What are endowment funds?
The term “endowment fund” is not generally defined, but has the following characteristics: Endowment funds are investment funds that are explicitly set up for foundations. Fund specialists also like to refer to them as “pen”.
However, the term “foundation fund” is not protected. As a result, the funds do not have to adhere to standardized guidelines on the investment approach or investment style. Nevertheless, foundations that invest in such funds have very specific investment needs: On the one hand, the investments should generate high returns, while at the same time the capital invested must not be exposed to excessive risks. Foundation funds are therefore usually mixed funds with a conservative investment strategy and low costs. They usually own up to 30 percent of the shares 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 with extremely fluctuating prices on the capital markets, became clear in the past year.
For foundations, objective and analytically sharp decision-making aids are therefore extremely important when looking for suitable foundation funds. This also includes the annual foundation fund study by the Munich consulting company FondsConsult Research. The Foundation Fund Study 2020 by FondsConsult shows which funds were able to hold their own in an extremely difficult capital market environment last year – and which funds were less successful.
Note: In our lexicon we explain all the terms relating to investment funds and ETFs, for example issue surcharge and reinvesting.