Community foundations posted an average 10.7 percent return on investment last year, a new report says.
The “Community Foundation Investment Survey,” conducted by the Council on Foundations in Washington, D.C., includes responses from 169 of the council’s community foundation members.
That group includes more than four in 10 community foundations with assets greater than $5 million, and more than six in 10 of those with assets of $25 million or more, the council says.
While the average return for the group was down from 22 percent in 2003, the strong showing in 2004 represented the second year of double-digit growth and brought three-year median returns to almost 7 percent.
Assets for participating community foundations have increased all but two years since 1994, the report says, growing by more than 10 percent in seven of those 11 years.
Community foundation spending rates, which include fees for both investment management and administration, have been more than offset by median returns over the past 15 years, increasing foundations’ purchasing power over time.
As of the end of 2004, 65.4 percent of the combined assets of community foundations surveyed were invested in equities, 22.1 percent in fixed income, 9.8 percent in alternative strategies and 2.7 percent in cash, the report says.
Over the last 15 years, allocation of assets to alternative investing strategies has grown, from 0.9 percent of assets in 1999 to 9.8 percent in 2004, with hedge funds representing the largest share.
As of 2004, more than half of all foundations surveyed allocated at least a portion of their assets to alternative strategies, with four in 10 investing in hedge funds, up from one in four the year before.
The growth in alternative strategies appears to have come at the expense of fixed income, which has been falling since 1996 and reached its lowest level in 2004, the report says.