May 24, 2011 | Read Time: 2 minutes
Endowments fared well last year, achieving investment returns of about 12 percent, but that is far less than what they achieved in 2009, when returns topped about 20 percent, according to two studies—one of foundations and the other of charities—released today by the Commonfund Institute.
While returns were smaller compared with last year, they were a marked improvement over 2008, when returns on investment portfolios dropped 26 percent.
Still, the study on foundations found some disturbing news about foundation endowments over the past nine years, said John S. Griswold, the executive director of the institute, the research arm of Commonfund, a Wilton, Conn., company that manages endowments for nonprofit clients.
“After accounting for investment returns and spending, the average foundation is slightly below its original nominal dollar value,” he says. “This means that the last nine years have left foundations with less, in real terms, than they began with.”
Commonfund did not produce the same analysis for the 69 nonprofits it studied, which include a mix of cultural, social-service, and religious groups as well as operating foundations—organizations that run their own programs and do less grant making than a typical foundation.
‘A Great Relief’
The studies found little difference between the return on investment for endowments held by foundations and those held by charities.
Among 175 private foundations and community foundations, the Commonfund Institute found that the average return was 12.5 percent in 2010, compared with 20.9 percent the previous year. For the charities and operating funds, the institute reported an average net return of 11.6 percent compared with 21.5 percent in 2009.
“Two consecutive years of good performance is a great relief for foundations and operating charities participating in the two studies after the serious erosion in asset values experienced in FY 2008,” said Mr. Griswold.
Among other key findings:
- Only 10 percent of the charities in the survey reported increased donations in 2010, compared with 20 percent last year. However, fewer of them reported decreased donations: 17 percent said giving dropped in 2010, compared with 38 percent in 2009.
- The average amount foundations distributed from their endowments in 2010 was 5.8 percent, about the same as in the previous year. Foundations are required by law to give away at least 5 percent of their assets, on average, each year.
A summary of the studies’ findings is available free on Commonfund’s Web site. Nonprofits may also request a full report on both studies at no charge. Go to: http://www.commonfund.org.
