Leading an organization that hopes to exist in perpetuity, CIO Eric Doppstadt says one of his challenges is to preserve the Ford Foundation’s philanthropic capacity at the same levels today, in five years and in 50 years.

The foundation’s endowment has not received any new inflow of capital since 1946. It raises no money and accepts no contributions. With the obligation of all foundations to spend 5% annually, Doppstadt says his team needs “superior performance in every aspect of investing.”

They have provided it, almost doubling the endowment in the last 15.5 years to $16 billion from $8.3 billion when Doppstadt joined in mid-2009, while disbursing nearly $11 billion to fund the foundation’s global grantmaking and operations, he says. The Ford Foundation reported returns for one, three and five years of 8.9%, 0.3% and 9.2%, respectively.

Challenges to superior returns in recent years have included “increasingly narrow public equity markets, constrained liquidity in private equity markets, negative performance in real estate markets, and the poor performance of many popular ‘diversifying’ strategies,” in Doppstadt’s view.

Seeding investment managers is one way his team has maintained Ford’s assets for enduring operations, he says. “We look for ways to work with managers early in their life cycle,” Doppstadt says. “It is the best way to get alignment.” Overall, that kind of investing aligns with his view that investors need to pay more attention to relationships.

“Seeding new firms offers the opportunity to back newer, hungrier managers and get preferential economic terms,” he says. “We work hard to be seen as partners of investment firms, which provides opportunities for co-investments and access to managers with capacity limitations.”

Specifically, managers that the foundation helped put in business, or for which it was a “Day 1” investor, now manage more than one-third of the endowment, including the vast majority of its venture capital and private equity portfolios.

Doppstadt stresses that the Ford Foundation deliberately does not take ownership stakes in the firms, saying, “We want their investment success to flow to the people making the investments.”

Instead, Ford benefits from negotiating incentives for the foundation as a founding investor that can include access to a founders’ share class investment in the firm and guarantees of the ability to add capital in the future.

But even with these investments in place, changing markets in recent years—especially liquidity constraints that created “a lengthy drought in venture capital and growth equity investments”—prompted Doppstadt’s team to complete an “optimization exercise.”

He says this effort, intended to ensure they always remain conscious of the portfolio’s liquidity, involved creating plans for extended bear markets, when liquidity is challenged. Reviewing cycles and the foundation’s data from its own private market investing dating back to 1970, the team evaluated stress scenarios—including the tech bubble of 1999 to 2000, the global financial crisis of 2008 to 2009, and the COVID-19 pandemic—to “build conservatism into the portfolio to include a margin of safety for the institution.”

That work led to an allocation of 8% to 10% of the portfolio to cash and short-term fixed-income investments over the last five years. In 2022, Doppstadt says, the foundation had to draw from it.

All with the long term in mind.

—Amy Resnick