The Endowment Handbook

6Alternatives to Endowment

This chapter enables you to:

• Appreciate how reserves and endowments are complementary.
• Learn about the different types of reserve funds and understand how to create and manage them.
• Understand why some donors prefer funds that are more nimble than endowment.
• Acknowledge other vehicles that can provide long‐term financial resilience.

Endowment is one proven process for securing financial resilience, but it isn't the right path for every cause, especially those with a limited history or a short‐term objective. Even an organization with a large endowment finds that other classes of assets provide necessary flexibility. For example, the Cleveland Museum of Art, with an endowment exceeding $1 billion, still maintains emergency and strategic reserves that can be deployed in the face of urgent crises, fluctuations in cash flow, or sudden opportunities.

Further, endowment does not appeal to every donor, especially those who created their own wealth and have realized the benefits of deploying financial capital quickly and creatively. Some have been influenced by the endowment criticisms explored in Chapter 1. Others saw organizations struggle through financial hardships such as the Great Recession or the disruptions of the COVID‐19 pandemic because of limits on the use of endowed assets. Entrepreneurial donors are adept at leveraging financial resources in many imaginative ways and find the inflexibility of endowment to be a constraint. For these donors, ...