How to handle church endowment (looking for best guaranteed return)

[dandan14]

I posted this question over on fatwallet this morning, but haven't gotten any responses. I thought you guys might have some ideas.

I was talking with a friend this weekend who works for a small church (which is a tax exempt organization). They received a multi-million dollar gift several years ago, and have been drawing a substantial amount of principal each year to meet their budget. (At this rate the money will be gone in <5 years.)
My friend believes they are only getting a 3% return on this money, which I think is pretty low for this type of deposit. They need access to the money, but shouldn't need more than $200k to be readily accessible. Any ideas on how this could be handled? A 4-5% return would be significantly better.

Anyone have experience with million-dollar endowments? Is it common to use CD ladders, Treasuries, or a mixture of both? Are there options that I may not be familiar with?

 

[brewer12345]

If the church is consuming the principal at that kind of rate, it doesn't make whole lot of difference whether they get 3 or 4% on it. Endowments are usually invested in a diversified portfolio and tapped at the rate of 5% or so a year. The more sophisticated stuff doesn't apply if the money is being rapidly spent.

 

[dandan14]

If the church is consuming the principal at that kind of rate, it doesn't make whole lot of difference whether they get 3 or 4% on it. Endowments are usually invested in a diversified portfolio and tapped at the rate of 5% or so a year. The more sophisticated stuff doesn't apply if the money is being rapidly spent.

Right....that's why I've asked to take a look at their budget. If they do it right, it is a nice revenue generator. If they continue on the path they are on, it's going to be bad news. I was just surprised they were earning such a low rate.
Since I knew FDIC guarantees topped out at 100k, I wasn't sure what the norm was with a $1m fund.

 

[brewer12345]

T-bills are probably the most prudent thing to do.