Foundations in the US had another stellar fiscal year in 2013, riding strong equities markets to average investment returns of 15.6%.
This is the second year in a row private charities have earned double-digit gains on their portfolios, according to research by the Commonfund Institute and Council on Foundations. The 153 institutions covered in the study together held assets worth $94 billion at the year’s end.
Consultant use declined year-on-year, from 80% to 73%. Amid these large gains, foundation dialed back their reliance on consultants and outsourced-CIO operations. The portion either outsourcing or considering it fell by 9 percentage points over the year. In 2013, 69% of those surveyed managed portfolios internally with no plans of handing off control, up from 57% in 2012.
Consultant use likewise declined year-on-year, from 80% to 73%.
Foundations did not tend to compensate for the reduction in external help with internal hires. The average non-profit employed 1.3 full-time investment specialists, down slightly from 1.4 the year prior.
Asset managers have taken up the slack, instead. The average foundation had 153 managers on its roster in 2013—13 more than in 2012.
Alternative investment firms took up the majority of foundations’ manager rosters, while appetite for these strategies remained steady. The typical charity dedicated 42% of its portfolio to hedge funds, private equity, venture capital, commodities, and real estate, among other alternatives.
Stocks accounted for roughly the same portion of assets (44%) as alternatives, and fueled investment returns.
Relative to pension funds, foundations tend to prefer growth assets and alternatives to fixed-income exposure—a bias that paid off in 2013. The typical 9% bond allocation—which had shrunk by a third since 2011—lost 0.7% over the year.
With investment gains mounting, most foundations reported spending more on their charitable activities than the previous year.
John Griswold and Vikki Spruill, the heads of the Commonfund Institute and Council on Foundations, respectively, called their findings “good news” for the US.
“As foundation assets continue to rebound,” Griswold and Spruill noted, “they have more resources to invest in programs that advance the common good.”
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