In a rising interest rate environment, fixed income assets will not generate the kind of returns investors have seen over the past 30 years.
An investment in a “risk-free" 10-year U.S. Treasury bond would decline 4.9% with a 1% rise in interest rates.
Relying on bonds to generate returns sufficient to sustain and grow charitable gift annuity pools may ultimately lead to disappointing results for nonprofits.
For nonprofits, clearly defining gift annuity objectives and aligning them with risk tolerance will help to manage expectations as to the level of support gift annuities will provide in the future.
A stronger U.S. economy, an expected pickup in earnings growth during the second half of the year and continued dollar strength support our recommendation to overweight equities.
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