Endowment: Effectiveness of External and Internal Management

An expert discussion took place on the third day of the Gaidar Forum 2019 dedicated to the discussion of new development prospects for endowment of non-profit organizations. The site was moderated by Irina Tolmacheva, Head of Research Projects and Intellectual Property Division of the Extra-Budgetary Activity Management, RANEPA.

During 2018, in the course of events at various sites, representatives of the leading endowment funds and representatives of management companies discussed current proposals for changing the existing mechanism of the NPO endowment and building an effective system between the funds of the Central Committee and the management companies.

Ekaterina Gantseva, Deputy Chairman of the Board of the National Association of Stock Market Participants, opened the expert discussion with the report “Performance of the Fund and Management Companies”. The speaker noted that she turned to a study conducted at Harvard University on the relationship between managing endowment funds — internal and external. According to the results of the study, if the expenses of internal management range from 0.75 to 1.25%, then in the case of external management, they range from 1 to 2%, since everything depends on the use of alternative investments, but profitability is always higher by 2-3%. The speaker also noted that in 2016 the majority of museum funds, such as the British Museum, the Louvre and the Metropolitan, laid the expected return on their projects, which amounted to 3% of investments, and in 2017 the profitability was more than 6.7%. The following changes that have been proposed are the possibility of pooling labor funds within the framework of management, which means allowing to merge medium-sized funds of endowment in the 275th Federal Law of the Russian Federation and allows to offer more interesting strategies.

Elena Ivanitskaya, Deputy Director of the Department of Strategic Development and Innovation at the Ministry of Economic Development of the Russian Federation, said that the main task facing the non-profit sector is to stimulate emergence of new endowment funds. One of the programs is aimed at allowing the use of public fundraising tools. The speaker also proposed a more flexible approach to the terms that are set aside by the legislation for the formation of endowment, thus the funds will be provided for another six months to increase capacity.

In addition, the speaker touched upon the topic of harmonization of the provisions of the 275th Federal Law with other legislation that regulates the non-commercial area today, since many issues have not been included in the horizon of consideration of the aforementioned law.

The discussion was concluded by Alla Samoletova, Assistant Rector of the European University at St. Petersburg. The speaker told about the possibility of investing not only by non-profit organizations in the classical sense, but also by any universities that would like to send their funds to the endowment. In her opinion, it is also necessary to increase the volumes of endowment and to work more actively with attracting cash funds.

Alexandra Perfilyeva, RANEPA

All records of live broadcasts from the Gaidar Forum 2019

10th Gaidar Forum Organizers:

The Russian Presidential Academy of National Economy and Public Administration (RANEPA);
The Gaidar Institute for Economic Policy (Gaidar Institute);
The Association of Innovative Regions of Russia (AIRR).

The general partners of the Gaidar Forum are Gazprom and Gazprombank; strategic partners include Prosveshcheniye publishing house, Coca-Cola, Pharmstandard group, ACIG Group of Companies, the Russian Textbook Corporation, SANOFI, Novartis, Johnson & Johnson, Russian Railways, MSD, and Mastercard; EY, Cisco and Russian Direct Investment Fund are partners. This discussion’s partners are Philips, Cherkizovo and RVC.

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