What endowments and foundations can learn from Clarkson’s Farm

When Clarkson’s Farm launched in 2021, one point stood out: how much weather can disrupt a harvest. Too much rain, too little sun, or a mistimed frost can reduce yields and cut income for a full year. The margin for error is thin, and success often hinges on factors entirely beyond the farmer’s control.

Watching Clarkson adapt has been part of the appeal. Rather than rely only on crops and hope for better conditions next season, he has built new income streams - farm shop, restaurant, mushrooms, and goats. The result is a farm that is less reliant on any single, unpredictable income source.

This idea may seem distant from endowments and foundations. But the link is closer than it first appears.

Risk of a single “crop”

For years, endowments and foundations have relied heavily on public equities, often alongside bonds for diversification. Equities have played a vital role in helping institutions grow their capital over time, and they remain central to most portfolios today. Nearly every respondent to the 2025 Newton charity investment survey reported holding equities, reflecting the sector’s deep trust in public markets.

Yet this structure mirrors a farm built only on crops. It works when conditions are favourable but leaves exposure when conditions shift.

In recent years, that volatility has been particularly acute. Sharp swings driven by inflation shocks, interest rate changes, geopolitical tensions, and shifting growth expectations have made equity returns more unpredictable. While equities are well suited to long-term growth, they are not designed to deliver consistent, dependable income.

This creates a structural challenge.

Volatility meets spending needs

Endowments and foundations don’t just invest - they spend. Their commitments, whether funding programmes or supporting operations, tend to be relatively stable. Markets, on the other hand, are not.

When income from a portfolio falls short, the gap is often filled by selling assets. In strong markets, this is manageable. But in weaker markets, selling can lock in losses and make it harder for future growth.

This resembles a farmer selling land after a poor harvest to cover costs.

For some institutions, the pressure is even greater. Market swings have made cashflows less predictable at a time when costs have risen and other funding sources have narrowed.

Diversification with purpose

Clarkson’s response to agricultural uncertainty has been to diversify his income streams. Not into more crops, but into entirely different ventures - some of which are far less dependent on weather conditions.

For endowments and foundations, diversification should follow a similar path. It should not only increase the number of assets but introduce assets with different roles and, ideally, generate cashflows. Diversification isn’t about owning more things, it’s about owning things that behave differently.

This is where income-generating assets come into play.

Credit, infrastructure and real estate assets can generate income through interest payments, contracted revenues, or leases. This income can support spending needs. However, many high-quality liquid assets that generate income are currently trading at expensive levels. This is where illiquid assets provide a real benefit, they can offer this reliable income but also are trading at levels appealing to investors.

They can offer an illiquidity premium, enhancing expected returns, and helping to diversify portfolio risk.

It is no surprise that many of the largest and most sophisticated endowments have been increasing their allocations to illiquid assets over recent years.

Going further: the secondary market

Endowments traditionally access illiquid assets as primary investors, committing capital to new funds and waiting for it to be deployed over time.

While this approach has its merits, it also introduces challenges. Early years often show lower returns due to fees and uninvested capital. Timing of deployment also remains uncertain, and visibility over underlying assets at outset can be limited.

There is an attractive opportunity to go one step further: by accessing illiquid assets through the secondary market.

Instead of committing to new funds, investors buy into existing ones - gaining exposure to portfolios that are already built and, in many cases, already producing income.

This is an area where specialised investment managers, private wealth investors, and pension schemes have already been active, and increasingly so.

Why secondaries matter

Secondaries provide several advantages for endowments and foundations. Capital is invested straight away, avoiding the drag of uncalled commitments whilst mature portfolios generate income sooner, supporting spending needs. Secondary interests are also often purchased below their stated value, creating potential for an immediate uplift. For organisations where spending is linked to total asset values, this uplift can translate directly into increased distributable income, enhancing their ability to fund their work.

Building resilience

None of this suggests moving completely away from equities. They remain important for long‑term growth and will continue to play a central role in portfolios.

But reliance on equities alone, especially as a source of liquidity, creates risk in volatile periods.

Clarkson still grows crops. But he no longer depends on them alone. Additional ventures provide balance, allowing the farm to withstand a poor season.

Endowments and foundations can adopt a similar approach. By adding cashflow‑generating illiquid assets, portfolios can become less dependent on asset sales and better aligned with spending needs. Utilising the secondary market offers an increasingly attractive opportunity.

Looking ahead

Farming and managing an endowment share a common challenge: delivering stable outcomes in an environment shaped by factors beyond control.

For Clarkson, in addition to his, often hapless, mini projects, he has the mother of all diversifying income streams coming from his Amazon deal. Whilst a tv deal likely isn’t available for endowments, it is a relevant reminder of the role that an income stream can provide when bad weather disrupts a harvest. Resilience isn’t built by hoping for better weather, it’s built by preparing for worse.

Clarkson’s approach offers a reminder - diversification works best when it introduces new sources of income, not just more exposure to existing risks.