Foundation Endowments Gain 13.7% Return

The endowments of the nation’s private and community foundations achieved an average 13.7-percent gain on their investments last year, according to an annual survey by the Commonfund Institute. Endowments of charitable institutions gained an average of 13 percent, the report said.

Both returns were a significant jump from 2005, when foundations and charities both achieved average returns of 7.9 percent.

The Commonfund Institute is the research arm of Commonfund, a company in Wilton, Conn., that manages $40-billion in assets for 1,800 educational institutions, foundations, and health-care and other nonprofit organizations.

At the 279 private and community foundations studied, the Commonfund Institute found that:

• The return on investments varied slightly by foundation size. Foundations with more than $1-billion in assets reported earning an average of 15.6 percent, while those with endowments of $51-million to $100-million grew by 12.4 percent on average.
• The average share of a foundation’s assets spent remained at 5.5 percent last year. That was the same as in 2005 and the lowest level recorded in the five years of the institute’s survey.
• Foundations continued to cut the portion of their endowments invested in stocks of American companies, down last year to 33 percent of all assets, from 36 percent in 2005. The organizations instead increased alternative investments (up to 23 percent of all investments, from 21 percent the year before), international equities (accounting for 20 percent compared with 18 percent in 2005), and cash and short-term investments (8 percent in 2006, up slightly from 7 percent the year before).

At the 101 nonprofit organizations Commonfund studied, investment returns varied slightly by type of charity. Among the key findings:

• Cultural institutions achieved a return of 13.3 percent, social-services charities earned a return of 13 percent, and religious groups, 12.6 percent. Those returns fueled much of charities’ growth, with an average 81.5 percent of asset growth coming from investment returns, and the remainder presumably from gifts and donations.
• Charities decreased the portion of their endowment spent on operations last year to an average of 5.1 percent of total assets, down from 5.5 percent in 2005 and 5.7 percent in 2004.

Copies of “Commonfund Benchmarks Study 2007 Foundations Report” and “Commonfund Benchmarks Study 2007 Operating Charities Report” are available free to nonprofit organizations and can be obtained by contacting John Griswold via e-mail at jgriswol@cfund.org. For those not affiliated with nonprofit groups, copies of the survey findings cost $500.