Asset Allocation Considerations for Foundations

ABC Foundation is a charitable organization dedicated to supporting educational initiatives within its local community. The foundation has a long-term goal of growing its endowment to ensure the sustainability of its operations and funding commitments. In light of this, the investment committee of ABC Foundation is considering the appropriate asset allocation strategy for its endowment portfolio.

As a candidate for the CFA Level 3 exam, please discuss the key considerations that the investment committee should evaluate when establishing an asset allocation policy for the ABC Foundation’s endowment. Your answer should include an explanation of the unique aspects of foundations compared to other institutional investors, as well as the implications of such characteristics on the investment strategy.