In its latest findings, the Commonfund Institute said that foundation portfolios saw the steepest losses since the 2008 Global Financial Crisis last year, with double digit annualized losses reported in 2022, on average.
The Council on Foundations – Commonfund Study of Investment of Endowments for Private and Community Foundations looked at the annual returns of 277 foundations. Over the calendar year 2022, endowed funds for 171 private foundations returned on average -12%, after 2021 saw a robust 16.3% gain for foundations.
Returns were worse for community foundations that averaged -13.3%, following average gains of 14.8% in 2021.
“We are always concerned when we see returns — long- or short-term — decline. Fortunately, financial markets have generally produced good returns in recent years, so we are hopeful that 2022 will prove to be an anomaly and not a trend. Strong year-to-date results in 2023 give credence to our optimism,” said Kathleen P. Enright, president and CEO of the Council on Foundations, and George Suttles, executive director of Commonfund Institute, in a joint statement.
The 11th annual study looked at portfolios with combined assets of $119.6 billion.
Both Enright and Suttles remarked that only a few years ago that foundations’ 10-year returns were only slightly above the 5% level, which were not enough to fund grant making or meeting operating expenses. They say that foundations have remained committed to maintaining spending levels in support of their missions despite the challenges of recent years such as the global pandemic and rising inflation.
Drilling down to average asset mixes, the stats remain relatively unchanged with alternative investment strategies rising to 51% of assets, up from 50% in 2021 among private foundations. Private foundations hold double the allocation to alternatives of community foundations, which tend to investment more in U.S. equities and fixed income. The principal alternative strategies remain private equity (U.S. and international private equity, venture capital, private credit, private real estate and energy and natural resources) and marketable alternatives (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives.
