I do not get why foundations/endowments would have longer terms investment horizons, while insurance companies have shorter horizons. How are they different in that aspect, because don’t endowments and foundations also make payouts throughout their investment horizons?
They have very different liquidity requirements.
The investment horizon differs based on what type of insurance company.
Life Insurance companies have fairly low liquidity requirements, because their payouts are pretty predictable (with large sample sizes, the expected payout in a given year gets closer and closer to the one predicted by mortality tables).
On the other hand, Property/Casualty Insurance companies can have large, unexpected payouts in any given year. Think of an insurance company with a lot of policies in states that get hammered by a lot of major storms in a given year - it’s payouts in that year will be much higher than expected. So, they have a greater need for liquidity to avoid having to sell off assets at fire-sale prices.
Does the life insurance concept apply to endowments and foundation, that make predictable cash flow payments to the entity (thus resulting in relatively lower liquidity requirements)?
An endowment/foundation would have the goal of being around for several generations, whereas a life insurer wants to ensure that it can cover cash outflows over the future lifetime of its existing policyholders. While both would have horizons measured in decades, I can see where the foundation/endowment would have a longer horizon.
An endowment/foundation typically has a spend goal of “x% of portfolio and preserve capital”, where x is sometimes averaged to smooth out the effects of portfolio volatilty. In a sense, that does ensure some predictability in payment.