Foundations and charities reported returns of more than 20% in 2009, an increase of almost 50 percentage points from a year earlier, with gains in almost all asset classes, according to a Commonfund Institute survey.
The returns also were the highest in the eight-year history of the institute’s Benchmark Study of Foundations and in the six-year history of its separate Benchmark Study of Operating Charities.
Foundations returned an average 20.9% and operating charities returned 21.5% for the year ended Dec. 31, 2009. Both suffered losses of 26% in 2008. Three-year returns for foundations and charities were an annualized -1.1% and -0.7%, respectively, and five-year returns were 3.6% and 4%, respectively.
The previous average high return for foundations was 17.6% in 2003, following the rebound from the collapse of the tech bubble, John S. Griswold, Commonfund executive director, said in a telephone interview.
Mr. Griswold said that while the high returns were a relief to those organizations, they fall short of covering spending, inflation and other costs for many.
Mr. Griswold said donations to charities and community foundations are down for the year. Spending is up for foundations, he said.
As of Dec. 31, 2009, international equities was the top performer for foundations, returning 39.1%; followed by domestic equities, at 30%; distressed debt, 25.9%; commodities and managed futures, 22.3%; marketable alternative strategies — including hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives — at 18.6%; energy and natural resources, 15.5%; fixed income, 13.1%; alternatives, 10.5%; and short-term securities and cash, 9.2%. The negative returns came in private equity, at -0.3%; venture capital, -3.6%; and private equity real estate, -13.5%.
The average asset allocation for foundations at year-end 2009, was 35% alternatives, 28% domestic equities, 16% international equities, 14% fixed income and 7% short-term securities, cash and other investments.