Family offices, endowments and foundations: what Australians are learning from US peers

The endowment model in Australia looks different from its American blueprint. Australian not-for-profits are re-engineering it around tax advantages, pooled vehicles and outsourced governance to fit constraints their US peers never face.

For the past two decades, the American ‘endowment model’ has been the reference point for institutions trying to make a pool of capital last forever. The endowment model in Australia has followed a different path.

It was pioneered at Yale under David Swensen. The proposition is simple: a perpetual fund with a long horizon can tolerate illiquidity. The strategy is to load up on private equity, venture capital and other alternatives, spend a disciplined slice each year, and let the rest compound.

Australian not-for-profits have watched this work at scale and drawn lessons from it. What is striking, in 2026, is how little of the model they are copying wholesale. Australian not-for-profits are quietly re-engineering it to fit constraints their US peers never face.

The gap starts with size. The 2025 NACUBO-Commonfund Study of Endowments, released in February 2026, covered 657 US colleges and universities holding $944 billion between them. They returned 10.9 per cent in FY25 and 7.7 per cent a year over the past decade, at an average effective spending rate of 4.9 per cent.

The median US endowment was $253.6 million. By contrast, the entire pool of net assets held in Australian ancillary funds, the closest local equivalent, reached about $16.4 billion in 2020-21 on Productivity Commission figures. That is smaller than a single mid-tier Ivy League fund.

Australian NFPs are not playing a smaller version of the same game; they are playing a different one.

Where the endowment model in Australia does not translate

Three constraints break the direct copy:

The first is scale itself. The US model’s engine is access to top-quartile private-market managers, and that access is gated by size. NACUBO found institutions above $5 billion held 62.5 per cent of their portfolios in alternatives, against just 12.5 per cent for those under $50 million. Most Australian foundations sit well below that lower threshold. This puts the very asset classes that drive the model’s returns largely out of reach.
The second is the payout rule. A US institution sets its own spending rate, and the typical 4.9 per cent is a policy choice. An Australian private ancillary fund must distribute at least 5 per cent of net assets every year. A public ancillary fund must distribute at least 4 per cent. This is a floor, not a target, and one that sits above what many endowments would otherwise choose. Higher forced distributions leave less to compound and less room to lock capital away in illiquid strategies.
The third is governance. Smaller funds rarely have an in-house investment team, and the patient, well-paced private markets program the model assumes is difficult to run without one.

What Australian NFPs are adapting

The interesting work lies in how Australian not-for-profits have adapted the endowment model in Australia to local conditions. The most distinctive adaptation is built on tax.

Because Australian charities are tax-exempt and can claim refundable franking credits on franked dividends, domestic equities are worth materially more to a foundation than to almost any other investor.

JBWere models total returns of roughly 8.5 per cent a year for a charitable endowment once the franking rebate is included. Where US endowments chase global alternatives, a rational Australian fund tilts home, toward fully franked Australian equities. That is adaptation, not imitation.

The second adaptation is pooling. Unable to reach scale alone, many NFPs join collective vehicles that buy it for them.

Perpetual alone manages more than 1,000 philanthropic trusts and endowments through structures such as the Perpetual Foundation. This gives small funds shared access to investment expertise, administration and, increasingly, private-market exposure they could never assemble individually. Community foundations and sub-funds within public ancillary funds do the same job.

The third is outsourcing the investment office. NACUBO reported that 46.2 per cent of US institutions now use an outsourced chief investment officer. The model is even more natural in Australia, where the governance gap is wider and the outsourced-trustee tradition runs deep.

Koda Capital and similar advisers have built their not-for-profit practices around exactly this: giving boards endowment-grade investment governance without an in-house team.

For trustees, the options have narrowed to a handful of defensible paths.

The first is to pool for scale rather than going it alone, accepting a collective vehicle’s constraints in exchange for access and lower cost.
The second is to build the portfolio around the tax settings the fund actually has, leaning into the franking-credit advantage instead of importing a US asset mix designed for a different system.
The third is to outsource the investment function, closing the capability gap through an OCIO or asset consultant rather than under-resourcing it internally.
The fourth, and most consequential, is to decide explicitly between perpetuity and spend-down: whether the fund exists to give modestly forever or to deploy its capital harder now. Mandatory distributions and the national push to lift giving both tilt the calculus toward spending sooner.

The policy backdrop sharpens the choice

That push is not abstract. The Productivity Commission’s 2024 report, Future Foundations for Giving, restated the government’s goal of doubling philanthropic giving by 2030 and expects giving to rise by $6.4 billion, or 48 per cent in real terms, by then. It recommended setting the ancillary-fund minimum distribution somewhere between 5 and 8 per cent, with smoothing over three years, and renaming ancillary funds as “giving funds.”

The direction of policy is plainly to give more, and sooner. Every notch higher on the mandated payout pulls Australian practice further from the low-spend, illiquid-heavy US archetype and toward a model in which capital is expected to work harder in the present.

The lesson is the framework, not the portfolio

What Australian NFPs are learning from their US peers, then, is not the asset allocation. That allocation is built on scale and tax settings local funds do not share. Copying it would be a category error.

What does translate is the discipline beneath it: a clearly defined purpose, an explicit and defensible spending policy, genuine investment governance, and an honest decision about whether the fund is built to last forever or to spend itself out in pursuit of impact.

The endowment model in Australia, applied well, is not a portfolio to copy. It is a framework for thinking about patient capital, and that, Australian foundations can use.