Foundation
A charitable organisation that invests its assets and gives away part of the returns each year.
Private and community foundations invest in funds that fit their mission and payout needs. Many are open to newer managers if the strategy and team are a good fit.
US private foundations must generally pay out at least 5 percent of their assets each year, which shapes how much illiquidity they can take on. Larger foundations invest much like endowments, with dedicated teams and large private market allocations, while smaller ones often use an outsourced investment office.
Many foundations also make mission-related or impact investments that support their charitable goals, sometimes from a separate pool with different return expectations. A fund whose strategy overlaps the foundation's mission, such as healthcare access, climate or financial inclusion, can find a receptive audience.
Worked example
A $900M health foundation keeps 30 percent of its portfolio in private funds. A GP raising a $100M fund focused on primary care technology pitches both the investment team and the program team. The foundation commits $5M from its core portfolio and adds $2M from its mission investment pool.
Common questions about foundation
What is the difference between a foundation and an endowment?
Both invest long-term pools of money. An endowment is attached to an institution such as a university and funds its operations, while a foundation exists to give grants and must meet a minimum payout requirement in the US.
Do foundations care about impact when choosing funds?
Many do, at least for part of the portfolio. Even when returns come first, a strategy aligned with the foundation's mission, or a clear policy on exclusions and responsible investment, can be what wins the commitment.