COVID-19 and Trusts, Foundations, Endowments, and Program Related Investments

March 19, 2020 | We were not fully prepared for this; not one of us had a COVID-19 toolkit in our desks. On the investment front though, some are better prepared than others. Financial professionals are expected to be able to manage investment volatility. Schooled (and ideally, experienced) in dealing with rapidly-changing markets, it is their job to objectively deploy their tools, talent, tactics, and research.

Leaders of mission-oriented organizations and nonprofits, whose primary focus is other than solely generating financial returns, and who are seeing the precious financial assets of the organization at risk, are in an entirely different position. Money at risk means people are at risk, and that is another matter entirely. This piece is for you, and my heart goes out to you.

What’s Happened So Far

The S&P Stock Index, which is a widely used measure for the investment markets, has been positive for nearly every year of the past decade. The abrupt change from this relative calm to the roller coaster of big swings in daily returns are a shock to the system, psychologically as well as empirically.

Data Source: MacroTrends

Here’s how this information looks in a different format, and with a few more years added to it.

Data Source: MacroTrends

Now we can see clearly the gut-wrenching drop in the market that took place from 2007 through 2008 as well as the rebound in 2009, and the extended recovery. It also shows the market drop we’re experiencing now. As of market close on March 18th 2020 the US Equity markets have rolled their most recent gains back to 2016, officially erasing the “Trump Bump.”

In the most recent market downturns (1987, the DotCom bubble and the Great Recession) the equity markets have behaved in a pattern similar to what you see here in ’08-’09 (the Great Recession). This is is why much of the conventional wisdom you will hear today is to “hold serve,” and remain invested according to the investment policy you had before the virus hit. That advice is based on an assumption that the equity market recover pattern will not be different this time.

That “hold serve” may be good advice for some organizations and portfolios. It does, however, assume (another assumption) that the rest of your world has not dramatically changed, which it may very well have, and it also assumes (one more here) that the way your funds are invested is appropriate to your current liquidity and cash flow needs. For that advice to be right for you, you must (and we acknowledge how hard this is in the moment) dispassionately evaluate the whole of your financial situation as you make decisions about your organization’s investment portfolio. You may not have the time or energy to perform this entire financial review in the moment. It would be best if you did that very soon, though.

What’s Next

What can we expect from here? More volatility. Know that the “markets” primarily represent the trades of professional investors making large bets on market direction, what they think will happen next, or what they are trying to influence if they are particularly sophisticated. Knowing that should not change any of the decisions you make as an investor, or the guidance you take from your objective, qualified advisors. It may prompt you to rely on those advisors even more. It is beneficial, at a time like this, to have excellent investment advice from objective, experienced, sophisticated, qualified investment advisors. These can be in the form of paid professionals, Board members, committee members, or a short-term task force brought together specifically for this purpose.

As this COVID-19 crisis evolves, and as its economic and financial effects take hold, you should regularly hear from your investment management and investment advisory teams. Expect to hear about what they are thinking and about how your strategies and portfolios are responding in this environment. Changes may be warranted, based on your circumstances. There is no way to know if the past will repeat itself exactly, and if it does, when it will do so. This is unprecedented, and the financial markets are structured differently today, which means that we are in uncharted territory, and markets (because they are people-driven) may respond differently than they have before. Insist on information as frequently as you want it in a format that is meaningful and useful to you and your team.


Please allow us to be helpful to you in your learning and/or decision-making process. Call or email anytime. We are available for a call or video visit. We look forward to a safe in-person visit when we can all do that again.

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