Foundation Investment Returns Fell in 2014, Study Finds

Year-over-year investment returns (net of fees) for private and community foundations fell in fiscal year 2014, after robust gains in 2013, a study by the Commonfund Institute and the Council on Foundations finds.

Based on data from 244 private and community foundations, the annual survey found that the 142 private foundations who responded to the survey reported an average return of 6.1 percent in 2014, down from 15.6 percent in FY2013, while the 102 community foundations that participated reported an average return of 4.8 percent, compared to 15.2 percent in 2013. Across all asset classes, private foundations performed better than community foundations, generating a return of 7.1 percent, compared to the average return of 4.9 percent for community foundations. The study also found that the average return for private foundations with assets between $101 million and $500 million was 5.9 percent, compared to 4.2 percent for community foundations that size. Among those with assets below $101 million, private foundations saw average returns of 5.9 percent, compared to an average of 5.0 percent for community foundations.

A similar pattern holds for longer time periods. Private foundations registered an average return of 11.1 percent for the trailing three-year period, for example, while community foundation returns averaged 10.5 percent. For the trailing five-year period, the average return for private foundations was 9.2 percent, while community foundations gained 8.7 percent. And for the trailing ten-year period, both private and community foundation reported returns of 6.3 percent.

The majority of institutions responding to the survey (59 percent of private foundations and 61 percent of community foundations) also reported increases in their mission-related spending. For private foundations, the average rate of increase was 21.11 percent, while among community foundations the average increase was 33.9 percent.

"This research also helps us understand how the economic recovery has impacted foundation decision-making," said Vikki Spruill, president and CEO of the Council on Foundations. "Recent investment gains were sufficient to fund foundations’ mission-related grantmaking, while also keeping pace with inflation and the cost of managing investment programs."