July 22, 2004 | Read Time: 2 minutes
Foundation endowments grew by 17 percent last year, according to a new study by the Commonfund Institute. The study,
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ALSO SEE: » Related tables: Foundation Endowments |
based on data from 272 private, community, and public foundations, said foundations had average losses of 8.7 percent in 2002.
Foundation endowments outperformed the three major equity indexes in 2003. The Dow Jones industrial average dropped 2.8 percent over the same period, while the Standard & Poor’s 500 lost 1.6 percent and the Nasdaq rose 10.9 percent. Foundations with more than $1-billion in assets performed best, with returns averaging 20.5 percent, while the smallest foundations in the study (those with assets of $50-million to $100-million) had the lowest average returns, at 15.5 percent.
The Commonfund Institute is the research arm of Commonfund, a company in Wilton, Conn., that manages approximately $29-billion in assets for more than 1,600 educational institutions, foundations, and health-care and other nonprofit organizations.
Along with the increased return on investments, foundations also distributed a slightly higher percentage of their assets in 2003 than they did in 2002. The average share of assets spent rose to 6.3 percent from 6 percent.
However, that change is probably accounted for by a relatively small number of foundations, because two-thirds of the foundations in the study reported they had not changed their spending rates, and nearly one-fourth of foundations (23 percent) reported they had decreased their spending rates.
Nearly half of all the foundation assets in the study (48 percent) were invested in stocks of American companies. The biggest portion of those investments were in the stocks of large corporations, which accounted for 61 percent of all the domestic stock holdings of foundations. The percentage of endowments invested in American companies far exceeded the percentage invested in the next largest type of assets — 21 percent in fixed-income holdings such as bonds.
The smallest foundations followed the most conservative investment strategies, with 79 percent of their assets in domestic stocks and investments that guarantee fixed returns. That contrasts with the largest foundations, which had one-third of their assets in other holdings, such as hedge funds, international investments, and short-term securities.
To a significant extent, the study found, the distribution of investments was driven by contributions of stocks from major donors.
About half the community and public foundations (49 percent) said they had received increased gifts and donations in 2003, compared with 22 percent that reported increases in 2002. Among large foundations, two-thirds reported they had seen a rise in the amount of donations.
The foundations in the study had assets totaling $138-billion.
Copies of “2004 Commonfund Benchmarks Study-Foundations 2004″ can be obtained free of charge by nonprofit organizations by contacting John S. Griswold Jr., executive director of the Commonfund Institute, at (203) 563-5000, or by e-mail at jgriswol@cfund.org.
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2002 fiscal year (based on 192 foundations) |
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2003 fiscal year (based on 242 foundations) |
| Average Return of Foundation Endowments of Different Sizes | ||||
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$50- to $100-million |
-10.3%
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15.5%
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$101- to $500-million |
-8.6%
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16.8%
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$501- to $1-billion |
-7.9%
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17.0%
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Over $1-billion |
-7.7%
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20.5%
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All foundations |
-8.7%
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17.0%
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| How Assets Are Invested | ||
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Short-term securities and cash | 5% |
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International equities | 12% |
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Alternative strategies | 14% |
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Domestic equities | 48% |
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Fixed income | 21% |
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