[Foundation-l] Thinking for the Future

[Robert Rohde]

On Wed, Mar 26, 2008 at 4:31 PM, Geoffrey Plourde <geo.plrd at yahoo.com>
wrote:

> The Foundation really should start thinking for the future. I noticed that
> a couple people were talking about an endowment. For the WMF, what would a
> endowment require?
>
>

The Wikipedia endowment article says large endowments will usuallly realize
a time averaged rate of return of ~10% (before inflation), so to generate 1
million dollars per year towards the budget you'd need to set aside at least
10 million dollars for investment.  (In practice, endowments often reinvest
1/2 their gains, so the actual target income is often closer to 5%.)

While I don't think there is anything wrong with setting 10% or so of the
budget towards an endowment or long-term contigency, accumulating enough
capital to make it useful as an investment vehicle will take a long time.
In addition, for growing organizations, it often makes more financial sense
to spend money towards projects that will increase revenues.  For example,
in the early going one would certainly expect to be able generate much more
than a 6% return for each dollar spent on fundraising initiatives.

-Robert Rohde