Private foundations are gaining ground after the declines of the recession, according to the 2012 Council on Foundations-Commonfund study released Thursday.
The Study for Investments of Private Foundations shows that foundation endowments returned an average of 12 percent (net of fees) last year, after a 0.7 percent decline in 2011.
The study was the result of a collaboration between the Council on Foundations, a nonprofit membership association of grant-making foundations, and the Commonfund Institute, the education and research arm of Commonfund. The study included 140 foundations with $78.7 billion in assets.
Viewing the foundations' returns by size of foundation found only slight differences. Foundations with assets between $101 million and $500 million saw returns of 12.4 percent. Foundations with assets of more than $500 million realized an average return of 11.9 percent, while foundations with assets under $101 million produced an average return of 11.4 percent.
Trailing three-year returns averaged 7.9 percent compared to 10.3 percent in 2011. The decline reflects the fact that the strong returns of 2009 have been dropped from the three-year calculation, the study says.
Trailing five-year returns averaged 1.8 percent versus 1.4 percent in the prior year, reflecting the continuing inclusion of the losses in 2008. For the trailing 10-year period, returns averaged 7.9 percent compared with last year’s 5.2 percent, as the losses from 2002 are no longer included.
The increase in returns restores the much needed growth in the endowment, says John S. Griswold, executive director of Commonfund Institute. “Even more heartening is the higher 10-year return, an average of almost 8 percent. Last year’s 10-year return, in the 5 percent range, was simply not high enough to sustain spending levels once inflation and investment management costs are taken into account.”
Forty-seven percent of the foundations reported their mission-related spending in dollar terms continued to grow.
“We are encouraged to see growth in mission-related investing and even more encouraged that giving is increasing even though the economic recovery has remained unevenly,” says Vikki Spruill, president and CEO of the Council on Foundations.
International equities and domestic equities showed the largest increase in return rates, with a 17.5 percent gain in internationals and 16.3 percent for domestics. Among other asset classes, fixed income returned 7.1 percent and alternative strategies returned 7 percent.
Continuing the deleveraging trend of recent years, the 13 foundations reporting that they carried debt had an average debt level of $46.5 million last year compared to $54.1 million in 2011.
