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Foundations report highest returns in 3 years — survey

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Private foundations reported an average return of 6.4% in 2016, while community foundations reported returns of 7.3% for the same period, according to a survey conducted by the Council on Foundations and the Commonfund Institute.

Both returns were higher than those reported for 2015 and 2014. For 2015, private foundations reported an average return of zero, while participating community foundations reported a -1.8% average return. Comparable returns for 2014 were 6.1% and 4.8%, respectively.

Mark J.P. Anson, chief investment officer of Commonfund, said at a news conference call Thursday,that, despite 2016 being a "most unusual year," it "turned out to be a very good year."

"Throughout that, the stock market continued to rally, bonds continued to rally, credit markets continued to rally," Mr. Anson said. "The general message from the financial markets was, 'Don't worry, be happy.'"

The fifth annual survey showed that larger private foundations realized slightly higher returns than their community foundation peers, but community foundations as a group outperformed private foundations by 90 basis points.

Among liquid investment strategies, U.S. equities had the highest average returns, at 11.8% for private foundations and 12.4% for community foundations.

Among alternative strategies, energy and natural resources had the highest average returns, at 12.9% for private foundations and 10.4% for community foundations.

Asset allocations remained largely stable for both private and community foundations, with virtually no change for the five major allocation categories — U.S. equities, international equities, fixed income, alternatives and cash, according to the survey.

The survey also revealed that 43% of private foundations and 59% of community foundations increased their spending in dollar terms, by 7.6% and 9%, respectively, over 2015.

Some 203 foundations participated in the survey — 122 private and 80 community. These foundations had $96.3 billion in total endowment assets as of Dec. 31.