Private foundations’ investment returns rose to an average of 15.6% in 2013, according to a survey released Wednesday by the Council on Foundations and Commonfund Institute.
Survey data showed that foundations with more than $500 million in assets had the highest return, 16.5% net of fees. Organizations with assets between $101 million and $500 million had an average return of 15.5%, and smaller foundations had an average return of 15.2%.
According to the study, trailing three-year returns for participating foundations averaged 8.7%, compared with 2012’s 7.9%.
Trailing five-year returns jumped to 12% from 1.7%, as the abysmal 2008 return of -25.9% dropped out of the five-year calculation. For the trailing 10-year period, returns averaged 6.9% compared with last year’s 7.9%.
The 2013 Council on Foundations-Commonfund Study of Investments for Private Foundations was based on data from 153 private foundations with assets of $94.1 billion.
Individuals at these institutions most knowledgeable about investment matters participated in the survey through Web-enabled questionnaires and field interviews during the first and second calendar quarters of 2014.
“This report contains good news for the country,” the leaders of the Council on Foundations and Commonfund Institute said in a joint statement. “With double-digit returns for the second year in a row, private foundations have regained solid financial footing positioning them well for community investment.”
The statement noted that an average of 56% of participating foundations reported an increase in mission-related spending, up from 47% a year ago, and only 26% reported a decrease, down from last year’s 32%.
“As communities continue to recover, they look to government, businesses and the philanthropic sector to help them find solutions. As foundation assets continue to rebound, they have more resources to invest in programs that advance the common good.”
Domestic Equities Ascendant
In fiscal 2013, domestic equities produced the highest return by far for foundations — an average of 31.8%, double the 15.9% return reported for investments in international equities, according to the study.
Alternative strategies generated a 7.3% return, while short-term securities/cash/other returned 0.1%.
Fixed income was down 0.7% in fiscal 2013 as the gradual withdrawal of market support by central banks caused historically low interest rates to rise and bond prices to fall.
Within the broad category of alternative strategies, distressed debt came out on top for the second consecutive year, at 24.4%, followed by venture capital at 14.2%.