This article was created in collaboration with Main Management.

Understanding Endowments: How They Work and the Power of Strategic Partnerships

Endowments are vital for organizations that strive for long-term financial stability and lasting impact. They provide a sustainable and consistent source of income to support mission-critical initiatives such as artistic and educational programming, scholarships, and operating expenses. But how do endowments work, and what role do partnerships play in their success? Let’s explore the basics of endowments and how organizations like Pacific Chorale can collaborate with asset managers such as Main Management to maximize their impact.

What Is an Endowment?

An endowment is a pool of financial assets—such as cash, stocks, bonds, or other investments—donated to an organization with the intent of providing ongoing financial support through investment returns. Instead of spending the principal donation (often called the corpus), the organization invests it. The earnings from these investments are used to fund specific initiatives or cover operational expenses, creating a reliable source of income over time.

Pacific Chorale’s annual operating fund supports their ongoing costs, such as salaries, programs, and facilities, ensuring the continuity of its day-to-day operations. The operating fund includes earned revenue such as ticket sales, and contributed revenue including foundation and government grants as well as donations from individuals. In contrast, an endowment is a permanent fund that is invested, with only the returns used to provide additional support for the organization’s ongoing operations. It provides a reliable stream of revenue and financial stability through long-term growth. Contributing to an endowment goes beyond meeting an organization’s annual expenses—it creates a lasting legacy, strengthens the organization’s foundation, and ensures its mission thrives for generations to come.

Key Components of an Endowment:

1. Principal: The original donated amount, which is preserved to maintain sustainability.
2. Investments: The funds are carefully invested to generate income and growth while managing risk.
3. Payouts: Typically, 4-5% of the fund’s value is distributed annually to support the organization’s needs.
4. Restrictions: Donors may place restrictions on how their contributions are used, such as funding specific programs or scholarships. Unrestricted funds provide greater flexibility.

Endowments are crucial because they offer financial stability, enabling organizations to weather economic fluctuations and plan boldly for the future.

The Role of Strategic Partnerships

For an endowment to succeed, effective collaboration between the organization and its asset manager is key. Consider the relationship between Pacific Chorale, a nonprofit arts organization, and Main Management, an experienced asset manager.

Defining the Partnership

• Pacific Chorale’s Role: As the steward of the endowment, Pacific Chorale determines how the funds will be used, whether for artistic programming, education initiatives, or operational support. They may also set specific goals or restrictions for the fund, often in consultation with donors and the Board.
• Main Management’s Role: As the asset manager, Main Management ensures that the endowment funds are invested strategically. They balance growth and income objectives with risk management, focusing on preserving the principal while generating steady returns.

Building a Foundation for Success

• Establishing Investment Guidelines: Pacific Chorale and Main Management work together to create an Investment Policy Statement (IPS), which serves as a roadmap for managing the endowment. This includes:
  • Setting clear objectives, such as achieving a target return to support annual payouts.
  • Determining the spending policy (usually 4-5% of the endowment’s value per year).
  • Aligning risk tolerance with Pacific Chorale’s goals.
  • Designing a diversified portfolio of investments, including stocks, bonds, and alternatives.
• Investment Management: Main Management uses its expertise to monitor the portfolio, make strategic adjustments, and capitalize on market opportunities. They ensure that the investments align with Pacific Chorale’s mission and long-term financial needs.
• Ongoing Communication: The relationship thrives on transparency and collaboration. Main Management provides Pacific Chorale with regular performance reports, educates leadership on investment strategies, and hosts periodic reviews to adapt to changing circumstances or goals.
• Beyond investment expertise, Main Management offers ongoing strategic marketing guidance to help amplify and convey the mission and needs of this esteemed program. Main’s contributions to the Chorale, and the outsourcing of expertise they provide, allows the Chorale’s leadership team to stay focused on achieving the vision.
• Delivering Impact: The annual payouts generated by the endowment allow Pacific Chorale to focus on its mission: bringing world-class choral performances to audiences, supporting arts education in their community, and ensuring financial stability for years to come.

The Pacific Chorale’s low operating expense-to-endowment ratio reflects its commitment to responsible financial management, supported by gifts to the endowment.

A Lasting Legacy

Endowments represent a commitment to the future. For donors, they provide a way to leave a legacy by supporting a cause they care deeply about. For organizations like Pacific Chorale, endowments ensure the ability to plan boldly and grow sustainably.

Through partnerships with trusted asset managers like Main Management, organizations can maximize the potential of their endowments. By blending financial expertise with mission-driven stewardship, they create a foundation for enduring impact and meaningful change.

Whether you’re a donor, an organization, or a steward of an endowment, understanding how these funds work—and how partnerships can amplify their effectiveness—can unlock new opportunities to achieve your goals and make a difference.

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About Pacific Chorale: Pacific Chorale, the GRAMMY Award-winning resident chorus at Segerstrom Center for the Arts, has been a cornerstone of Orange County’s cultural landscape since 1968. Renowned for its artistic innovation and praised as a choir that “can sing anything…with polish, poise, and tonal splendor” (Orange County Register), the ensemble has risen to national prominence (Los Angeles Times) by premiering over 35 works, including commissions by celebrated composers like John Adams and Eric Whitacre. Its pandemic-era film, The Wayfaring Project, garnered acclaim on PBS SoCal and KCET, reaching global audiences. Beyond presenting its own concert series, Pacific Chorale partners with Pacific Symphony and frequently performs with leading orchestras like the Los Angeles Philharmonic, with which it won the 2022 Grammy Award for Best Choral Performance. Internationally, the choir has toured 19 countries, collaborating with renowned ensembles worldwide. Committed to accessibility, Pacific Chorale offers education programs for all ages, from after-school vocal training for youth to community-wide singing events, fostering a love for choral music across generations.

About Main Management: Main Management, LLC is an SEC Registered Investment Advisor that offers innovative and proprietary investment solutions to a diverse client base, including financial advisors, high-net-worth individuals, endowments, and family offices. The firm was founded by three industry veterans in 2002 with a combined experience of over 100 years, positioning Main Management to deliver a comprehensive client experience. As a fiduciary, the company is committed to prioritizing clients’ interests and maintains a focus on post-fee and post-tax results across various market conditions. By leveraging a team-based approach, fostering a client-centric culture, and benefiting from the guidance of an external advisory board comprised of senior investment leaders, Main Management strives to consistently deliver high-quality service and value to its clients. Based in San Francisco, the firm’s partners are strategically located throughout the United States, ensuring the ability to effectively serve clients nationwide.