Middling Returns Have Nonprofits Rethinking Investments and Spending, Survey Finds

A prolonged period of low interest rates and disappointing endowment returns has prompted nonprofits to consider changes in asset allocation and grant-making practices, according to a study released today.

The report is based on a survey conducted in December and January by Fiduciary Trust, a wealth-management firm. The poll garnered responses from 236 foundations, charities, schools, and religious institutions.

Low interest rates have squeezed nonprofits’ market gains. To ensure solvency, 46 percent of all respondents said they have already taken steps to reduce spending or are considering reductions.

Foundations are taking a slightly more aggressive tack than other nonprofit entities, with more than half saying they were considering cutting back on grant making and more than a quarter reporting they had already done so. Private grant makers, which must annually distribute at least 5 percent of their assets for a charitable purpose, fear they will deplete endowments if their investments don’t cover the required payout.

Among other findings:

• Twenty percent of the nonprofits have responded to lower interest rates by increasing the amount of risk in their investment portfolio.
• An additional 16 percent were considering a move to riskier investments.
• About 40 percent of the organizations reported that they have a written investment policy but don’t review it more frequently than every three years.