Community foundation returns

Investment returns for community foundations have fallen from the previous two years but continue to outpace national trends, a new report says.

The average community foundation posted investment returns of 7 percent in 2005, compared to double-digit growth in the two prior years, says the Council on Foundation’s latest “Investment Performance and Practices of Community Foundations.”

The report surveyed 165 foundations, representing four in 10 community foundations with assets of $5 million, and more and more than half of those with assets of $25 million or more.

The group’s 15-year median return was 9.7 percent, more than enough to cover an estimated spending rate of 5.5 percent of assets.

The average three-year year investment return was more than 13 percent each year.

Almost two-thirds of the combined assets of community foundations were invested in equities as of the end of 2005, the report says, while almost one-quarter was in fixed income, just over one-tenth was in alternative strategies and 2.4 percent was in cash.

Among equities, investment in the international markets more than doubled to 14.2 percent of total portfolio assets last year from 6 percent a decade ago.

Reliance on alternative strategies jumped to 11.2 percent last year from less than 1 percent in 1999, the report says, with an increasing reliance on hedge funds.

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