Foundations, Operating Charities Report 2009 Investment Returns of 21 Percent

Foundations and operating charities reported average investment returns of 21 percent in fiscal year 2009, up sharply from a -26 percent decline in 2008, two studies from the Connecticut-based Commonfund Institute find.

The study, the 2010 Commonfund Benchmarks Study of Foundations, was based on a survey of 130 private foundations and 43 community foundations with assets totaling $103.7 billion. Another study, the 2010 Commonfund Benchmarks Study of Operating Charities, referenced 66 cultural, religious, and social service institutions which reported an average net return of 21.5 percent in 2009, rebounding smartly from a -25.8 percent decline in 2008.

While 2009 saw the highest returns for foundations and operating charities in the eight and six years, respectively, the studies have been conducted, the studies found that the average three- and five-year returns for foundations were -1.1 percent and 3.6 percent for foundations and -0.7 percent and 4.0 percent for operating charities. The studies also found that giving remained weak in 2009, with 38 percent of operating charities reporting a decline in giving revenue, compared with 35 percent in 2008, and only 20 percent reporting an increase, down from 37 percent in 2008.

The surveyed foundations saw the strongest returns, averaging 39.1 percent, from international equities. Other leading asset classes averaged 30.0 percent (domestic equities); 25.9 percent (distressed debt); and 21.8 percent (energy and natural resources, commodities, and managed futures), with the weakest return, -13.5 percent, delivered by private equity real estate investments. In addition, the foundations reported asset allocations of 28 percent to domestic equities, 14 percent to fixed income, 16 percent to international equities, 35 percent to alternative strategies, and 7 percent to short-term securities and cash.

"While the 2009 return was a great relief for foundations and operating charities participating in the two studies," said Commonfund Institute executive director John S. Griswold, "the fact remains that returns in the range of 21 percent were not enough to move trailing three-year returns into positive territory and five-year returns in the upper 3 percent range are well short of covering these nonprofit organizations' spending, inflation, and costs."