INVESTMENT POLICY AND PERFORMANCE
In June 1971 the Board of Trustees of the Ford Foundation
adopted an investment policy derived from this general principle:
The Foundation's investment policies, and their administration,
shall serve the Foundation's scientific, educational, and
charitable purposes, all for the public welfare. Investment
decisions shall be made so as to sustain and strengthen the
capacity of the Foundation to effectuate its purposes and to serve
the general welfare of the people. The policy statement brought
together in one place a number of previous formulations that
emphasized the objective of sustaining the capacity—in
purchasing power—of the Foundation's earning assets. This
emphasis was expressed in the following terms: The Foundation
should
-
maintain
itself as an organization with a strong and continuing capacity for
charitable action;
-
accept the
concept that long-term total return is the correct yardstick for
investment measurement, total return being defined as investment
income (dividends and interest) plus capital gain or loss, whether
realized or unrealized;
-
continue to
pay out more than the minimum requirement of the Tax Reform Act of
1969, and
-
intensify
its effort to diversify away from its concentration of holdings of
nonregistered, nonvoting Class A Stock of Ford Motor
Company.
These
principles were applied during the fiscal year ended September 30,
1971, to a portfolio whose market value grew from $2.8 billion to
approximately $3.3 billion during the year.
This rise
in the value of our assets was largely a reflection of the major
upswing in the stock market during the year. As the ten-year table
at page 101 shows, the Foundation's asset value has risen as
sharply on previous occasions (1963 and 1967). It has also fallen
even more sharply in response to downturns in the market (1966 and
1969).
While it is
encouraging to see a rise in the Foundation's asset values in the
short run, the long-term pattern is of course more important. Thus,
taking a long-term perspective indicates that the Foundation's
assets expressed in dollars of constant purchasing power have been
declining. The market value of the Foundation's assets at the end
of fiscal 1971 was about the same as it was at the end of fiscal
1962. But over the decade 1962-1971, the nation's consumer price
level rose by almost one-third. Expressed in dollars of constant
purchasing power, therefore, the value of the Foundation's total
portfolio fell by almost $1 billion from October 1, 1962 to
September 30, 1971. (See chart, opposite.) During the decade the
Foundation's charitable expenditures totaled $2.536 billion, or
$1,080 million more than income.
The result of the Foundation's investment activities during
fiscal 1971 can be measured by reference to the standards
customarily used for mutual funds, pension funds, and other
endowments. Under the total-return concept, the total return on
stocks in Standard & Poor's 500 Stock Index during fiscal 1971
was 20.6 per cent, and total return for the thirty-five stocks in
the Dow Jones Industrial Index was 20.8 per cent. Total return to
the Foundation portfolio during the fiscal year was 25.8 per cent.
The three main elements of the portfolio performed as follows:
-
the Ford
Motor Company Class A Stock (valued as if it were marketable common
stock at about $1.2 billion at the end of the year) showed a total
return of 39 per cent;
-
other
equities (also approximately $1.2 billion in market value at the
end of the year) showed a total return of 24.7 per cent;