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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