Operating Charities Report Improved Investment Returns in 2013

Investment returns for operating charities averaged 15.1 percent in fiscal year 2013, up from 11.7 percent the previous year, a report from the Commonfund Institute finds.

Based on data from sixty charities with $24.3 billion in total assets, the FY2013 Commonfund Benchmarks Study of Operating Charities found that investment returns for twenty-three cultural groups, nineteen religious institutions, and eighteen social service organizations averaged 15.1 percent, 15.3 percent, and 14.8 percent, respectively. The report also found that three-year net returns for participating operating charities averaged 8.5 percent, up from 7.6 percent in FY2012. Among asset classes, domestic equities produced the highest return (31.1 percent), followed by international equities (17.3 percent) and alternative strategies (10.5 percent), while short-term securities/cash/other returned 0 percent and fixed income produced a negative return of -0.7 percent, in contrast to a positive 7.4 percent return in 2012.

While larger operating charities, which typically have the most diversified portfolios, have produced the highest average returns in years past, in FY2013 smaller operating charities with assets under $101 million generated an average return of 16.5 percent, compared with 13.4 percent for charities with assets of more than $500 million and 15.1 percent for those with assets between $101 and $500 million.

"What is most notable about returns in FY2013 is that both more diversified and less diversified portfolios produced good returns and risk was generally muted," said Commonfund Institute executive director John S. Griswold. "We attribute much of this to the record-low interest rate investment environment created by the Federal Reserve, although we will now have to wait and see how the withdrawal of monetary support affects investment portfolios."