Foundations & Endowments

Nonprofits and foundations: Understanding discretionary investment management What’s right for your foundation or non-profit?

How does your foundation, endowment, or nonprofit investment committee make decisions when it comes to investment management?

Perhaps you take the non-discretionary path; you use internal investment experts within your institution to make decisions about asset allocation and investment types. The investment professionals you engage merely execute the sell or buy requests the committee makes.

Or you might take the discretionary path; you grant more decision-making authority to external advisors. They provide strategy and allocation recommendations in an end-to-end approach.

Both paths meet the obligations of the investment committee for oversight of investment decisions. But depending on the liquidity, growth, and asset variety your foundation or institutional portfolio needs, comparing the discretionary versus non-discretionary approaches to investment management carefully will help you find the right fit.

What are the differences?

The two models have some similarities but differ in the following ways:

Discretionary model

Offers a more agile response time with the ability to make decisions outlined in an investment policy statement rather than waiting for the committee to meet, discuss, and decide.
Frees investment committees up to focus on more long-term goals and objectives.
Features the ability to quickly select and implement investment managers best suited for any designated asset class.
Places a higher fiduciary responsibility on the investment provider.
Includes higher fees since the provider’s decision-making responsibilities increase.

Non-discretionary model

Increases response time because the investment committee must make all the decisions.
Places the responsibility for selecting a manager on the committee.
Places a higher fiduciary responsibility on the investment committee.
Includes lower fees due to the increased role of the committee.

Why discretionary?

The number of investment options is huge: According to a 2025 tally by the Truist Advisory Services Investment Advisory Group, there are more than 58,000 mutual funds, exchange-traded funds, hedge funds, open private equity funds and open private debt funds^{Disclosure 1} available. And the recordkeeping environment is multilayered; depending on the type of investment and the type of institution or foundation realizing gains or losses in a portfolio, federal, state, and local tax and filing codes may apply. A discretionary model may be the best way for many investment committees to address both the weight of back-office work and the complexity of the markets.

The discretionary model, as noted above, reduces lag time between recommendation and implementation of investment moves. This is essential during volatile markets or when an organizations expenses and obligations vary from quarter to quarter.

Finally, the discretionary model allows institutions to add a variety of nontraditional asset classes and expand the global scope of their investment opportunities as compared to the opportunities they can access in the non-discretionary model.

Comparing the discretionary versus non-discretionary approaches carefully will help you find the right fit.

Why non-discretionary?

Control and cost are the primary factors that organizations count as benefits of a non-discretionary model.

The non-discretionary model caps external investment advisors’ freedom of action, even when an investment policy statement exists. The investment committee is embedded in the organization, so they control both the long-term vision and the short-term transactions for the portfolio.

The fees for non-discretionary investment management are generally lower. However, absolute costs should be weighed against both ancillary costs—for example, the savings associated with outsourcing back-office responsibilities—as well as the opportunity costs that come with freeing up committee members to focus more on the organization’s mission and vision.

Making the choice

Choosing a discretionary or non-discretionary investment model for your organization should be done thoughtfully. Some questions to consider include:

How much time, expertise, and resources are board members and staff willing to devote to investment management, recordkeeping, decision-making, and market research?
Which model best aligns to the structure, composition, and dynamics of the investment committee?
What’s the organization’s overall comfort level with each approach?

Choosing an advisor to implement a discretionary model also means your institution is choosing an investment philosophy. Truist Wealth advisors use one that is rooted in a disciplined approach, guided by evidence-based strategies, and focused on maintaining portfolios that align with each client’s values, goals, and time horizon. We stay anchored and filter out the noise. We lead with evidence to form an actionable point of view. And we build portfolios with ideas and strategies that matter.

When Truist Wealth works in the discretionary model it’s a partnership—your investment committee working with our team to make decisions for your institution’s assets.

Get a check-up on your non-profit or foundation’s investment management model.

Talk to a Truist Wealth advisor today.

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