WASHINGTON The 50 largest European foundations have roughly 10% more assets than their U.S. peer group, but their investment portfolios are less diversified, according to new research by Watson Wyatt Worldwide.
The largest 50 European foundations have e147 billion ($194 billion) in total assets, compared with $175 billion for U.S. foundations, the study found.
The European foundations invest an average 34% of assets in founder or sponsor stocks, whereas U.S. foundations and university endowments, in particular, are more heavily invested in alternatives, with only 13% of total assets in legacy stocks, the research found.
Private equity is the most popular choice among European foundations that invest in alternatives, representing around 80% of assets invested in alternatives.
Watson Wyatt, Washington, found that both the largest U.S. and European foundations allocate a similar proportion of assets to fixed-income strategies roughly 19% for the U.S. vs. 16% for Europeans but on average, European foundations keep larger balances in short-term investments such as cash or money markets. The average short-term allocation was 9% for the Europeans vs. 4% for U.S. foundations.
European foundation investments are typically influenced by their history and respective backgrounds in deciding investments, said Mirko Cardinale, senior investment consultant; U.S. foundations generally look more toward risk management as a strategy. For instance, several Italian foundations were funded out of the privatization of that countrys savings banks, and those funds still hold proportions of their assets in the Italian banking sector, he said.
The research, which ranks the top 50 European foundations by assets, found that Italy had the largest aggregate foundation assets, but Denmark ranks highest when adjusted for gross domestic product. Spain and France rank second lowest and lowest, respectively, in both rankings.
Although there are some exceptions, there are some consequences for risk management, in terms of portfolio diversification especially as volatility has increased in recent weeks, Mr. Cardinale said. As pressure mounts for European foundations to more thoroughly diversify, Mr. Cardinale said he expects a major shift toward alternative investments. Its already starting to happen, he said. They are slow decision makers.
Transparency is also lower in Europe than in the U.S., the research found. Reporting and disclosure standards differ from country to country, making access and comparisons difficult, Mr. Cardinale said.
Germany and Switzerland are the least transparent of the 11countries examined, although that might change soon. The European Foundation Centre, Brussels designed to mirror the Foundation Center in New York is working to make European reporting standards more uniform, he said.
Neither Marianne Johnston nor Róisín Hughes, both spokeswomen for the European Foundation Centre, was available for comment at press time.