Warren Buffett’s advice to stick with low-cost index funds rather than high-fee money managers makes sense for philanthropies as well.
“America’s foundations are taking money that could be devoted to their programs—to alleviate global poverty, to improve education, to support medical research or promote the arts—and transferring it to wealthy asset managers,” writes journalist Marc Gunther, formerly with Fortune and the Guardian.
Many foundations pay investment officers seven-figure salaries but don’t disclose their investment performance (notable exceptions are the MacArthur and Kellogg foundations).
Lower fees and higher returns on the $800 billion locked up in foundation endowments could free capital for actual impact.
Based on limited information available, it looks like Vanguard’s index funds beat the average 10-year returns of foundation money managers by between 0.3 and 1.1 percent.
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