Foundations returned an average 12% net of fees for the year ended Dec. 31, according to a report from the Commonfund Institute and Council on Foundations.
2012 was a significant improvement from the average -0.7% return in 2011.
Medium-size foundations, with assets between $101 million and $500 million, had the strongest year, with an average return of 12.4%, while foundations with more than $500 million in assets returned 11.9%, and less than $101 million, 11.4%.
The largest foundations, however, had the strongest annualized three- and 10-year returns at 8.6% and 8.3%, respectively. Medium-size foundations had the best five-year annualized returns at 2.1%.
For the entire universe of 140 foundations that were analyzed, the average three-year annualized return was 7.9%; five years, 1.8%; and 10 years, 7.9%. Outside of the three-year figures, all the return numbers were an improvement from 2011.
Not surprisingly, public equity was the greatest contributor to 2012 returns. International equity led the way at 17.5%, followed by U.S. equity, 16.3%; distressed debt, 14.7%; hedge funds, 8%; private equity, 7.7%; fixed income, 7.1%; alternatives overall, 7%; real estate, 6.7%; venture capital, 6.5%; energy and natural resources, 4.6%; commodities and managed futures, 1.3%; and short-term securities, 1%.
Asset allocations for the foundations leaned more heavily toward equities than in 2011. International equity was up four percentage points to 16%, while domestic equity rose to 26% from 23%. Alternatives were down to 42% from 44%; fixed income, to 11% from 13%; and short-term securities, down to 5% from 8%.
The 140 foundations participating represent $78.7 billion in assets.
