Foundation Endowments Dipped in 2008, but Giving Rose

Grant makers’ endowments plunged by 26 percent last year as the stock market fell to levels not seen in years, says a new report from the Commonfund Institute.
That was a sharply different picture from the one in 2007, when endowments grew by 9.9 percent. But foundations’ returns still compared favorably to the overall performance of the market.
The report was based on a survey of 221 private foundations and 69 community foundations. The Commonfund Institute is the education and research arm of Commonfund, which manages nonprofit endowments. Last year’s study surveyed foundations that held assets of at least $50-million, but this year, because so many suffered losses that pushed them below that cutoff, the minimum was $10-million.
The foundations’ returns declined by 3.1 percent when calculated over a three-year period, compared with growth of 10.8 percent for the three-year period ending in December 2007. Five-year returns were still slightly positive (2.2 percent), down from 13 percent for the five-year period ending in 2007.
Giving Was Up Slightly
Yet the average share of their funds that foundations gave away increased slightly, to 5.8 percent from 5.5 percent in 2007.
Forty-five percent of foundations in the survey said they had increased their spending by an average of 20.4 percent—five times the rate of inflation.
“These are institutions that, even in hard times, are cognizant of their missions and their responsibilities, and are trying to keep faith with their program grantees and people who rely on them for support,” said William Jarvis, managing director at the Commonfund Institute.
Mr. Jarvis, of the Commonfund Institute, said the investment performance of foundation endowments was roughly on par with that of the educational organizations and operating charities his group had also surveyed. “The big news is that all types of charities were affected more or less equally by the market downturn in the final quarter of last year,” he said.
But wealthier foundations performed slightly better. Endowments of less than $50-million recorded a decline of 28.5 percent, compared with 24.6 percent for endowments worth more than $1-billion.
Only Fixed Income Grew
Declines were reported across all types of investment categories except for fixed income, which grew by 0.6 percent.
Investments in international equities reported the sharpest drop (down 41 percent), followed by domestic equities (down 36.3 percent). Alternative strategies as a whole posted losses of 16.4 percent. Among them, venture capital and private equity performed the best, with losses of 6.2 percent and 7.8 percent, respectively.
Foundations in the study held, on average, 36 percent of their money in alternative strategies, 27 percent in domestic equities, and 16 percent in fixed income.
Alternative investments grew as a share of foundations’ overall endowments in 2008. But Mr. Jarvis said that foundations’ share of funds in alternative investments, which cannot be sold off as quickly as some other types of assets, would probably decline this year.


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Foundation Endowments Drop as Giving Rose in 2008, Survey Finds

As U.S. foundations watched the value of their investments plummet by an average of 26 percent in 2008 due to the recession and stock market collapse, they awarded an average of 5.8 percent of their assets in 2008, compared with 5.5 percent in 2007, according to a new survey from Commonfund Institute, the Associated Press reports.


The Wilton, Connecticut-based institute surveyed 290 private and community foundations and found that while nearly half the foundations reported increasing their spending, by an average of 20.4 percent, 31 percent decreased spending by nearly a third. However, because the value of their assets continued to fall, many foundations announced at the end of last year that they would cut their donations to charitable causes in 2009.


According to the Chronicle of Philanthropy, declines were reported across all types of investment categories except for fixed income, which grew by less than 1 percent. Investments in international equities reported the sharpest drop (down 41 percent), followed by domestic equities (down 36.3 percent). As a whole, alternative strategies posted losses of 16.4 percent; venture capital and private equity performed the best, with losses of 6.2 percent and 7.8 percent, respectively.


Although the endowments of the group of Broad foundations decreased in year-over-year value to $2.1 billion from $2.5 billion, they have rebounded by 10 percent during the first five months of 2009. Spokesperson Karen Denne told the AP that foundation officials are optimistic the markets will continue to improve, but it will likely take several years for the endowments to recover what they lost in 2008.


Commonfund Institute managing director William F. Jarvis told the AP that some foundations surveyed are selling assets and opening lines of credit with financial institutions to ensure that they can meet their 2009 commitments, but foundation endowment managers aren't ready to give up on the stock market. Javis noted: "Our chief investment officer is fond of saying, 'if you want to have no risk, you also have to accept that you'll get no return.'"


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