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    David and Lucile Packard Foundation Investment Management

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    David and Lucile Packard Foundation
    Investment Philosophy and Strategy

    1) What investment philosophy and strategy would you choose in order to best further the goals of the David and Lucile Packard Foundation?

    2) To what extent can your investment philosophy and strategy at the David and Lucile Packard Foundation differ from that of a manager of a for-profit fund or from that of an individual investor? Please explain your reasoning.

    Include answers to the following:
    a) Define an investment philosophy and strategy.
    b) Analyze investment philosophies and strategies in terms of risk, time horizons, and market timing.
    c) Compare and contrast investment philosophies of foundations, individuals, and for-profit funds.

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    Solution Preview

    Step 1
    The goal of David and Lucile Packard Foundation is to earn above the benchmark investment returns rate and also ensure growth in the portfolio in order to give significant funds to current and future grantees. The foundation is ready to take risk appropriate not only to preserve but to increase the spending power of the endowment. Pursuing this goal the David and Lucile Packard Foundation decided to move away from its two-stock portfolio. It had investments in HP and Agilent but since has decreased its holding to less than seven percent. The investment objective of the Foundation is to diversify and also to make program related investments.

    Step 2
    Since the objective of David and Lucile Packard Foundation is to earn above benchmark investment growth and returns, the suitable philosophy for the foundation is the value investing. This means that the foundation should seek relatively undervalued stocks and hope that they will produce high returns in future. This philosophy should be mixed with investing in companies that have strong fundamentals. The David and Lucile Packard Foundation should invest in shares of companies which have a strong earning potential. Further, the foundation should have the philosophy of carrying out socially responsible investing. That is, it should invest in companies that adhere to a certain set of moral or ethical business standards.

    The investment strategy that the foundation should have should be "buy and hold." David and Lucile Packard Foundation should use this strategy because it is a long term investment strategy. This strategy has been recommended because long term equity markets give a good rate of return. Also since the foundation is a large investor it should focus on market timing. It should buy stocks on the lows and sell on the highs. The foundation can predict future market price movements through forecasting of economic conditions or analyzing the market conditions. The foundation can carry out technical and fundamental analysis.

    Step 3
    To a great extent the philosophy and the strategy of an individual investor can differ from that of David and Lucile Packard Foundation. The investment philosophy refers to the set of guiding principles that form a company's, individuals', or a foundation's investment decision making. The investment strategy represents the rules, or procedures that guide the ...

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