About the business of charity.

• Author: Miller, David
• Position: GUEST [column] - Denver Foundation - Organization overview

Charitable organizations teach us how change can occur through generosity and dedication to a mission. But while generosity of spirit certainly drives the work of charities, nonprofit organizations also apply principles of business excellence every day. While it is often noted that charities can learn from businesses, individual investors can learn from the investment management practices of large charitable organizations.

Founded in 1925, with more than $500 million in assets today, The Denver Foundation is the oldest and largest community foundation in the Rocky Mountain region. We steward a community endowment and administer charitable funds for more than 800 families, individuals and businesses--including numerous charities that invest their endowments with us.

It is essential that we practice the utmost care as we manage assets for our donors and the community's future needs. Through the leadership of our volunteer Investment Committee and our investment consultants, Monticello Associates, The Denver Foundation has achieved outstanding investment performance.

* Over the last 10 years, The Denver Foundation's investments have averaged a return of 6.21 percent each year, compared to the S&P 500 of -0.15 percent. The foundation has outperformed the S&P 500 by 6.36 percent per year.

* The foundation ranks in the top 6 percent of more than 2,000 institutional investors, including endowments, foundations, pension plans and universities.

* If an individual invested $10,000 in the S&P 500 on Jan. 1, 1999, it would be worth $10,646 as of Sept. 30, 2009. The same investment in The Denver Foundation's portfolio would be worth $19,773--almost twice as much as the stock market.

What are some lessons that individual investors might glean from the success of institutional investors such as The Denver Foundation?

Carefully establish your goals. The starting point for investing is to articulate in writing your investment goals, including time horizons and tolerance for risk.

Develop an investment strategy consistent with your goals. Once the goals are set, the asset allocations fall naturally from them. Asset it allocations refer to what percentage of your portfolio you put into various classes of assets: stocks, bonds, private equity, etc. Your goals may change over time, so plan on rebalancing your allocation periodically.

Conduct research and implement your strategy. Within each asset class, you then need to determine how much to put into different...