Two in Five German Foundations Expect Below-Inflation Returns

Two in Five German Foundations Expect Below-Inflation Returns

Nearly two in five German foundations expect their 2018 investment returns to come in below the inflation rate of 1.8 percent, a survey conducted by the Berlin-based Association of German Foundations finds. 

According to the survey, 39.1 percent of the 230 respondents anticipate below-inflation rates of return, up from 19.6 percent for 2017, while 46.5 percent anticipate above-inflation rates of return, down from 65.2 percent in 2017. The survey also found that 26.1 percent of respondents are investing their capital in impact-oriented ways, up from 22.1 percent in 2016, with 11 percent of 127 respondents planning to make impact investments.

"[Two thousand eighteen] was a tough year," said Felix Oldenburg, secretary general of the 4,400-member association. "Although the figures show that the low-interest phase is fully reflected in the return on investment, they also show that foundations have learned their lessons from the past years: they have turned from passive savers into active investors. Unfortunately, there are still too few tailor-made offers from financial service providers."

The association also reports that despite year-end turmoil in the financial markets, the number of foundations in Germany continued to grow in 2018, up 2.1 percent, or 554 new foundations, to 22,743. And while the survey found that 89 percent of all German foundations were located in western federal states, net growth in the number of foundations of 3.7 percent in the five eastern states outpaced that of the western states.

In addition, the survey found widespread support for reforms designed to give foundations more flexibility, with more than 90 percent of respondents saying they thought passage of the Business Judgement Rule — under which foundation boards could not be held liable for a foundation's missteps if they have exercised due diligence in their governance, and which would give them more protection, especially with respect to the investment of assets — to be important or very important.

"In order to have an impact on society, foundations urgently need more flexibility. Politicians have already announced changes in this regard," said Robert Bosch Foundation board chair Joachim Rogall, who chairs the board of the Association of German Foundations. "Now we hope that legislators will implement the foundation law reform quickly."

(Photo credit: GettyImages)

"Making More From Less: Foundations Growth Despite Weak Returns." Association of German Foundations Press Release 03/04/2019. "Aktuelle Grafikblätter zum Stiftungswesen in Deutschland." Association of German Foundations Web Page 02/21/2019.