Put Your Money Where Your Heart is – Investor Orientations and Endowment Portfolio Investments in German Foundations

Abstract

Germany benefits from an especially lively philanthropic sector, with over twenty-three thousand active charitable foundations. An empirical assessment of the portfolio preferences of German foundations yields fundamental intragroup differences in their approach to asset allocation. We build on entrepreneurial orientation theory to explore these differences in motives, rationales, and portfolio investment preferences and extract a typology along with a commercial and mission orientation in charitable foundations' investment orientation. We derive an explanatory model that improves our understanding of the observed differences foundations exhibit in their investment orientation. Our model shall enable a more structured knowledge of the sources of capital for differing commercial and social endeavors.

Keywords: Charitable Foundations, Endowments, Investor Orientation, Entrepreneurial Orientation, Commercial Investing, Mission-Related Investing

JEL Classification: L26, L31, L33, G11