The widespread adoption of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) across the country has already been of great help to charities, in part because the financial markets collapsed just months after the uniform act was approved. Most, if not all, endowment funds created in the past six years are “underwater”—a phrase used to indicate that the fair market value of the investments in a particular endowment fund is less than the value of the gift that originally created that fund. Many older funds may also be underwater or approaching that condition. Under laws that had been in effect in many states, the amount a charity could spend from an underwater fund was limited, and, had UPMIFA not been adopted, charities that depended on their endowments to fund a significant portion of their operations would have been severely hampered in their ability to provide services.
Community foundations generally maintain a variety of fund types from donor advised funds to agency endowment funds to designated and field-of-interest funds. Community foundations and other charitable organizations may also have relationships with supporting organizations. Learn more about the particular characteristics, management and legal requirements of these giving options and find information to help determine the best structure for your donors.
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“If I create a fund at the community foundation, can my investment manager still manage the funds?” You may have already come across a donor that asked this question. Such a donor is essentially requesting that the fund they create be invested outside of the foundation’s investment pool(s). While there are cases where the answer must be “no” (e.g., donor wants the investment firm she owns to manage the assets), there are also cases where the answer should be “no.” A strong policy will guide the community foundation in those cases where the answer may be “yes.”