Risk and Reward: The research
My doctoral thesis deals with asset management in German foundations (Stiftungen) and undertakes a legal comparison with US fiduciary investment law. My supervisor, Prof. Dr. Birgit Weitemeyer, holds the chair for tax law at Bucerius Law School and acts as director of the Institute for Foundation Law and the Law of Non-Profit-Organizations.
Why not-for-profit organizations actually care about profit
For almost all German foundations, namely for charitable foundations that sum up to 95 % of all foundations, the investment of their assets is the only source of income that they can influence directly. Hence, it is of particular importance for German foundations to constantly elaborate on and evaluate the legal ground for an effective yet secure asset management as they are legally characterized by the dedication of their assets to an external, if not necessarily, but mainly non-profit purpose.
While German legal studies have covered most aspects of said asset management, a comparative approach towards this topic has yet to be undertaken. It is widely acknowledged throughout German legal studies that the US fiduciary law must be considered most experienced and most advanced regarding asset management of not-for-profit entities. Therefore, I have opted for the comparative approach to address hitherto unanswered questions and possibly even to be able to provide suggestions for improvement beyond that.
The comparative legal analysis of asset management in German foundations gains even more importance as the German legislation recently brought forward a comprehensive revision of German foundation law without, however, clarifying all open questions regarding asset management. Instead, the new provisions seem to be more of a patch up than a solution.
What German foundation law can learn from US fiduciary law
Researching as a Visiting Scholar at Columbia Law School does not only come with the opportunity to live and work in arguably the most inspiring city of the world, but it also connects with leading legal scholars in the U.S., allowing for an intensive, fruitful academic exchange of ideas and views.
I had the honor to discuss my thesis with David M. Schizer, Dean Emeritus and Harvey R. Miller Professor of Law of Columbia Law School, and Robert H. Sitkoff, Austin Wakeman Scott Professor of Law and John L. Gray Professor of Law of Harvard Law School. Both have expressed their conviction that the extensive experience of US fiduciaries in managing their assets will provide useful insights for German law.
In fact, the constant change of market conditions since the early 19th century, which can be seen as the beginning of modern discussions on asset management by not-for-profit organizations, has led US law to develop a broad and flexibility focused standard for fiduciary investment decisions. This standard implements the modern capital market theory into fiduciary investment law and enables trustees and directors of fiduciary relationships to adapt to any economic challenge they are facing.
The effectiveness of this approach is best demonstrated when looking at the return-of-investment of leading endowments in the US, namely the endowments supporting the Ivy League universities: the Princeton university endowment for example has managed to generate an investment return of stunning 46,9 % (in absolute numbers: $ 37.7 billion) for 2020. Even though this is considered an outlier, the average ROI for Princeton lies at 12.7 % over the last 20 years which is still a yield-percentage that most German foundations can only dream of.
Columbia Law School – Visiting Scholar at an Ivy League university
During my stay at Columbia Law School as a Visiting Scholar, I had the opportunity to use the vast collection of legal materials of the Arthur W. Diamond Law Library and to exchange ideas with fellow visiting scholars in the weekly Visiting Scholar Forum at which I gave a talk about my thesis. The ongoing discussions with fellow Visiting Scholars gave a diverse and cross-system view on my topic and allowed me to constantly reevaluate my findings and underlying assumptions.