Nonprofit Investors Cautious About Stock Market in 2021, but Confident in Long-Term Prospects, Commonfund Survey Finds
More than 75 Percent of Endowments and Foundations are Optimistic About Achieving CPI +5 Percent Over the Next Decade
WILTON, CT, March 22, 2021 — Commonfund, a prominent investment manager for nonprofit institutions, today announced the results of its survey of nearly 300 sophisticated institutional investors from endowments, foundations, healthcare organizations, family offices and public pensions in attendance at the 23rd Annual Commonfund Forum, held virtually on March 8 – 9, 2021.
Investors attending the conference represented $1.1 trillion in total assets. The survey results underscore the themes that drove discussion at the event, including the dual-track economic recovery, ESG and environmentally sustainable investments, and the evolving opportunity set in private capital.
When asked about their expectations for U.S. stock market returns in 2021 versus the 10-year average annual return of 13.6 percent for the S&P 500 Index, the majority (58 %) believe this year’s returns will be lower than average, while just 10 percent expect that they will be higher. These investors are similarly apprehensive about the U.S. economic recovery, with 76 percent of respondents ranking the prolonged impact of COVID-19 among their top three concerns for 2021, followed by bubbles/narrowness of stock market valuations (60 %) and the expanding U.S. deficit (54 %).
“The global economy appears to be on a path to recovery, but investors remain justifiably cautious about the effects of the ongoing pandemic, narrowness of market returns and increasing deficit levels,” said Mark Anson, CEO and CIO of Commonfund. “We believe that one of the keys to successful investing through uncertain times is to seek out pockets of opportunity created by these imbalances, while remaining true to strategic asset allocation targets.”
Looking at their own organizations, two-thirds (67 %) of all respondents are “cautiously optimistic” that over the next ten years they will be able to achieve CPI +5 percent, a rate of return sufficient to cover inflation, distributions, and investment costs. This represents an increase from the last Commonfund Forum survey in March 2019, which found that only 46 percent of investors were “cautiously optimistic” about achieving CPI +5 percent. An additional 9 percent of 2021 respondents are “very bullish” about their prospects, roughly even with the 2019 findings.
“Following the tumult of last year, many institutional investors – and nonprofits in particular – face the prospect of significant changes in their operations and in the fulfillment of their missions,” Anson continued. “However, these same investors remain cautiously optimistic which reflects their commitment to long-term strategic policies and investment practices that are aligned with their overall objectives.”
Additional survey findings include:
- Despite the value of illiquid investments as a source of potential returns and a diversification tool, only a slim majority (57 %) of respondents believe their board/investment committee fully understands and appreciates the role of these private (illiquid) investments in the portfolio. Thirty-four percent are mixed, 6 percent say no and 2 percent are unsure.
- Half (50 %) of respondents agree or strongly agree that their institutions can invest in ESG-focused strategies without sacrificing financial returns, while 30 percent remain neutral, 11 percent disagree or strongly disagree and 10 percent are unsure.
- When asked to choose their top three potential economic concerns for 2021, respondents were the least concerned about low interest rates (21 %), hawkish Fed Monetary policy (5 %) and corporate debt levels (5 %).
The survey was conducted during the annual Commonfund Forum held virtually on March 8 – 9, 2021. Now in its 23rd year, Commonfund Forum has grown into a leading annual conference for sophisticated institutional investors from educational institutions, foundations and charities, pension funds, insurance companies, family offices and healthcare organizations. This year, the event convened some 700 investors from North America, Europe and Asia for a two-day conference that explored the important themes driving strategic policy decisions and tactical opportunities to support and sustain the missions of their organizations.
This year’s program, “Transformation,” took the past as prologue, but focused on the trends, forces and players shaping the future for institutional investors. Featured speakers included: Safi Bahcall, Physicist, Biotech Entrepreneur and Author; Todd Cozzens, Co-Founder and Managing Partner, Transformation Capital; Nisa Leung, Managing Partner, Qiming Venture Partners; Kellie McElhaney, Founding Director of the Center for Equity, Gender and Leadership, Haas Schools of Business; Adam Posen, President, Peterson Institute for International Economics; Cyndi Robert, Chief Financial Officer, American Heart Association; Allison Schrager, Economist and Senior Fellow, Manhattan Institute; Diane Swonk, Chief Economist and Managing Director, Grant Thornton, David Thomas, President, Morehouse College and Trustee, Commonfund; Darren Walker, President, Ford Foundation; and, Fareed Zakaria, Host of Fareed Zakaria GPS, CNN Worldwide.
Commonfund was founded in 1971 as an independent asset management firm focused on not-for-profit institutions. Today, we are one of North America’s leading investment firms, managing $25.7 billion in assets for some 1,300 institutional clients, including educational endowments, foundations and philanthropic organizations, hospitals and healthcare organizations and pension plans. Our primary business is investment management, and we are active in all sectors of the global capital markets, both public and private.