The Future of Philanthropy: Trends in Nonprofit Investment Strategies

As nonprofit leaders look ahead, the way they manage assets is evolving. Interest rates, volatile markets, and pressure to demonstrate measurable outcomes are reshaping nonprofit investment strategies. From mission-related investing to social impact bonds, tomorrow’s philanthropy requires both financial discipline and bold innovation. 

What’s driving change in nonprofit investing?

Several forces are pushing organizations to rethink investment strategies. Market volatility has increased, making traditional 60/40 portfolios less predictable. At the same time, donors are seeking transparency and alignment between giving and mission needs. New financial models, such as social impact bond structures, have expanded the toolbox for investing.  

Professionalization of oversight

Nonprofit investment management is becoming more sophisticated. Many institutions are adopting an outsourced chief investment officer (OCIO) model instead of relying solely on consultants. Fee transparency and performance benchmarking are now expected. Boards are also using data dashboards and ongoing education to better understand portfolio risks, aligning governance with evolving trends in endowment investing.  

The choice between an investment management consultant and an OCIO often depends on the specific needs, resources, and preferences of the nonprofit organization. Each option has its advantages and disadvantages, so careful consideration should be given to determine which service aligns best with the organization’s goals and constraints. For an in-depth look at which option might be best for your organization, read our article.  

Private markets go mainstream with liquidity discipline

Private markets are no longer niche. Nonprofits are accessing private credit, secondary funds, and interval funds to diversify returns. To balance liquidity with private markets, organizations are tightening capital-call policies and maintaining reserves to ensure grantmaking commitments are met — even during downturns. 

Mission-related investing (MRI) becomes the default

The line between mission-related investing vs. program-related investing is clearer today. MRIs, designed to achieve both financial returns and mission alignment, are becoming standard. Place-based impact investing, community development financial institution (CDFI) deposits, and community investment are on the rise. Boards are also exploring catalytic capital — defined as patient, risk-tolerant funding — to unlock new opportunities. 

Measuring impact with rigor

Impact measurement frameworks have matured, and donors are requesting more transparency than ever before on the impact their donations are having. The IRIS+ impact measurement framework, alongside the UN Sustainable Development Goals (SDGs) are logic models, providing standards for evaluating outcomes. Nonprofits are building portfolio-level KPIs, reporting cadence, and an impact policy to answer the common question: How should nonprofits measure impact? 

Innovative financing models

Social impact bonds, also called pay-for-success contracts, are gaining traction. Social impact bonds are structures where investors provide upfront capital for a program, and repayment is tied to achieving measurable outcomes. While these models introduce complexity and risks, they can unlock cross-sector partnerships when aligned with the mission. Understanding how social impact bonds work and the stakeholders involved is critical before adoption. 

Spending policies evolve

Endowment spending policy trends are also changing. Total return spending policies and smoothing rules help balance stability with growth. Guardrails are being added for underwater periods and inflation shocks to preserve intergenerational equity. Boards are revisiting these approaches to help ensure resilience. 

What boards should do next

To keep pace, boards should: 

• Update the investment policy statement (IPS) and align it with evolving trends in endowment investing. 

• Build an impact policy and adopt an impact measurement framework such as IRIS+ or SDGs. 

• Decide whether an OCIO or consultant model best fits nonprofit investment management needs. 

• Develop a 12-month roadmap for portfolio and governance improvements. 

Interested in learning how Mercer Advisors helps support nonprofit missions? Visit our library of Nonprofit News & Insights articles or contact our Endowments & Foundations team. Let’s work together to create a framework that empowers your organization to thrive — today and for years to come.