market declines coincide with elevated spending and fixed multi-year commitments.

The most challenging scenario occurs during a material drawdown, when several forces compound at once:

• Asset values decline.
• Grant commitments remain fixed in dollars.
• The effective payout rate rises as a percentage of assets.
• The capital available to compound in recovery is permanently reduced.

Liquidity Isn’t the Risk—Erosion Is

Modeling representative private foundation portfolios under base case and stress scenarios shows a consistent pattern. Even when obligations remain fully fundable, maintaining elevated spending through a significant market decline materially accelerates long-term real erosion.2

The risk facing many foundations is not an immediate liquidity shortfall. It is the amplified long-term cost of maintaining fixed withdrawals during periods when assets are temporarily impaired.

Key Considerations for Boards and Investment Committees

As foundations navigate a normalizing return environment, several considerations may warrant renewed attention to ensure that mission ambition and portfolio capacity remain aligned across a full cycle:

• Alignment between spending and forward-looking return assumptions
  Is the current payout level supported by long-term real return expectations rather than recent experience?
• Interaction between commitments and portfolio behavior
  How would a material market decline affect effective withdrawal rates given existing multi-year obligations?
• Flexibility within grantmaking
  What portion of spending is structurally committed versus discretionary, and how clearly is that flexibility defined?
• Reassessment framework
  Have conditions been articulated in advance under which spending or portfolio risk tolerance would be revisited?

Conclusion

Private foundations have benefited from a period of strong market support. As conditions normalize, elevated payout levels may remain appropriate, but their durability depends on deliberate alignment with long-term real return capacity.

The most resilient institutions are not those insulated from volatility. They are those that define in advance how spending, commitments, and portfolio risk tolerance interact so that decisions made during periods of stress are disciplined rather than reactive, and long-term impact is not unintentionally impaired.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

In FY25, the NBOA-Commonfund Benchmarks Study of Independent Schools reported annual returns of 11.5% across the peer set, bringing 10-year average returns to 7.7%. Independent schools remain concerned about budget headwinds from both inflation and enrollment pressure, despite strong market performance helping to increase operating budget support from the endowment and a moderate increase in annual gift budget support. Donor trends appear to be shifting, with major gifts becoming increasingly concentrated among a smaller group of donors. OCIO usage continues to increase, in part as a solution to budgetary pressures and increasing portfolio complexity.

Key themes from the report include:

• Strong Investment Performance: Investment performance remained strong in FY25, with an average annual return of 11.5%, modestly below FY24’s 12.3% but still well above long-term returns for most institutions (average ten-year return is 7.7%). Size-based performance differences have reversed again, with larger endowments outperforming smaller endowments after smaller endowments outperforming FY23-24. Smaller endowments under $10M returned 10.9% in FY25, trailing the $10M–$50M and $50M+ cohorts at 11.6%. Over a three-year horizon, the smallest cohort outperformed, returning 12.7% versus 11.2% and 11.1% for the $10M–$50M and $50M cohorts, respectively. These performance shifts predominately reflect allocations of public vs. private equity, with larger endowments typically having larger allocations to private assets.
• Operating Budget Support from Endowments Increased while Spending Rates Remained Steady: Institutions are increasingly relying on endowments to support operating budgets (total average 7.1% in FY25 vs. 6.4% in FY23), even as total average stated spending rates have remained steady at 4.3%. This implies that the growth in operating budget support from the endowment is driven by strong investment performance rather than increased spending. This trend is most pronounced among the $50M+ cohort, where operating support from endowments rose from 7.8% in FY23 to 8.5% in FY25. While the short-term trends have increased, they remain below the 2000s when both spend rates and operating budget support from the endowment were higher.

NBOA Stated Spend Rate and % Operating Budget from Endowment (FY05-FY25)

• Increase in Annual Giving Budget Support: Operating support from annual giving has also moderately increased over the past three years (6.8% in FY25 vs. 6.5% in FY23), particularly in schools with the largest endowments. Similar to endowment support, the increase in annual giving likely reflects strong market performance, as donors tend to give more during periods of investment gains.
• Donor Trends Shifted: While overall gifts (annual giving or endowment) vary from year to year, there is a clear trend that a majority of gifts are coming from fewer donors. Historically, 80% of donations came from 20% of donors, whereas now roughly 90% of donations come from just 10% of donors. Institutions are also seeing a continued shift toward restricted gifts, as donors are more focused on the impact of their gift. Despite the increase in dollars, median gifts per student have remained relatively stable. Fundraising remains a top concern for schools.
• Increased OCIO Involvement: Use of OCIO providers by secondary schools continues to expand, regardless of endowment size. As independent schools face operating budget pressures and constrained resources, the investment landscape becomes increasingly complex with the operational needs of alternatives, regulatory changes, and increased market volatility. OCIO providers can provide access to constrained investment opportunities and diligent risk management, freeing up time for investment committees and business offices.
• Inflation and Enrollment Headwinds Persisted: Enrollment continues to be the top concern facing secondary schools, especially those with endowment assets under $10M. Demographic shifts are contributing to student population declines. However, enrollment declines disproportionately affect New England, New York, and New Jersey while the rest of the country experiences enrollment increases. Additionally, inflation remains a challenge, increasing operating costs and placing additional strain on budgets already more reliant on endowment and gift support.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• Corporate activity contracted materially in 2022 as rising interest rates, valuation uncertainty, and heightened regulatory scrutiny made deal execution prohibitively difficult and often unattractive.
• By late 2025, those constraints began to ease; financing conditions stabilized, market confidence improved, and long-deferred strategic expansion began moving back onto boardroom agendas. M&A and IPO activity began to recover.
• We view 2025 as the early phase of a broader normalization, supported by a strong pipeline of deferred transactions and increasingly favorable market and regulatory conditions.
• Historically, such environments have favored event-driven strategies, particularly merger arbitrage and equity capital markets managers.
• Recognizing these dynamics, TIFF increased exposure to event-driven strategies through allocations to merger arbitrage and equity capital markets managers.

“We are optimistic about the outlook for equity and debt underwriting, particularly amid the resurgence in the IPO market and higher acquisition finance-related activity.”
— David Solomon, Goldman Sachs CEO at Q4 2025 earnings period

A Shift in Corporate Sentiment

During the Q4 2025 earnings season, corporate commentary shifted meaningfully with renewed enthusiasm around M&A and equity capital markets: a dealmaking renaissance. After several years of constrained activity, corporates are now eager to act. We see early signs of recovery in 2025 across mergers and equity capital market issuance, creating conditions that have historically favored event-driven strategies. To understand the significance of this shift, it is helpful to revisit what caused the slowdown.

The 2022 Reversal

Prior to 2022, deals were elevated across both M&A and equity capital markets. Following the initial COVID shock, extraordinary monetary and fiscal stimulus drove interest rates to historic lows and sharply reduced the cost of capital. IPO issuance and M&A reached record levels in 2021, supported by strong equity markets and abundant financing. For event-driven managers, the opportunity sets were broad with low closing risk. According to HFRI, event-driven strategies were among the best-performing hedge fund categories in 2021.

Conditions changed abruptly in 2022. Inflation surged, prompting one of the fastest monetary tightening cycles in decades. At the same time, heightened regulatory scrutiny extended review timelines and increased deal uncertainty. This deadly combination materially weakened business confidence and reduced corporate willingness to pursue transactions.

Global IPO issuance fell by roughly 70–80%,1 while M&A volumes declined 40–50% from prior peaks.2 As transaction activity slowed, opportunity sets narrowed and event-driven strategies faced a challenging backdrop.

Early Signs of Recovery

After several years of limited IPO and M&A activity, material pressure began to build beneath the surface, and a substantial backlog of high potential transactions accumulated. As of late 2025, more than 1,300 unicorns3 remained held within private equity and venture capital portfolios.4 Prolonged holding periods increased pressure on private equity sponsors to unlock capital and realize IRRs, while venture-backed companies faced growing urgency to secure long-delayed liquidity events.

By 2025, several headwinds that froze corporate activity began to ease:

• Interest rates stabilized, reducing uncertainty around financing costs.
• Equity markets recovered, restoring confidence in public market exits.
• Corporate balance sheets strengthened, supporting renewed management confidence in strategic decision-making.
• Regulatory review processes became more predictable, improving visibility around deal execution timelines.

Boards and sponsors shifted from “wait-and-see mode” to careful execution with optimism. In 2025, both M&A and equity capital markets rose ~40% year-over-year in dollar terms5 6 with broad-based recovery across sectors and geographies. Strategic transactions led the rebound as companies repositioned for growth, with artificial intelligence serving as an additional catalyst for large-scale deals.

As transaction flow resumed, event-driven opportunity sets expanded accordingly. Event-driven performance recovered alongside activity, with the HFRI Event-Driven Index returning approximately 11% in 2025.

We view 2025 not as a short-term rebound, but as the early phase of a broader normalization. Financing conditions have stabilized, business confidence is restoring, regulatory review processes have become more predictable, and the backlog of deferred transactions remains substantial. In our view, the recovery reflects a return toward the long-term growth trajectory that preceded the disruption.

Why This Matters for Event-Driven Strategies

Event-driven strategies are designed to capitalize on corporate activity. As transaction volumes expand, opportunity sets broaden meaningfully. Recognizing these dynamics, TIFF increased exposure to event-driven strategies through allocations to merger arbitrage and equity capital markets managers.

Merger Arbitrage Strategies

Merger arbitrage strategies seek to capture the spread between a target company’s trading price and the offered price in a merger transaction (deal spread).

Higher deal volumes expand the investable universe, allowing managers to be more selective and better diversified across deals. Improving confidence in deal completion and more predictable regulatory timelines can reduce downside risk and shorten holding periods.

While increased competition has narrowed spreads in parts of the market, disciplined managers with strong deal selection, risk management, and portfolio construction remain well positioned to participate across a broader and more active opportunity set.

Equity Capital Markets Strategies

Equity capital markets (ECM) strategies seek to capture deal-specific alpha by providing liquidity across primary and secondary issuance, including IPOs, follow-ons, block trades, and convertible securities.

ECM managers are positioned to benefit from a growing pipeline of transactions and increased issuance frequency. Experienced managers often engage with issuers well ahead of market reopening, working alongside management teams and underwriters on positioning, investor messaging, and deal structuring. These long-standing relationships and preparation can translate into improved access and more attractive allocations as issuance resumes.

Portfolio Diversification Benefits

Importantly, both strategies tend to exhibit low correlation to broader hedge fund strategies. Returns are driven less by market direction and more by deal structure, execution, and corporate decision-making, offering meaningful diversification benefits within a multi-strategy portfolio.

Positioning for a Multi-Year Normalization

Our objective was not to time a short-term rebound, but to position the portfolio for a sustained reopening of corporate activity.

We believe the recovery that began in 2025, supported by stabilizing financing environments, a more predictable regulatory backdrop, and a substantial pipeline of deferred transactions, represents the early stages of a multi-year normalization.

As transaction flow continues to rebuild, event-driven strategies are positioned to benefit from an expanding opportunity set across mergers and equity capital markets.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. There is no guarantee that any particular asset allocation or mix of strategies will meet your investment objectives.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• Transformational capital can significantly accelerate mission impact, but without discipline, it can introduce governance, financial, and strategic risks.
• A concise, investment-focused framework can help nonprofit boards and staff prepare for large gifts and steward them responsibly.
• Transformational gifts should be treated as balance sheet events, not just programmatic opportunities.
• This four-principle framework emphasizes governance readiness, capital discipline, investment and spending alignment, and long-term mission integrity.
• When applied together, these disciplines help convert generosity into durable mission outcomes.

Context: A Framework for Transformational Gifts

An unprecedented transfer of wealth is underway, accompanied by a growing prevalence of large, often unrestricted, gifts to nonprofit organizations. While transformational capital can significantly accelerate mission impact, it also introduces governance, financial, and strategic risks if not managed with discipline.

This article offers an investment-focused framework to help nonprofit boards and staff prepare for large gifts and steward them responsibly as balance sheet events, not just programmatic opportunities.

Principle 1. Governance Readiness Before Capital Arrives

Institutional and Fiduciary Preparedness

Sophisticated donors increasingly seek evidence that an organization is ready for capital, not merely in need of it. Readiness is demonstrated through clear strategic priorities, transparent financial reporting, and thoughtful articulation of how unrestricted funds would advance mission impact.

Equally important is governance capacity. Large gifts magnify existing strengths and weaknesses. From an investment perspective, they often require boards to oversee meaningfully larger and more complex balance sheets. Boards must be prepared to make higher-stakes fiduciary decisions related to risk, liquidity, and time horizon. Organizations anticipating significant gifts should ensure audit, finance, and investment oversight structures are clearly defined, active, and appropriately resourced.

Principle 2. Capital Discipline After the Gift

A Deliberate Strategic Pause

A common post-gift pitfall is moving too quickly into spending or expansion. The best practice is to impose a deliberate pause — often 90 to 180 days — before major commitments are made. For boards, this pause allows time to evaluate how new capital should function on the balance sheet before committing to investment or spending decisions. This period allows organizations to document donor intent, update policies, and conduct scenario and stress testing before capital deployment.

Capital Allocation Policy

Before determining how funds are invested or spent, boards should adopt a capital allocation policy that explicitly addresses:

1. Permanence: What portion of the gift is permanent versus time-limited?
2. Time Horizon: Over what period should the capital be deployed or preserved?
3. Risk Tolerance: What financial and operational risks are acceptable in pursuit of mission goals, and how do those risks interact with existing revenue variability and reserves?

Separating capital allocation decisions from annual budgeting helps preserve strategic clarity and long-term discipline and creates a clearer foundation for investment and spending policy design.

Principle 3. Investment and Spending Considerations

Beyond the Traditional Endowment

Large gifts do not automatically imply permanent endowment. Many organizations benefit from hybrid structures such as board-designated endowments, time-limited capital pools, or multiple investment sleeves with differing objectives and liquidity needs. These structures allow organizations to align investment risk, liquidity, and spending expectations with the role each pool plays in supporting the mission.

The appropriate structure depends on mission volatility, revenue stability, and organizational capacity to govern increasingly complex investment programs.

Investment and Spending Policy Alignment

A larger asset base warrants a re-examination of the Investment Policy Statement, including risk tolerance tied to mission variability, liquidity needs, and governance procedures appropriate to scale. As assets grow, informal practices often need to be replaced with clearer delegation, monitoring, and decision-making frameworks.

Spending policies should likewise reflect the organization’s absorptive capacity rather than default market norms, with phased or dynamic spending approaches often better supporting sustainable impact and protecting long-term purchasing power.

Principle 4. Protecting Mission Integrity Over Time

Managing Financial, Cultural, and Reputational Risk

Transformational gifts can alter organizational culture, incentives, and public perception.

From a balance sheet perspective, boards should consider concentration risk, sensitivity to investment performance, and the long-term effects of relying heavily on a single pool of capital. Transparency should emphasize accountability and learning, rather than performative reporting.

Conclusion

Transformational philanthropy presents a rare opportunity to strengthen nonprofit impact and resilience. Organizations that pair generosity with disciplined governance, clear capital allocation and investment policy frameworks, and thoughtful investment strategy are best positioned to translate large gifts into enduring mission success.

How We Help

At TIFF, we partner with nonprofit boards and executive teams to prepare for, receive, and steward transformational gifts with confidence and discipline. We help organizations answer the most consequential questions these gifts raise:

• How should this capital function on the balance sheet?
• What level of investment risk and liquidity best supports the mission?
• How should spending and governance evolve as assets scale?

This work focuses on capital allocation strategy, investment and spending policy design, and governance readiness, helping organizations make well-governed decisions that honor donor intent while protecting long-term institutional integrity. TIFF’s investment expertise and educational resources are designed to support nonprofits as their balance sheets — and fiduciary responsibilities — grow in complexity.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.