How must an endowment fund be invested?
In general, the board members of a foundation must perform their duties, including their investment duties, with the care an ordinarily prudent person in a like position would exercise under similar circumstances. Various laws governing the investment of charitable assets including the Uniform Prudent Management of Institutional Funds Act (UPMIFA), the Uniform Prudent Investor Act (UPIA), and the Third Restatement of Trusts all embrace the concept of modern portfolio theory. Under modern portfolio theory, prudent investment policy is based on diversification of assets, long-term performance benchmarks and the importance of a portfolio’s total return on investment.
