Foundation and Operating Charity Investments Slightly Down in 2011

Two studies released by the Commonfund indicate that investment returns were slightly negative in FY2011 after rising in FY2010 and FY2009.  It was the first time since FY2008 that foundations and operating charities reported negative returns.

John S. Griswold, Executive Director of the Commonfund Institute, called 2011 “a frustrating year for foundations and operating charities.” He said, “On top of the negative investment returns, the addition of inflation and investment management costs means that these institutions fell a little farther behind financially, even before spending for mission support. It’s fortunate that this year was preceded by the two strong years of FY2009 and FY2010. We are also encouraged by the fact that gifts and donations to operating charities rose again in FY2011, even though giving remained less than robust.”

For the 179 independent/private foundations and community foundations participating in the 2012 Commonfund Benchmarks Study of Foundations, the average FY2011 total net return was -0.9 percent compared with 12.5 percent in FY2010 and 20.9 percent in FY2009 (all returns are net of fees).   

The return was even worse for operating charities.  The 68 operating charities­ comprising cultural, religious and social service institutions ­participating in the 2012 Commonfund Benchmarks Study of Operating Charities reported an average net return on investment funds of -1.8 percent compared with 11.6 percent in FY2010 and 21.5 percent in FY2009.

Spending strengthened among foundations but slipped modestly among operating charities. Fifty percent of the foundations reported higher spending in FY2011.  Only 38 percent reported higher spending in FY2010. Underscoring the improvement in spending, just 25 percent of foundations reported decreasing their spending in dollars, down from 43 percent in FY2010. Thirteen percent reported no change in spending.

Among operating charities, 30 percent reported increasing their spending in dollars, up from 25 percent the year before. While 35 percent reported a decrease in spending in dollars, this was down sharply from 49 percent in FY2010. Twenty-two percent reported no change versus 19 percent last year.

In addition to information on investment returns and spending, the Commonfund reports cover asset allocations, debt load, staffing for investment matters, and changes in gifts received. Overall, the reports provide insights on the challenging financial environment facing foundations and operating charities.    

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