Foundations, Charities Returns Remain in Double Digits

Investment returns were in the range of 12% in FY2010 – the second consecutive year of double-digit returns and a welcome offset to the 26% 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% (net of fees), compared with 20.9% in FY2009. 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% compared with 21.5% in FY2009.  

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).  

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Both independent/private and community foundations returned an average of 12.5%. Domestic equities provided the strongest return, an average of 17.7% for all Study participants. International equities followed, generating a return of 14.5%.  

After that, broad asset class returns were: alternative strategies, 10.6%; fixed income, 8.1%; and short-term securities/cash/other, 9.2%. Within alternative strategies, energy and natural resources, commodities and managed futures provided the highest return, a gain of 22.1%. This was followed by a 15% return from distressed debt; 11.3% from private equity; 9.4% from venture capital and 9.1% from marketable alternative strategies. The only negative return, -2.5%, came from private equity real estate (non-campus).  

At December 31, 20010, participating foundations’ asset allocations were: 

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

Cultural organizations’ returns averaged 11.5%, religious institutions averaged 11.8% and social service organizations averaged 11%. Domestic equities produced the best return for Study participants, an average of 17.3%, followed by international equities at an average of 12.7%.   

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

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

  • Domestic equities: 24%, 
  • Fixed income: 20%, 
  • International equities: 19%, 
  • Alternative strategies: 28%, and 
  • Short-term securities/cash/other: 9%. 
For more information, visit http://www.commonfund.org.

Investors Put Trust Back in Equities

Globally, year-to-date cash contributions to equity and mixed funds through April 2011 surpassed fixed income for the first time since the financial crisis.

The data was compiled in a monthly global flow review from Strategic Insight, an Asset International company.

“The net cash flow data – equity funds gathered $110 billion through April, mixed funds $30 billion, bond funds $100 billion – confirms a slowly shifting trend from global and other fixed income themes to selected equity categories, demonstrating investors’ desire for higher equity allocations to meet their long-term financial objectives,” said Daniel Enskat, Head of Global Consulting for Strategic Insight.  

Beyond the slow shift back to equities overall, “significant progress continues to be made in emerging markets, particularly Brazil.  Through Q1 2011, the market captured $20 billion in flows or a remarkable 10% of worldwide cash contributions,” added Enskat. Net flow gains have pushed the country’s regional market share to 90%.   

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Though Brazil dominates the region, Enskat noted that “there is a growing set of opportunities for cross-border fund managers across Latin America as a whole, especially in smaller countries such as Chile, Peru and Colombia, that are leading the way in cross-border UCITS fund distribution.”    

He added that “large distributors in Brazil and Mexico are showing a greater willingness to work with third-party fund managers of late.  Many international fund companies such as Investec, Blackrock and MFS are building up their regional presence, and firms such as Franklin Templeton already have an established business south of the border.”  

The report, “Equities, Brazil and Emerging Market Bridges,” features additional details on fund flow trends globally as well as examples of local and cross-border managers capitalizing on the business opportunities in Brazil and beyond.  

More information is at http://www.StrategicInsightGlobal.com.

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