National Foundation Study Shows Investment Returns Rose in 2017; Spending Rates Mixed, Gift-Giving Increased for Community Foundations
Data from the Council on Foundations-Commonfund Study Position Private and Community Foundations for Future Mission Support
New York, NY, August 9, 2018 – Data gathered in the 2017 Council on Foundations-Commonfund Study of Investment of Endowments for Private and Community Foundations® (CCSF) show that participating private and community foundations realized significantly higher investment returns for the 2017 fiscal year (January 1 – December 31, 2017) than they did in FY2016.
Participating private foundations reported an average FY2017 return of 15.0 percent compared with 6.4 percent in FY2016. Participating community foundations reported an average return of 15.1 percent for FY2017, up from 7.3 percent in FY2016. (All return data are reported net of fees.)
The improvement in investment returns was even sharper when compared to FY2015, when private foundations reported an average return of 0.0 percent, while participating community foundations reported a -1.8 percent average return.
FY2017 returns were the highest since FY2013, when private foundations reported an average return of 15.6 percent and community foundations reported an average return of 15.2 percent.
The effective spending rate in FY2017 rose moderately to 4.8 percent from last year's 4.7 percent for community foundations. Among private foundations, the effective spending rate declined to 5.7 percent from 5.8 percent in FY2016.
With the economy and stock market performing well throughout the year, 49 percent of participating community foundations reported that gifts and donations rose in FY2017, up from 34 percent reporting higher gifts in FY2016. Twenty-two percent of community foundations reported a decline in gifts, about half of the 40 percent reporting a decline in FY2016. (There is concern that gifts and donations to nonprofit institutions may be at some degree of risk in the wake of the enactment of the Tax Cuts and Jobs Act, which places limits on itemized deductions. However, this concern did not affect 2017 as the legislation was not signed into law until December 22 of that year.)
“We are gratified with stronger investment performance in FY2017, but perhaps most reassuring is the increase in trailing 10-year average annual returns. For private foundations, the good return this year boosted trailing 10-year returns to an annual average of 5.5 percent compared to last year's 4.7 percent. For community foundations, the 10-year average annual return rose to 5.3 percent from 4.6 percent in FY2016. Even in the mid-5 percent range, returns are usually not sufficient to maintain the corpus of foundations' endowments after spending, inflation and costs, but they offer some breathing room compared to last year,” said Gene Cochrane, Interim President and CEO of the Council on Foundations, and Mark Anson, CEO and Chief Investment Officer of Commonfund, in a joint statement. “Based on last year's data, private foundations' effective spending rate was significantly higher than their annual 10-year return while community foundations’ 10-year return and spending were more closely aligned. We must hope for continued good results from the global financial markets for foundations of both types to support their operations and fulfill their missions over the long term,” Cochrane and Anson added.
With 224 participating foundations representing combined assets of $104.5 billion, the Study is believed to be the most comprehensive annual survey of its kind. This is the sixth year that Commonfund Institute and the Council on Foundations – two leading organizations in the field of foundation investment and governance policies and practices – have partnered to produce this research.
To request a copy of the Council on Foundations – Commonfund Study of Investment of Endowments for Private and Community Foundations, click here or the image below.