The average annual returns on endowed funds declined in calendar 2022 from the prior year by the largest amount since the global financial crisis, according to a survey of 277 foundations by the Council on Foundations and Commonfund Institute released on Tuesday.
Specifically, 171 private foundations participating the survey saw average declines of a net 12% in calendar 2022, a reversal of the net 16.3% return they reported in the prior year.
Similarly, the average 2022 return for 106 community foundations participating in the study, was a net -13.3%, compared with a net 14.8% return in 2021.
The average year-over-year declines for both types of foundations were the largest recorded since 2008, during the global financial crisis.
Larger foundations tended to perform better in 2022 than their smaller peers.
Private foundations with assets of more than $500 million returned a net -9.1% in 2022. All other size and type of foundation categories on average lost a net 12%, except for community foundations with assets of less than $101 million, which reported a net -14% return.
Over the 10-year period through the end of 2022, private foundations delivered an average annualized return of 7.3%, while community foundations recorded average annualized returns of 6.4% over that period.
The survey comprised a total of 277 private and community foundations, representing combined assets of $119.6 billion.
"We are hopeful that 2022 will prove to be an anomaly and not a trend," said Kathleen P. Enright, president and CEO of the Council on Foundations, and George Suttles, executive director of Commonfund Institute, in a joint statement in a release issued in conjunction with the study. "Strong year-to-date results in 2023 give credence to our optimism."
They added: "It was just a few years ago that 10-year returns were only slightly above the 5% level, which is not sufficient to fund grant-making, meet operating expenses and keep up with inflation. Nevertheless, through the challenges of recent years, including the global pandemic and rising inflation, foundations have remained committed to maintaining spending levels in support of their missions."
Asset allocations for both private and community foundations changed little from year-end 2021 to year-end 2022.
For example, U.S. equities represented 23% of assets in private foundations for both years, while for community foundations, this allocation dipped slightly from 35% to 34%.
Private foundations continued to have a much higher allocation to alternative assets — 51% as of year-end 2022, compared with 27% for community foundations.
The Council on Foundations is a nonprofit membership association that serves as a guide for philanthropies, according to its website.
Commonfund Institute is the research and education center of Commonfund, an asset manager with more than $25 billion in assets under management, according to its website.