NBOA President and CEO
The conversation around endowment management in independent schools is shifting. During events like the Great Recession or the COVID-19 pandemic, business leaders could decently isolate and analyze the factors that contributed to the economic impact of these events. Today, school leaders are navigating what many scholars are calling a polycrisis — a convergence of risks that are complex, compounding and often contradictory. But within this turbulence, there is also opportunity.
To get some clarity on the turmoil in today’s economic climate, I turned to George Suttles, who, as executive director of Commonfund Institute, leads Commonfund’s educational, thought partnership and professional development activities. I talked with Suttles in June, so I offer the caveat that geopolitical, legal and economic conditions may have — make that, probably have — shifted by the time you’re reading this. And that’s precisely the point: uncertainty is now the baseline. “Our crystal ball is as murky as anyone else’s,” Suttles told me. “Some initial indicators are pointing to a recession, while others are pointing to a rebound from the initial contraction we saw earlier this year.”
Still, Suttles noted, “We continue to stay vigilant and take advantage of increasing optimism entering the third quarter.” For independent school leaders willing to stay disciplined and think long-term, there’s strength to be found in foundational investment principles and strategic planning.
It’s Different This Time
Asked about the similarities between today’s uncertainty and events like the Great Recession and the COVID-19 pandemic, Suttles said he’s not focusing so much on those as on the differences. He introduced me to the scholarly concept of polycrisis noted above. “Today’s environment is shaped by persistent inflation, geopolitical uncertainty, tariff rate yo-yos and tighter monetary policy, and then there’s the sociocultural aspects that have added more layers of risk.”
He noted that this time, unlike previous crises, uncertainty is being fueled by overlapping dynamics: supply chain instability, political polarization, questions about international students’ status and mounting public policy pressure on education institutions. “Is the public policy environment that higher ed is currently facing going to extend to K-12 independent education?”
Endowments Are Built for This
For CFOs and finance committees, the message is clear: resist reactionary decisions. “Independent schools with endowments, especially those with legacy endowments, have seen this type of volatility before,” Suttles reminded me. Whether it’s been wars or other geopolitical upheaval, the tech bubble bursting, the Great Recession or the pandemic, they have adjusted and weathered the ups and downs. They’ve done that with smart scenario planning, strategic communication and maybe some tweaks to asset allocation. But for the most part, their portfolios are set up to ride out turbulent times. That long-term view is grounded in three core tenets of the endowment model — equity bias, diversification and the liquidity premium. All of them still hold as strong pillars in this volatile moment.
Cash and Consistency
Today, liquidity is particularly top of mind. “We’re seeing schools trying to make sure they understand where their pockets of liquidity are, whether it’s from fundraising, leveraging lines of credit or in the endowment,” Suttles noted. But it’s also trusting that your portfolio is resilient. Some schools are leaning toward cash and cash equivalents, while others are taking stock of where those pockets of liquidity exist in their portfolios. Where that cash comes from depends on portfolio construction.
Suttles offered a reminder that consistency matters more than reaction. “Don’t pop the champagne corks during a double-digit return year and go on a spending spree, but don’t sell everything and go hide in the basement during a downturn.” A narrow focus on just the year-to-year annual return puts schools in danger of making poor decisions tied to the moment.
That’s why NBOA and Commonfund emphasize the long-term perspective in our annual Commonfund Study of Independent Schools, which looks at endowment management practices and policies. The core tenet tells us that when times are good and when times are bad, stay the course. “Your focus should not be quarter to quarter, year to year,” Suttles advised. “It should be 5-, 10-, 15-, 20-year return targets. If you’re hitting those longer-term return targets, you’re achieving intergenerational equity, maintaining the purchasing power of the endowment for generations to come.”
Right now, it might feel tempting to panic. Resist that urge. “Time is on our side,” Suttles said. Panic, though, can have its positive side if it’s channeled toward taking a look at endowment management and making strategic tweaks that fit the needs of your particular institution.
Communicate To Calm
Part of managing through a polycrisis means equipping leadership with the language and tools to speak confidently to their communities. “When parents are scared, students are scared, donors are scared, alumni are scared, and all the other stakeholders that you know independent schools are accountable to, [are] proactively and strategically communicated with about how the institution is thinking about managing this polycrisis and stewarding resources—that provides a calming effect across those stakeholder groups.”
Rethinking Scenario Planning
Scenario planning has always been a best practice, but the polycrisis demands deeper and more agile models. Last year’s CSIS survey showed top concerns were fundraising, inflation, return targets and enrollment — still relevant, but now infused with added complexity. Complexity doesn’t mean adding 20 new tabs to your scenario spreadsheets. Just start with your top-of-mind issues and layer in the factors that could amplify them — from tariffs to enrollment headwinds to policy pressure.
Of all the risks in this moment, Suttles highlighted one that’s often underappreciated: mission slip. “You might get so distracted trying to contort and manage and forecast that as an independent school, you forget that your mission is to educate young people and prepare them to be engaged global citizens.” Keeping focused on that “north star” is more important now than ever.
The Governance Muscle
The boards that will navigate this moment most successfully are those that have already exercised their governance muscles. “If they have been disengaged when times are good, it’s going to be incredibly difficult to engage them and fully activate them in times of crisis,” Suttles observed.
Building up that muscle might mean more frequent meetings for the finance and investment committees, actively seeking data, creating strategic inputs and sharing them with decision makers. Commonfund, for example, has been fielding more requests from clients for scenario planning around spending, asset allocation and the impact of tariffs on spending power.
Some schools are even creating scenario-planning committees that include representatives from across other board committees. Or if they don’t have the bandwidth, the executive committee steps in to become the scenario planning body.
Regardless of an institution’s investment governance model, independent schools must practice intentionality that includes a long-term focus, deep research, strategic risk management and agility. Taken together, that approach will allow for resilient portfolio management with readiness to take advantage of strategic opportunities.” Ultimately, it’s understanding opportunities and trade-offs across strategies and asset classes, especially given your institution’s evolving liquidity needs, that plays the most important role.
The polycrisis is real. So is the silver lining that comes meeting its challenges head-on with prudent investing, a long-term view and strategic planning and clear communication to constituents. The payoffs include renewed opportunities to align governance, mission, investment strategy and stakeholder communication toward sustainable, intergenerational success.
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