What are endowment funds?
The term “endowment fund” is not generally defined, but it has the following characteristics: Endowment funds are investment funds that are set up explicitly for foundations. Fund specialists also like to refer to it as a “pen”.
However, the term “endowment fund” is not protected. As a result, the funds do not have to adhere to standardized investment approach or investment style guidelines. Nevertheless, foundations that invest in such funds have very specific investment needs: On the one hand, the investments should generate high returns, but at the same time the invested capital must not be exposed to excessive risks. Endowment funds are therefore usually mixed funds with a conservative investment strategy and low costs. They usually own an equity stake of up to 30 percent and distribute income annually.
How important it is for foundations to find a defensive and flexible investment product that keeps risk and return in an acceptable ratio for foundations, even when prices on the capital markets are extremely fluctuating, became clear last year.
Objective and analytically sharp decision-making aids are therefore extremely important for foundations when looking for suitable endowment funds. This also includes the endowment fund study published annually by the Munich consulting firm FondsConsult Research. The Endowment fund study 2020 by FondsConsult shows which funds were able to hold their ground well in an extremely difficult capital market environment last year – and which funds were less successful.
A notice: In our lexicon we explain all terms relating to investment funds and ETFs, for example front-end load and reinvesting.