Foundations Report Robust Investment Returns in FY13

Investment returns for private foundations averaged 15.6 percent (net of fees) in fiscal year 2013, up from 12 percent in FY12, a study by the Commonfund Institute and the Council on Foundations finds.

Based on data from a hundred and fifty-three private foundations, the annual survey found that funders with assets of more than $500 million saw the highest average return, 16.5 percent, while those with assets between $101 million and $500 million and those with assets of less than $101 million reported average returns of 15.5 percent and 15.2 percent, respectively. The study also found that trailing three-year returns averaged 8.7 percent, up from 7.9 percent in FY12; trailing five-year returns jumped to 12 percent from 1.7 percent, as the -25.9 percent return of FY08 dropped out of the five-year calculation; and trailing ten-year returns averaged 6.9 percent, compared with 7.9 percent the previous year.

Among asset classes, domestic equities produced the highest returns — an average of 31.8 percent, or double the 15.9 percent return for international equities — while alternative strategies generated a return of 7.3 percent and short-term securities/cash/other returned 0.1 percent. Fixed income produced a negative return (-0.7 percent) in FY13, as historically low interest rates began to rise and bond prices fell. Within the category of alternative strategies, distressed debt returned 24.4 percent, followed by venture capital (14.2 percent), marketable alternative strategies (12.6 percent), private equity (11.4 percent).

As the year ended, the foundations in the sample held total assets of $94.1 billion and had allocated 24 percent of those assets to domestic equities (compared with 26 percent in FY12), 9 percent to fixed income (vs. 11 percent), 20 percent to international equities (vs. 16 percent), 42 percent to alternative strategies (vs. 42 percent), and 5 percent to short-term securities/cash/other (vs. 5 percent).

"This report contains good news for the country," Council on Foundations president and CEO Vikki Spruill and Commonfund Institute executive director John S. Griswold 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."

"Private Foundations’ Fiscal Year 2013 Investment Returns Build on FY2012 Gains." Commonfund and Council on Foundations Press Release 07/23/2014.