TY - JOUR T1 - Donation Risk and Optimal Endowment Portfolio Allocations JF - The Journal of Portfolio Management SP - 109 LP - 120 DO - 10.3905/jpm.2014.41.1.109 VL - 41 IS - 1 AU - David Blanchett Y1 - 2014/10/31 UR - https://pm-research.com/content/41/1/109.abstract N2 - An endowment is only one component of the total economic worth of a charitable organization. Other assets, such as real estate, donation revenue, and program service fees generally represent a larger portion of the total wealth of a charity yet are often ignored in the endowment optimization process. This article provides evidence that changes in charitable donations, referred to as donation risk, have statistically significant exposures to different asset classes and risk factors. Through a series of portfolio optimizations it is determined that the optimal allocation for an endowment varies materially for different compositions of total wealth. These findings suggest that narrowly focused portfolio optimization routines that ignore donation risk are insufficient, and that a holistic definition of wealth is necessary to build truly efficient endowment portfolios.TOPICS: Portfolio construction, in portfolio management, statistical methods ER -