The Investment Fund for Foundations (TIFF) in 2009 Custom Case Solution & Analysis

1. Evidence Brief (Case Researcher)

Financial Metrics

TIFF AUM: Declined from $11.3B (2007) to $7.8B (2009) due to market downturn and redemptions. (Exhibit 1)
Performance: TIFF Multi-Asset Fund returned -26.3% in 2008 compared to the policy benchmark of -23.9%. (Exhibit 2)
Fee Structure: TIFF operates as a non-profit cooperative; fees are cost-recovery based, significantly lower than commercial alternatives. (Paragraph 12)

Operational Facts

Business Model: Outsourced Chief Investment Office (OCIO) provider for non-profits and foundations.
Governance: Member-owned cooperative structure; board composed of foundation executives.
Capacity: High reliance on external managers; internal team focuses on manager selection and asset allocation. (Paragraph 15)

Stakeholder Positions

David Salem (CEO): Proponent of maintaining long-term, endowment-style investing despite short-term volatility.
Member Foundations: Facing liquidity pressure; some questioning the necessity of illiquid alternative allocations.

Information Gaps

Specific redemption terms: Exact liquidity lock-up periods for the Multi-Asset Fund are not clearly quantified in exhibits.
Client churn: The rate of member attrition beyond AUM decline is not explicitly broken out.

2. Strategic Analysis (Strategic Analyst)

Core Strategic Question

How should TIFF adjust its investment strategy and member communication to prevent further AUM erosion while maintaining its mission-driven endowment model during a period of extreme liquidity preference?

Structural Analysis

Competitive Rivalry: High. Foundations are evaluating internalizing investment functions or shifting to lower-fee passive index products.
Bargaining Power of Buyers: High. Members have low switching costs and are prioritizing immediate liquidity over long-term absolute returns.

Strategic Options

Option 1: Pivot to Liquid Assets. Increase allocation to ETFs and cash. Trade-off: Protects AUM in the short term but sacrifices the long-term return profile that defines the TIFF mission.
Option 2: Double Down on Endowment Model. Educate members on the necessity of illiquidity for premiums. Trade-off: Risks further redemptions from members facing immediate budgetary crises.
Option 3: Hybrid Tiered Strategy. Create a new, highly liquid sub-fund for members with immediate needs while maintaining the core endowment fund. Trade-off: Operational complexity and increased management overhead.

Preliminary Recommendation

Option 3. TIFF must accommodate the immediate liquidity needs of its members to preserve its core base, while ring-fencing the long-term endowment strategy for those foundations capable of remaining invested.

3. Implementation Roadmap (Implementation Specialist)

Critical Path

Month 1-2: Segment member base by liquidity needs; survey top 20 members to gauge potential redemptions.
Month 3-4: Design and launch the Liquidity-Focused Sub-Fund (LFSF) with clear fee structures for liquidity management.
Month 5-6: Communication rollout; reposition the core fund as a long-term capital preservation vehicle.

Key Constraints

Manager Liquidity: Underlying alternative managers in the Multi-Asset Fund may have gates that prevent rapid cash extraction.
Governance Approval: The board must approve the shift, which may be contentious if it deviates from the original mission.

Risk-Adjusted Implementation

Expect 15% of AUM to migrate to the LFSF. Maintain a cash buffer of 10% in the LFSF to prevent a secondary liquidity crisis if market conditions worsen.

4. Executive Review and BLUF (Executive Critic)

BLUF

TIFF is suffering from a misalignment between its long-term investment horizon and the immediate fiscal reality of its member foundations. The proposed hybrid strategy is necessary but insufficient. The primary danger is that the Liquidity-Focused Sub-Fund becomes a dumping ground for underperforming assets, damaging the brand. TIFF must explicitly define the Liquidity-Focused Sub-Fund as a defensive cash-management tool, not an alternative investment vehicle. If the board does not approve the creation of this liquidity tier by the next quarter, the organization faces a death spiral of forced asset sales at fire-sale prices to meet redemptions.

Dangerous Assumption

The analysis assumes members will remain loyal if a liquidity option is provided. In reality, once a foundation moves to a liquid vehicle, they have already started the process of disintermediation.

Unaddressed Risks

Operational Friction: The cost of running two distinct investment strategies may exceed the cooperative revenue model.
Regulatory Scrutiny: Changing fund mandates during a market crash may trigger fiduciary complaints from members who stayed in the original, illiquid fund.