Foundation Source has released a report looking at foundation investments during and since the Great Recession.
Private foundations have different missions, investment goals and financial needs, but in their publication "Trends in Private Foundation Investment," The Foundation Center says they face a common challenge: meeting their philanthropic commitment in an uncertain financial market. This report, based on an analysis of 238 foundations with less than $50 million in assets, "provides unusual transparency" into the investment choices of such foundations. It provides an in-depth look at the asset allocation, returns, and behaviors of foundations from 2008-2013, as well as insight into their relationships with investment managers. According to the report, the vast majority of foundations have been able to recover to some extent from the financial crisis and have seen overall financial gains since 2008.
Despite the relatively similar returns for foundations in all three size categories, those with under $1 million in assets have seen little to no asset growth.
The report offered this analysis of the situation:
One likely explanation is that these smaller foundations may have disbursed more than their counterparts. Findings from our previous research indicate that foundations with assets of less than $1 million tend to have a larger distribution to-size ratio than foundations with bigger endowments. In both our 2012 and 2013 Foundation Source annual reports on private foundations, we found that foundations of this size distributed an amount well above 20% of their average assets
Meanwhile, on the foundation-adviser relationship, the report found that the importance of management fees was surprisingly low on the list of evaluation criteria for clients:
While almost half (45 percent) of the respondents "delegates broad responsibility to advisers,” it is surprising to learn that 65 percent of these foundations have no written investment policy statement to guide their advisers. Though the majority of clients do not request information on social impact or mission-related investments, the report does note a growing trend and recommends advisers to consider this for the future.
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