Private and community foundations’ endowed funds posted double-digit returns in 2023, a dramatic turnaround from the double-digit negative returns posted the previous year, according to a study from the Council of Foundations and Commonfund Institute.
The average annual return among the 182 private foundations participating in the latest annual study was 12.6% for the year ended Dec. 31, while the 109 community foundations participating in the study returned an average 14.1% for the period.
Private and community foundations had returned -12% and -13.3%, respectively, for the year ended Dec. 31, 2022.
For the three, five and 10 years ended Dec. 31, private foundations returned an annualized average 4.9%, 9.5% and 7.1%, respectively, while community foundations returned an annualized average 4.5%, 8.8% and 6.2%, respectively.
“Despite year-to-year volatility in the markets, this year’s report shows what we know to be true: Private and community foundations are primed and positioned for the long term, and it pays off,” said Kathleen Enright, president and CEO of the Council on Foundations, and George Suttles, executive director of Commonfund Institute, said in a joint news release on Sept. 4.
“We will continue monitoring how institutions respond to these challenges, but we remain confident in the ability of foundations to support their communities, through ups and downs, in the years to come,” they said.
Smaller private and community foundations experienced the best returns over 2023, according to the study.
By asset size, private and community foundations with under $101 million in assets returned an average 13.4% and 15%, respectively, while those with assets of between $101 million and $500 million in assets returned an average 13.8% and 13%, respectively, and those with over $500 million in assets returned an average 10% and 12.7%, respectively.
As of Dec. 31, the average asset allocation among private foundations was 46% alternatives (down from 51% a year earlier), 25% domestic equities (up from 23%), 14% international equities (up from 13%), 12% fixed income (up from 9%) and 3% short-term securities/cash/other (down from 4%).
As of that same date, the average asset allocation among community foundations was 35% domestic equities (up from 34% a year earlier), 26% alternatives (down from 27%), 20% international equities (up from 19%), 16% fixed income (the same as the prior year) and 3% short-term securities/cash/other.
The study also showed that more foundations are using outsourced chief investment officer services. Among those surveyed, 39% of private foundations and 43% of community foundations reported using an OCIO office as of Dec. 31, up from 36% and 41%, respectively, the year before.
