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Survey, Foundation Executive Briefing Focus on Investments

Thursday, August 21, 2014

By Kristi Arellano, Communications Fellow, Boettcher Foundation

Attendees of Philanthropy Southwest’s executive briefing, held in Denver on July 23 at the offices of the Boettcher Foundation, got a first look and in-depth explanation of new data highlighting the performance of foundation investments.

Bill Jarvis, head of research at the Commonfund Institute, addressed attendees in Denver and presented a custom report that compared the performance of all foundations in the survey to that of Philanthropy Southwest members surveyed. The “2013 Study of Investments for Private Foundations,” produced by Commonfund in partnership with the Council on Foundations, had been released earlier that day, and Jarvis’ remarks were the first given to a group.

The report showed that the investment performance of foundations grew significantly in 2013. As a group, the 103 independent and 50 family foundations that participated in the survey, reported an average net annual return of 15.6 percent on their investments. The strong return marked a second year of double-digit increases and was up from a 12 percent average return reported in 2012.

When broken out by endowment size, foundations with assets of more than $500 million reported an average return of 16.5 percent, followed by foundations with assets between $101 and $500 million, which realized an average return of 15.5. Foundations with assets of less than $101 million saw an average annual return of return of 15.2 percent.

For their part, the 20 Philanthropy Southwest members that participated in the study had a net annual total return of 16.4 percent. The report also indicated that Philanthropy Southwest members tended to invest in domestic equities at a higher rate than the group at large. That fact benefitted the group because domestic equities generated the highest returns, averaging 31.8 percent for the year.

Nonetheless, Jarvis emphasized the wisdom of a diversified portfolio, particularly for long-term returns and cautioned against following the herd. The effective spending rate among foundations in the survey was 5.5 percent in 2013, up slightly from 5.4 percent in 2012.

“As a group private foundations -- quite against their critics -- increased their spending during downturn,” Jarvis noted. “The need went up, and foundations had a hard time dialing that back, which raised the question of sustainability.”

Following a discussion about the report and the trends it revealed, the conversation turned to survey participation and the need to increase the number of foundations that participate.

While 20 members of Philanthropy Southwest responded to the survey, Jarvis implored those who hadn’t participated to do so in future years. His group seeks to make its database of foundations as reflective of the sector as possible, and participation by members of regional associations helps in that effort.

“It is our joy to work with regional foundation associations,” he added.

Both Philanthropy Southwest and the Commonfund Institute are seeking suggestions for possible incentives that would make foundations more likely to participate in the future. Foundations that participated in the survey have received a copy. Another opportunity to learn more about the survey results will be available via webinar on September 9. Members who did not participate but are interested in the results should contact Philanthropy Southwest at 214-740-1787.

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