June 12, 2007 | Read Time: 2 minutes
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 released on Tuesday by the Commonfund Institute.
Endowments of charitable institutions gained an average 13-percent investment return, the report said.
Both returns were a significant jump from 2005, when foundations and charities both achieved average returns of 7.9 percent.
“Foundation investment performance improved significantly last year due to more favorable market conditions and continuing increases in allocations to international equities and alternative investments,” John S. Griswold, Jr., executive director of the institute, said in a statement accompanying the study.
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.
The returns show a somewhat better picture for investments than The Chronicle’s recent study of 268 endowments of foundations and charities, which achieved a median investment return of 11.7 percent in their 2006 fiscal year.
At the 279 private and community foundations studied, the Commonfund study 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 institute’s five years of study. Foundations continued to decrease the portion of their endowments invested in stocks of American companies, to 33 percent of all assets last year, from 36 percent in 2005. The organizations instead increased alternative investments (to 23 percent of all investments last year, 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 for charities varied slightly by type of organization. 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 earned 12.6 percent. Endowment gains accounted for 81.5 percent of the organization’s asset growth last year. Charities dropped the percentage of their endowment they 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 Mr. Griswold via e-mail at jgriswol@cfund.org.
For those not affiliated with nonprofit groups, copies of the survey findings cost $500 apiece.
