Endowment and foundation investing doesn’t need to be complicated to be effective. “We purposely decided to keep a lot of complexity out of the portfolio because it’s expensive,” says Kristen O’Connor, CFO and treasurer of the Beverly Hills, California–based Ahmanson Foundation since 1999. With help from a three-member board of trustees, O’Connor, 49, keeps the $1.13 billion portfolio’s annual expenses at a minuscule 0.31 percent. That has allowed the foundation to pay out a total of $610 million over the past 15 years as grants in the arts and humanities, education, and health and human services to underserved populations in Los Angeles County. Although the foundation has 70 percent of its assets allocated to equities (45 percent of that in index funds), 25 percent in fixed income and 5 percent in real estate, O’Connor opportunistically adds active strategies such as non-investment-grade loans and impact investments. After the financial crisis shaved 28 percent off the foundation’s returns, she bravely rebalanced the portfolio back into equities in March 2009, resulting in a 27 percent return by year-end. “Your biggest concern is, how is your foundation going to continue to support the community with reduced assets?” notes O’Connor, who is the immediate past president of the Foundation Financial Officers Group. Ahmanson earned 19 percent in 2013, handily beating the median 15.39 percent return for endowments and foundations with more than $500 million in the Wilshire Trust Universe Comparison Service universe.
