Foundation, Operating Charities Report Investment Returns of 12 Percent

Foundations and operating charities reported an average investment return of 12 percent in fiscal year 2010 — the second consecutive year of double-digit growth, though a significant drop from the average investment return of 21 percent for FY09, two studies from the Commonfund Institute find.

According to the 2011 Commonfund Benchmarks Study of Foundations, the average total net return earned by foundations in FY10 was 12.5 percent, compared with an average net return of 20.9 percent in FY09 and a -26 percent return in FY08. A second study, the 2011 Commonfund Benchmarks Study of Operating Charities, found that the average total net return for respondents in FY10 was 11.6 percent, compared with 21.5 percent in 2009 and -25.8 percent in 2008.

The average returns in 2010 were the fourth highest in the nine years that the foundation study has been conducted and the third highest in the seven years of the operating charities study. Commonfund also reported that the average three- and five-year returns for participating foundations was -0.3 percent and 4.2 percent, respectively, and 0.1 percent and 4.7 percent for operating charities. For the first time, the organization also calculated ten-year returns, which came in at 5.1 percent for foundations and 4.9 percent for operating charities.

Domestic equities, with an average return of 17.7 percent for all study participants, were the best performer in 2010, followed by international equities (14.5 percent), alternative strategies (10.6 percent), fixed income (8.1 percent), and short-term securities/cash/other (9.2 percent).

"Two consecutive years of good performance is a great relief for foundations and operating charities participating in the two studies after the serious erosion in asset values experienced in FY2008," said Commonfund Institute executive director John S. Griswold. "Over the nine years since the inception of the study, after accounting for investment returns and spending, the average foundation is slightly below its original nominal dollar value. This means that the last nine years have left foundations with less, in real terms, than they began with."