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Foundation board
External asset management for a private foundation: selection, control and liability
How the foundation board selects an external asset manager, defines the investment mandate and reporting and retains its own responsibility.
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BRANDAUER Rechtsanwälte
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Your matter is handled by a team combining corporate law, asset succession, real estate law and dispute resolution. We review the foundation declaration, board resolutions, information rights and liability issues and set out clear next steps. Mag. Bernhard Brandauer is responsible for the legal advice, supported by further specialised lawyers of the firm where the matter requires it.
1 August 2026, Mag. Bernhard Brandauer, Rechtsanwalt
An external asset manager can provide expertise and continuous market observation. It does not assume the responsibilities of the foundation board. Selection, mandate, supervision and the response to warning signs remain board tasks.
Section 17(2) PSG requires economical conduct with the care of a prudent manager. This concerns more than individual investments. A sound system combines foundation purpose, liquidity needs, risk capacity and control of the service provider.
The article on foundation board duties of care explains the general standard. The board liability self-check helps classify information and control gaps.
Define the investment framework before selecting a manager
Define the investment framework before selecting a manager
The board should first determine what foundation purpose the assets serve. A foundation making regular distributions needs different liquidity from one safeguarding a corporate holding or real estate over the long term.
An investment policy may describe permitted asset classes, diversification, liquidity reserves, currency risk, sustainability criteria and decision thresholds. It should not promise a return. It creates a reviewable framework for the mandate and its supervision.
The foundation declaration and existing resolutions may impose specific limits. The external manager cannot receive more freedom than the board itself possesses.
Decision matrix
Four levels of effective delegation
The external mandate works only if each level has its own evidence.
| Review point | Function | Evidence |
|---|---|---|
| Objective | Purpose, liquidity and risk capacity | Board resolution and investment policy |
| Selection | Qualifications, cost, organisation and conflicts | Provider comparison and reasons |
| Mandate | Service, limits, authority and reports | Agreement and controlled access rights |
| Supervision | Deviations, cost, risk and review | Reporting minutes and remedial resolution |
Select by service, organisation and conflicts
Select by service, organisation and conflicts
The selection should cover qualifications, experience with comparable assets, organisation, reporting, costs and conflicts of interest. A prominent name or long family relationship does not replace that comparison.
It is also necessary to review how investment decisions, custody, valuation and control are separated. Payments from product providers or affiliated entities may influence product selection and should be transparent.
The resolution records which providers were compared, why the selected mandate fits the purpose and which risks are consciously accepted or excluded.
Delegation is not a release from responsibility. The foundation board may assign specialist tasks. It must shape and supervise the mandate so that the foundation remains in control.
Align the agreement, authority and reporting system
Align the agreement, authority and reporting system
The agreement needs a clear scope, investment limits, fees, benchmark, reporting, termination and liability provisions. Authority should extend only as far as required. Withdrawals and exceptional transactions may remain subject to additional approval.
Reports must show more than current performance. Useful information includes holdings, transactions, fees, risk, policy deviations, liquidity and exceptional events. The board must understand the reports and challenge inconsistencies.
The foundation auditor reviews the financial reporting. The auditor does not replace ongoing investment supervision by the board. The information channels should complement each other.
Process
Step by step towards a reliable decision
- 01Step 101Step 1
- 02Step 202Step 2
Compare providers
Review service, organisation, fees and conflicts.
- 03Step 303Step 3
Define the mandate
Align policy, agreement, authority and reports.
- 04Step 404Step 4
Review reports
Address deviations, risk and costs regularly.
- 05Step 505Step 5
Resolve measures
Amend or terminate the mandate and pursue loss where required.
Respond to deviations and separate liability questions
Respond to deviations and separate liability questions
Warning signs include repeated policy breaches, unclear valuations, unusually high turnover, opaque fees or missing reports. The board should document the cause, economic effect and required measure.
The Supreme Court protects business decisions made ex ante on adequate information, without extraneous interests and in a plausible pursuit of the foundation interest. Blind reliance on a service provider does not meet that standard.
Under section 29 PSG a body member is liable for loss caused by a culpable breach. A defensible market risk, an asset manager error and a board selection or supervision failure must be assessed separately.
Initial assessment
Where does the external asset management need attention?
The questions classify selection, mandate and ongoing supervision.
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What stage has the foundation reached?
All paths at a glance
Overview of all answers.
The selection can be completed in a structured way.
Compare providers under the same criteria and connect the resolution, policy, agreement and authority.
The mandate first needs a binding framework.
Define purpose, liquidity, risk, permitted assets and reporting before comparing providers.
Ongoing supervision is insufficient.
Organise holdings, transactions, fees, risk and policy deviations. Define questions and review dates.
A potential contractual or duty breach must be reconstructed.
Secure the agreement, policy, authority, reports and transactions. Separate market risk, manager error and board duties.
Frequently asked questions
External asset management for a private foundation: selection, control and liability
May the board delegate all asset management? +
It may delegate specialist tasks. Responsibility for selection, mandate, supervision and responding to warning signs remains with the board.
Does every foundation need an investment policy? +
The PSG does not prescribe one standard form. For managed financial assets, a written policy provides an important benchmark for mandate and control.
Is a good annual manager report enough? +
Not always. The board needs timely information on holdings, fees, risk, liquidity, transactions and deviations.
Is the board liable for every market loss? +
No. Defensible market risk must be distinguished from a culpable failure in selection or supervision.
What is the role of the foundation auditor? +
The auditor reviews financial reporting and annual accounts. Ongoing control of the asset manager remains a board task.
Continue on the portal
Related in-depth guidance
Foundation board and liability
Duties and the standard of responsibility.
Foundation board duties of care
Record information, resolution and control.
Appointing the foundation auditor
Understand independence and the audit report.
Foundation board onboarding inventory
Record assets, contracts and advisers.
Topics
Asset managementPrivate foundationFoundation boardInvestment policyControlConflict of interestLiability
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