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Foundation Investment Returns Average 12.5% in Fiscal Year 2010, While Operating Charities Report Returns of 11.6%
Commonfund News

June, 2011

Two companion studies of foundations and operating charities show that investment returns were in the range of 12 percent in FY2010, well below the 21 percent range posted in the recovery year of FY2009. Nevertheless, two consecutive years of double-digit returns served as a welcome offset to the 26 percent portfolio decline experienced by these organizations in FY2008.

The average FY2010 total net return earned by the 175 independent/private foundations and community foundations participating in the 2011 Commonfund Benchmarks Study® of Foundations was 12.5 percent (net of fees), compared with 20.9 percent in FY2009 and -26.0 percent in FY2008. Meanwhile, the 69 operating charities—comprising cultural, religious and social service institutions—participating in the 2011 Commonfund Benchmarks Study® of Operating Charities realized an average net return on investment funds of 11.6 percent compared with 21.5 percent in FY2009 and -25.8 percent in FY2008.

Figure 1. Average Total Net Returns for Fiscal Years 2008, 2009 and 2010
Figure 2. Average Total Net Returns for Fiscal Years 2008, 2009 and 2010

The 2010 results were the fourth highest in the nine years that the Foundations Study has been conducted and the third highest in the seven years that the Operating Charities Study has been produced. Returns and all other data in the Studies were for calendar 2010 (January 1, 2010 to December 31, 2010).

The average three-year return for participating foundations was -0.3 percent, an improvement from last year’s -1.1 percent, while the corresponding five-year return figure was 4.2 percent, also an improvement over last year’s 3.6 percent. Participating foundations reported average 10-year returns of 5.1 percent. Respectively, similar period returns for operating charities were 0.1 percent (up slightly from -0.7 percent the year before), 4.7 percent (up from 4.0 percent last year) and 4.9 percent. (This is the first time that 10-year returns have been reported.)

Figure 3. Average One-, Three-, Five- and Ten-Year Net Returns for Fiscal Year 2010

“Two consecutive years of good performance is a great relief for foundations and operating charities participating in the two Studies after the serious erosion in asset values experienced in FY2008. While three-year returns are just about flat, five- and 10-year returns are edging back into the range of 5 percent, which is an encouraging sign although it still falls short of covering these nonprofit organizations’ spending, inflation and costs,” said John S. Griswold, Executive Director of Commonfund Institute, which sponsors the Studies.  “Over the nine years since the inception of the Study, after accounting for investment returns and spending the average foundation is slightly below its original nominal dollar value.  This means that the last nine years have left foundations with less, in real terms, than they began with.”

Figure 4. Value of $1 Million Foundation After Investment Returns and Spending FY2002-2010

Among operating charities, giving was stronger in FY2010, but far from robust. Among responding institutions, 17 percent reported decreased giving in FY2010, a marked improvement over the 38 percent that reported decreased giving in FY2009. But only 10 percent of participating operating charities reported an increase in giving in FY2010, sharply lower than the 20 percent that reported increased giving in FY2009.

Additional information about foundation and operating charity investment performance, asset allocation, governance and related topics follows.

Commonfund Benchmarks Study Foundations Report

The 175 participating foundations represented a combined total of $108.2 billion in assets. The Study universe comprised 135 private/public foundations and 40 community foundations.


Both independent/private and community foundations returned an average of 12.5 percent.

Domestic equities provided the strongest return, an average of 17.7 percent for all Study participants. International equities followed, generating a return of 14.5 percent. After that, broad asset class returns were: alternative strategies, 10.6 percent; fixed income, 8.1 percent; and short-term securities/cash/other, 9.2 percent. Within alternative strategies, energy and natural resources, commodities and managed futures provided the highest return, a gain of 22.1 percent. This was followed by a 15.0 percent return from distressed debt; 11.3 percent from private equity; 9.4 percent from venture capital and 9.1 percent from marketable alternative strategies. The only negative return, -2.5 percent, came from private equity real estate (non-campus).

Figure 5. Average Return by Asset Class for Fiscal Year 2010


Asset Allocation

At December 31, 2010, participating foundations’ asset allocations were:

    • Domestic equities: 26 percent
    • Fixed income: 13 percent
    • International equities: 16 percent
    • Alternative strategies: 38 percent
    • Short-term securities/cash/other: 7 percent

Figure 6. Asset Allocations for Fiscal Years 2008, 2009 and 2010
Figure 7. Alternative Strategies Asset Mix for Fiscal Years 2009 and 2010


The average effective spending rate for participating foundations was 5.8 percent, little changed from last year’s 5.9 percent. When viewed by size, foundations with assets over $1 billion had the highest effective spending rate, 6.2 percent, while foundations with assets between $501 million and $1 billion had the lowest, 5.6 percent. When viewed by type of institution, community foundations had an effective spending rate of 5.9 percent, measurably below last year’s 6.5 percent and reflecting FY2009’s robust returns. Private foundations reported spending at a rate of 5.8 percent, unchanged from last year.


The median debt for all Study participants is $18.5 million, down from $24.0 million in last year’s Study. The average debt level is considerably higher at $67.4 million, influenced by some larger institutions, but this, too, is well below last year’s average of $113.1 million. Debt level as a percentage of foundations’ endowments was also lower—9.3 percent this year compared with 14.7 percent a year ago.When viewed by type, private foundations’ debt level is significantly greater than that of community foundations.

Resources, Management and Governance

Participating foundations employ an average of 1.5 staff members to manage their investment portfolios. The number of voting members on foundations’ investment committees averages 5.9, 3.1 of whom are investment professionals. The vast majority of foundations—79 percent—reported using a consultant. Twenty-four percent reported outsourcing their investment management function.

Benchmarks Leaders

This year’s Commonfund Benchmarks Study Foundations Report once again included an analysis of the top decile (top 10 percent) and top quartile (top 25 percent) performers in the overall Study population. The objective of this analysis is to allow foundations to gain insight into the practices and policies of their “best of breed” peers. 

As noted, the average FY2010 for all Study participants was 12.5 percent. Benchmarks Leaders outperformed the overall average by a wide margin. For FY2010, the top decile of Study participants reported an average return of 18.5 percent, while the top quartile reported an average return of 15.8 percent. While the trailing three-year return was negative for the Study population as whole, Leaders reported positive returns, albeit barely. The average three-year return for all participating institutions was -0.3 percent, while the corresponding return was 0.8 percent for the top decile and 0.9 percent for the top quartile. For the trailing five-year period, the Study universe reported an average return of 4.2 percent, while the top decile reported an average of 4.9 percent and the top quartile reported an average of 5.0 percent. For the trailing 10-year period, all Study participants secured an average return of 5.1 percent, while the top decile led the way at 6.5 percent followed by the top quartile at 5.9 percent.

Commonfund Benchmarks Study of Operating Charities

The 69 organizations participating in the 2011 Commonfund Benchmarks Study® Operating Charities Report represent $20.0 billion in assets.

The Study universe included 32 cultural organizations, 28 religious institutions and nine social services organizations.


Cultural organizations’ returns averaged 11.5 percent, religious institutions averaged 11.8 percent and social service organizations averaged 11.0 percent.

Domestic equities produced the best return for Study participants, an average of 17.3 percent, followed by international equities at an average of 12.7 percent. Alternative strategies produced an average return of 8.6 percent; fixed income, 7.6 percent; and short-term securities/cash/other, 7.9 percent. Within the broad alternatives category, energy and natural resources, commodities and managed futures generated the best return, 23.6 percent. This was followed by an 11.5 percent return for distressed debt and 11.1 percent for venture capital. The only negative return, -0.2 percent, was generated by equity real estate (non-campus).

Figure 8. Average Return by Asset Class for Fiscal Year 2010

Asset Allocation

At December 31, 2010, participating institutions’ asset allocations were:

    • Domestic equities: 24 percent
    • Fixed income: 20 percent
    • International equities: 19 percent
    • Alternative strategies: 28 percent
    • Short-term securities/cash/other: 9 percent

Figure 9. Asset Allocations for Fiscal Years 2008, 2009 and 2010
Figure 10. Alternative Strategies Asset Mix for Fiscal Years 2009 and 2010


The average effective spending rate for operating charities participating in this year’s Study was 4.6 percent, a moderate decline from last year’s 4.9 percent. When viewed by type of organization, religious organizations had the highest effective spending rate, 5.0 percent, and social service organizations had the lowest, 3.0 percent. Cultural organizations’ effective spending rate averaged 4.8 percent. When viewed by size, organizations with assets over $1 billion had the highest effective spending rate, at 5.5 percent. No other size cohort reached the 5.0 percent level, and those organizations with assets between $10 and $50 million had the lowest effective spending rate, an average of 3.3 percent.

Resources, Management and Governance

The number of full-time professional operating charity staff members devoted to investments averaged 1.4, unchanged since the FY2009 Study. Seventy-two percent of Study participants reported having a chief financial officer while 15 percent reported having a chief investment officer. Eighty-three percent of Study participants report using a consultant. The average number of voting members on investment committees fell to 8.0 this year from 8.8 last year. The average number of investment committee members who are investment professionals showed little change year over year, averaging 5.4 in FY2010 versus 5.5 in FY2009.

Research Process and Methodology

The design of the Commonfund Benchmarks Studies of Foundations and Operating Charities took place in the winter of 2010. Fieldingof the Studies followed in the first and second calendar quarters of 2011.

For the Foundations Report, data from the overall Study population were segmented into four size categories to permit analysis of the policies and practices of foundations of differing sizes. As noted earlier, foundation data were also sorted by type of institution: independent/private and community foundations.

For the Operating Charities Report, data were segmented by type of institution:

  • Cultural
  • Religious
  • Social service

Data from operating charities were segmented into five size categories.

About Commonfund Institute

Commonfund Institute houses the education and research activities of Commonfund and provides the entire community of long-term investors with investment information and professional development programs. Commonfund Institute is dedicated to the advancement of investment knowledge and the promotion of best practices in financial management. In addition to the Commonfund Benchmarks Studies, Commonfund Institute teams with the National Association of College and University Business Officers (NACUBO) to produce the NACUBO-Commonfund Study of Endowments (NCSE)and provides a wide variety of resources, including conferences, seminars and roundtables on topics such as endowments and treasury management; proprietary and third-party research and publications, including the Higher Education Price Index (HEPI); and events such as the annual Commonfund Forum and Commonfund Endowment Institute.

About Commonfund

Founded in 1971, Commonfund is devoted to enhancing the financial resources of long-term investors including nonprofit institutions, corporate pension plans and family offices through activefund management, investment advice and treasury operations. Directly or through its subsidiaries—Commonfund Capital and Commonfund Asset Management Company— Commonfund manages over$27 billion for over 1,500 clients. Commonfund, together with its subsidiary companion organizations, offers more than 30 different investment programs. All securities are distributed through Commonfund Securities, Inc. For additional information about Commonfund, please visit


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