Navigating the Regulatory and Investment Landscape for Non-Profits

Navigating the Regulatory and Investment Landscape for Non-Profits
June 27, 2025 7 mins

Navigating the Regulatory and Investment Landscape for Non-Profits

Navigating the Regulatory and Investment Landscape for Non-Profits

Non-profit organizations in the U.S., Canada and the UK in particular, face unprecedented regulatory scrutiny and financial instability. Here are ways to strengthen investment strategies at a critical time using an OCIO model.

Key Takeaways
  1. Many non-profit organizations are experiencing funding gaps and new regulatory and political pressure, requiring well-constructed portfolios for strong returns.
  2. Limited internal resources challenge non-profits to navigate complex investment environments while staying focused on their core mission.
  3. Tailored investment strategies offered by an OCIO can align investment portfolios with non-profits' missions while taking advantage of quickly changing market conditions.

With funding gaps widening and policy shifts threatening long-term planning, non-profit organizations face more financial risk than ever — from economic burdens, complex investment markets and limited internal resources, to pressure to align investment strategies with broader missions, and, in some cases, mounting political scrutiny.

There are also barriers for smaller asset owners’ private investments. For example, many endowments and foundations have capital pools that are too small to meet the high minimums for private investments. To overcome these challenges, non-profit organizations (or not-for-profit as is more commonly used in the UK) need tailored expertise to manage risks and unlock long-term growth potential. An outsourced chief investment officer (OCIO) model can help bridge this gap.

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Non-profits are navigating increased cost-of-living with reduced government support, pushing them to rely more heavily on their asset pools. These organizations need cutting-edge investment strategies and expert execution to thrive in today's volatile and complex market.

Matt Hurshman
Associate Partner, Investment, Wealth Solutions, United Kingdom

A flexible implementation framework for an OCIO allows organizations to manage their equity market exposure and quickly respond to changing conditions. For example, Aon provides OCIO services to a charitable foundation in the UK that has underlying investments across public and private markets to:

  • Build a “go anywhere” portfolio across pooled and segregated accounts.
  • Obtain derivative exposures.
  • Invest in a portfolio of single stocks to support their mission to invest responsibly.1

58%

of endowments and foundations outsource investment decisions or plan to.

Source: 2024 Outsourced-Chief Investment Officer Survey, CIO Magazine

How Non-Profits Can Benefit from Tailored Investment Solutions

  • 01
    Expert Management and Strategic Advice

    OCIO services can provide expert management of investment portfolios, leveraging implementation and manager research expertise. They also offer strategic advice to help organizations shape their objectives and build tailored solutions to help meet those objectives.

  • 02
    Cost-Effective Solutions

    OCIOs help non-profits implement sophisticated investment strategies at a reasonable cost. This is particularly important in an environment where organizations face increased cost pressures and need to maximize the efficiency of their assets.

  • 03
    Navigating Complex and Volatile Markets

    OCIOs assist non-profits in navigating the complexity and volatility of investment markets. They provide the expertise needed to manage portfolios effectively, with the goal to help organizations achieve their financial and mission-oriented objectives despite challenging economic conditions.

Challenges in Policy and Regulatory Changes

Global shifts in political, economic and market conditions have widespread impacts, posing unique challenges for non-profits. Market volatility and policy changes such as potential tariffs have put pressure on their funding sources and investment opportunities.

"The ripple effects from the U.S. political situation are not confined to country borders. The impact is felt globally, reshaping investment strategies and complicating the ability to meet near-term spending goals,” says Jennifer O’Neill, a partner in Aon’s Wealth Solutions practice in the United Kingdom.

Not-for-profit organizations in the UK and Canada face economic challenges like reduced government support and rising living costs, increasing their reliance on investment returns.

In the U.S., there is pressure on the sector from a pullback on federal funding, scrutiny of diversity, equity and inclusion initiatives and climate-focused mandates. Higher education institutions, in particular, face challenges that require strategic investment governance, including:

  • Potential changes to federal funding, increased excise taxes and international student policies
  • Risk sharing in student loan management and donor intent complexities
  • Operational challenges linked to fiscal year results

A U.S. tax bill being debated in Congress currently calls for raising the excise tax rate on net investment income for private foundations and universities based on size with the proposal increasing tax from 1.39 percent to as high as 21 percent. This increase may lead to a reduction in the funds available for charitable activities, as foundations allocate more resources to cover this higher tax burden.2

"Non-profit organizations are far from a homogenous group, and we have seen dispersion grow since the pandemic. This must be taken into account when managing endowment or foundation asset pools. Understanding the mission, stakeholders, risk tolerance and the pressures in the current paradigm are crucial to developing and managing a portfolio to meet objectives within the agreed upon risk parameters.”

– Heather Myers, Partner and Non-Profit Practice Leader, Wealth Solutions, North America

62%

of higher education institutions said government policies and visa challenges are significant barriers to enrollment globally. This number surged to 93 percent in Canada and 70 percent in the U.S.

Source: The Global Enrollment Benchmark Survey, Studyportals

Reducing Fees and Improving Efficiency at a Foundation

Case Study

Reducing Fees and Improving Efficiency at a Foundation

Aon was selected as an OCIO provider for a U.S. foundation with over $500 million in assets and a complex private equity portfolio. The foundation wanted to outsource management of its portfolio to allow staff to focus on its core mission. Aon established a multi-period evolution of the portfolio to reduce the number of managers, which reduced overall fees. We added diversifying strategies, transitioned to a new custodian better suited for alternative investments and ensured the investment strategy aligned to the foundation’s objectives of health care, inclusion and responsible investing. The OCIO model reduced resource burdens on staff and provided active management and oversight in a challenging market.1

In a world characterized by volatility and disruption, it’s crucial for non-profit organizations to review their approach to governance and investment implementation. Aon’s extensive experience in serving a diverse array of asset types, including defined benefit and defined contribution pension funds and insurers, allows us to holistically serve organizations with multiple types of asset pools.

Ready to future-proof your portfolio?

See how Aon's OCIO expertise can help your organization achieve greater impact — even in uncertain times.

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1 There is no guarantee that results or savings will be achieved if you should select Aon Investments USA Inc. (AIUSA), Aon Investments Canada Inc., Aon Investments Limited (AIL) and/or its affiliated entities to provide services to you. The experience described does not represent all recommendations made to clients nor does it represent the experience of all clients. The reader should not assume that an investment in any securities identified or a particular recommendation was or will be profitable or favorable.

2 The Math Behind the Tax: How Proposed Private Foundation Tax Increases Could Reshape Grants to Nonprofits - Johnson Center for Philanthropy, Dorothy A. Johnson Center for Philanthropy

Aon’s Thought Leaders
  • Matt Hurshman
    Associate Partner, Investment, Wealth Solutions, United Kingdom
  • Heather Myers
    Partner, Non-Profit Solutions Leader, Wealth Solutions, North America
  • Jennifer O’Neill
    Partner, Responsible Investment, Wealth Solutions, United Kingdom

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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