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Endowments and Foundations

Foundations report strong returns in fiscal year 2017 – study

Private and community foundations averaged returns of 15% and 15.1%, respectively, in fiscal year 2017, according to the 2017 Council on Foundations-Commonfund Study of Investment of Endowments for Private and Community Foundations released Thursday.

The study looked at 143 private foundations and 81 community foundations, with a total of $104.4 billion in assets as of Dec. 31.

"This represents the strongest performance that we have seen in the past four years," said Deborah Spalding, Commonfund deputy chief investment officer and managing director, on a briefing call. "We had a great year in fiscal year 2017, with very strong markets across the board, and that was driven by strong global growth."

Ms. Spalding said private foundations tend to mirror large university endowments, with more investment diversification and more exposure to alternative strategies.

Among liquid investment strategies, non-U.S. equities had the strongest returns, at 26.4% for private and 26.1% for community foundations.

Among alternative strategies, private equity was the top performer, at 10% for private and 11.1% for community foundations.

"We recommend that all the participants use these survey results as a conversation starter, to think about this as a signpost, not a road map. That's a reminder to stick to your rebalancing policy," said Cathleen Rittereiser, Commonfund Institute executive director, on the call.

Gene Cochrane, interim president and CEO of the Council on Foundations and past president of Duke University's endowment, said most foundations are exceeding their 5% target spend rate. The survey found that 57% of private foundations and 56% of community foundations increased spending in dollar terms by 6.8% and 8.7%, respectively, in the 2017 fiscal year.

Asked whether this rate of growth can last, Ms. Spalding said, "We do believe the economic growth continues, as well as corporate earnings. However, we are mindful that there are high valuations in the private equity market as well as the public market, so some of those strong returns might not be seen in the future ... We do think the market is likely to be on margin and a bit more volatile than we have seen in the past."