Private foundations report average 6.1% return in 2014 — report

Private foundations returned an average of 6.1%, net of fees, for the year ended Dec. 31, well below the 15.6% average for the same period in 2013, the Council on Foundations and the Commonfund Institute reported Thursday.

The lower returns are due primarily to a significant drop in equity investment returns, William Jarvis, managing director and head of research at the Commonfund Institute, told a news conference describing results of the third annual survey conducted jointly by Commonfund and the Council on Foundations.

The average return for domestic equities was 10.4% for the 2014 calendar year vs. 31.8% for 2013, according to a report on the survey, which covered 142 private foundations. The average return for international equities was -0.9% last year compared to a 15.9% gain in 2013.

Among other broad categories, alternative investments provided a 4.4% average return in 2014 vs. 7.3% in 2013. The only category to improve was fixed income, producing a 3.8% average return last year vs. -0.7% in 2013.

The results were similar for community foundations, the report said. Last year's average return, net of fees, was 4.8% for the 102 community foundations responding to the survey. The average return was 15.2% in 2013.

Private foundations are generally financially supported by one or a few sources, such as an individual, a family, or a corporation, according to the Council on Foundations. Community foundations have a broader base of donors.

For community foundations, the average fixed-income return rose to 3.2% last year vs. -0.7% in 2013. The average domestic equity return sank to 9.8% from 30.9%; international equity average return fell to -2.7% from 15.1%; and alternative investments' average return dropped to 3.7% from 10.2%.

The survey noted that private foundations and community foundations have different investing styles and strategies. For the former, for example, alternative strategies accounted for 44% of dollar-weighted asset allocations last year; for the latter, alternatives represented a dollar-weighted 25%. Mr. Jarvis said the disparity is likely due to the fact that donors to community foundations are more comfortable and familiar with traditional asset categories vs. alternatives.

Domestic equities accounted for the biggest dollar-weighted asset allocation (34%) among community foundations last year. For private foundations, the domestic equity dollar-weighted asset allocation was 25%.

Fixed income represented a bigger dollar-weighted asset share of the average community foundation (15%) than for the average private foundation (9%). International equities accounted for a dollar-weighted 22% share of the community foundations' assets and 18% for the private foundations' assets.

The survey was based on interviews with foundation executives during the first half of 2015. The combined assets of the private and community foundations in the survey are $107.4 billion.