In a world of persistent inflation and evolving fiduciary responsibilities, foundations must rethink how they balance liquidity needs, risk management and long-term value creation, said Pascal Bernier (pictured left), portfolio manager of strategic asset allocation at Desjardins Global Asset Management, during the Canadian Investment Review’s 2025 Endowment & Foundation Investment Forum.
Comparing two foundations with $20 million in assets, he noted that, if one raises $2 million annually, its liquidity needs will be drastically different from those of a foundation that can’t materially grow its asset base through fundraising.
“That gives [the foundation with the ability to raise capital] greater flexibility to allocate some of their assets toward higher expected return strategies and have access to alternative assets that are less liquid because they won’t have the same liquidity needs.”
Read: 56% of institutional investors increasing allocations to alternatives: survey
This distinction, argued Bernier, is often overlooked in traditional asset allocation models, which tend to treat portfolio size as the primary determinant of strategy. “Size doesn’t tell you how much liquidity you need. Context does.”
Also speaking during the session, Maxime Chevalier (pictured right), expert advisor of alternative strategies at DGAM, focused on the growing role of alternative investments in institutional and high-net-worth portfolios. He highlighted the shift among Canadian pension funds — now allocating more than 30 per cent to alternatives — and invited foundations to consider a similar approach.
“Private markets offer lower volatility, stable cash flows and low correlation with traditional assets. They’re not just diversifiers anymore — they’re core building blocks.”
The shift is also about growth, he added. “Public equities often rely on market sentiment and earnings momentum. Private markets, on the other hand, generate returns through operational improvements, strategic repositioning and long-term value creation.”
Read: 66% of institutional investors increasing private asset allocations: survey
He also pointed to the alignment potential between alternatives and responsible investing mandates. “Foundations can now invest in infrastructure, real estate or private equity in ways that reflect their mission and values.”
Bernier warned of the dangers of rigidity in asset allocation, noting foundations with high disbursement needs and limited liquidity buffers risk being forced to sell assets during downturns, often at the worst possible time. “In those moments, you’re not just selling low. You’re potentially liquidating long-term value at a discount.”
To mitigate this, he advocated for wider asset mix brackets and scenario-based planning. “Flexibility is not a luxury. It’s a necessity.”
Data from the Canadian Institutional Investment Network found many Canadian foundations remain heavily invested in cash and short-term instruments, said Chevalier, noting this is particularly true for organizations with less than $50 million in assets, which often prioritize capital preservation over growth.
“This trend highlights a broader challenge. Many foundations are still struggling to shift away from low-yield, short-term investments toward more diversified, return-seeking strategies.”
Read more coverage from the 2025 Endowment & Foundation Investment Forum.