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Average total returns on investments were down 26 percent way off from 2007's almost 10 percent positive return--among nearly 300 independent/ private foundations and community foundations in the 2009 Commonfund Benchmarks Study of Foundations.
"The market turmoil that prevailed in the latter part of 2008 did not exclude foundations," said John Griswold, executive director of Wilton, Conn.-based Commonfund Institute, which sponsors the study. "In the current environment, many private and community foundations have been challenged to fulfill their missions," he said.
Returns and all other data from 221 independent/private foundations and 69 community foundations in the study were for the calendar year of 2008, representing combined assets of more than $131 billion.
Average three-year returns for foundations were down 3.1 percent from 10 percent a year ago. Five-year returns were still up, 2.2 percent, but way off from last year's 13 percent.
The average effective spending rate, obtained when dollars spent are divided by beginning-period asset value, rose from 5.5 percent in 2007 to 5.8 percent last year. Almost half of foundations (45 percent) reported that they increased their dollars spending an average of 20.4 percent while nearly a third (31 percent) reported lowering their dollar spending almost 2.5 times the rate of 13 percent in last year's study.
No matter their size, foundations could not escape the devastation, with one-year returns ranging from -23.3 percent to -28.5 percent across all institutions, whether $1 billion-plus or $10 million to $50 million. This comes after one-year returns of between 9 and 16 percent in 2006 and 2007.
Likewise, few asset classes were spared. Fixed income was the only class to manage a positive return, barely, at 0.6 percent. Others were down considerably:
* International equities, -41 percent
* Domestic equities,-36.3 percent
* Energy and natural resources,-23.3 percent (commodities and managed futures within this category,-28.2 percent)
* Marketable alternative strategies,-19.4 percent
* Alternative strategies as a whole, -16.4 percent
* Distressed debt returns,-13.7 percent
* Private equity real estate, -8.8 percent
* Private equity, -7.8 percent
* Venture capital,-6.2 percent
* Short-term securities,-1.8 percent
Average asset allocations for participating foundations were reported as 27 percent in domestic equities, down from 32 percent the year before; 15 percent in international equities, compared with 20 percent in 2007; 16 percent in fixed income, versus 15 percent the previous year; and 36 percent in alternative strategies, up from 28 percent.
"As markets fell sharply in the last months of 2008, it became very difficult for foundations to rebalance their portfolios and as a result, their less-liquid alternative allocations rose sharply in relative terms as their liquid investments were marked to market" Griswold said. "Reporting lags in these alternative strategies mean that foundations will only see their alternative investment portfolios valued with a delay of one to two quarters," he said.
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