Small Foundations Are More Generous Than Larger Ones, Study Finds

Title: 2017 Report on Private Foundation Investment Performance

Organization: Foundation Source

Summary: Foundations with less than $1 million in endowment holdings were more generous than their larger peers last year and as a result saw their overall endowment balances shrink an average of 1.4 percent in 2016.

Foundation Source surveyed 876 private-foundation clients with less than $50 million in assets. Such small and midsize foundations represent 98 percent of all private foundations in the United States.

The survey found that foundations with $10 to $50 million in endowment holdings had the highest average increase, at 6.8 percent. Across all foundations, the average increase was 5.9 percent.

“Why did the average asset balances of small foundations decline while larger foundations grew?” the report says. “Smaller foundations disbursed a greater percentage of their assets in grants and expenses.”

Foundations of all sizes gave more than the 5 percent minimum required by federal law, the report says, but it did not offer more detail.

Among the other findings:

• From 2015 to 2016, total endowment holdings among the foundations surveyed increased $200 million to $3.7 billion.
• When it came to the performance of their investments, the average returns across all foundations surveyed was 6.8 percent. Foundations with assets of $1 to $10 saw the best returns, at 7 percent.
• Across all foundations, the share of assets allocated to equities increased to 48.2 percent, up from 46.7 percent in 2015.

Stronger Investment Returns

The investment returns cited in the Foundation Source report are in line with returns cited in another report released earlier this year.

In the Council on Foundations-Commonfund annual study of foundations’ investment performance, private foundations reported an average return of 6.4 percent. Community foundations, which tend to invest heavily in U.S.-based equities, did better, with an average return of 7.3 percent.

It was a big improvement over 2015, when private foundations had an average return of zero percent and community foundations reported a minus 1.8 percent return, according to the Commonfund study.