In the first three months of this year, as the Dow Jones Industrial Average experienced a precipitous drop, the price of oil was high and went higher, and for the first time in seven years, economists were willing to say that the U.S. economy was either in the middle or on the brink of a major recession.

Not a good time to be in the stock market.

Unfortunately, the professional managers of the endowments and foundations in Douglas County have no choice but to keep their investments in the market and producing whatever returns are possible.

And if that’s not hard enough, they also have to hope that the declining economy doesn’t lead donors to quit giving.

Caution encouraged

Chip Blaser, executive director of the Douglas County Community Foundation, said he’s optimistic giving will stay up and the principal that the foundation already has in the bank won’t be negatively affected. The foundation has about $13 million on hand right now.

“Our first reaction would be we hope that people will continue to not be afraid to provide for charitable causes and things they want to support in their community,” Blaser said. “We hope they will continue to prioritize that and not get too spooked by the financial markets.”

For now, there’s no plan to drastically change the investment philosophy that the foundation uses in determining how to invest the endowed funds.

“We try not to react too much to the changes in the markets,” he said. “We keep a close eye on our investments and the markets, but we try not to make too many changes.”

Long-term lessons

At the Kansas University Endowment Association, while no one is cheering a downturn in the economy, it does serve to underscore a point that association leaders have been trying to make for the past couple of years.

“We’ve really had extraordinary returns the past few years, and they really were not sustainable,” said association senior vice president and treasurer Jeff Davis. “We’re finding right now the markets are down, and we are down, too, but not as much.”

Davis said when the endowment association is crafting a portfolio, the primary effort is to build a diversified portfolio that will perform better than the market when the market is up, and not lose as much when the market is down.

Dale Seuferling, president of the KU Endowment Association, said economic downturns present two challenges to those trying to recruit new donations: The need for donations is higher than ever, but the ability to donate immediately may not be as high.

“What becomes even more important in these times, as we talk to donors, is to make sure the case and need for support is clear,” Seuferling said. “With the rising cost of tuition and higher education, times are difficult for families, and they might need a little more help.”

As one option, he said, the Endowment Association may encourage people to make gifts over time instead of in one lump sum. Yet not all donors are going to experience the same degree of loss as the market.

“People’s circumstances and situations vary based on what the nature of their assets and holdings are,” Seuferling said.

Baker’s holdings

While KU’s endowment, at more than $1 billion, is certainly the biggest and oldest in the area, the endowment at Baker University faces many of the same issues.

Patrick Mikesic, director of development at Baker, said his university’s $37 million in endowed funds are invested with a specific plan in mind, one that doesn’t need a lot of tinkering.

“The way our endowment pool is set up, is set up so we can remain unaffected by any economic downturn,” he said. “We’re based on two factors: diversification and long term.”

Mikesic said his endowment determines how much it spends using a three-year average of its returns. That way, he said, any economic downturns can be averaged out by the upcycle that typically follows a downturn.

The most urgent effect of any downturn, Mikesic said, is the shock that potential donors may feel when they look at a balance sheets and see they’ve lost $500,000 or $1 million.

“But it’s just on paper. They’re affected by that mentally more than anything,” Mikesic said. “If they wait a year, that million dollars is back in there on paper.”