How Are Foundations Doing?
Seems like a pretty straightforward question, right? Before answering it, let’s use a very specific example using Ivy League endowments to illustrate some core concepts. As the table below shows, Ivy League performance can be viewed in a variety of ways, for example, it shows the average Ivy League endowment returned 9.7% for the 5 year period to June 30, 2018, ahead of both the traditional mix of 60% stocks and 40% bonds – up 9.0% and versus the overall college universe NACUBO,which returned 7.3%. Importantly, you can see their performance stacked up to each other.
5 Year Return Chart – Ivies
By offering multiple points of comparison, this chart offers a more complete view of Ivy League performance:
- Absolute return information – ex: Harvard up 7.6%
- Relative return data –ex: versus the benchmark of all colleges and public market indices
- Peer group information – as the 8 schools represent a homogeneous group in terms of size and asset class exposure.
Only with a fuller picture can the more interesting and useful questions be asked, like what can Harvard and Cornell do better? (Harvard did a clean sweep of it’s investment team 2 years ago).
So What About Foundations?
The same concepts above holds true for any group of investor – including foundations which can benefit from having a meaningful comparison base of representative peers to benchmark their performance. However, unlike colleges who publicly disclose performance, foundations typically do not. Therefore foundation trustees had to rely on surveys or tiny samples of huge foundations to figure out where they stood versus other foundations. Our parent company, Foundation Financial Research which publishes the FoundationMark indices solved this problem by developing a methodology for accurately estimating investment performance for all foundations using publicly available data.
While there is no Ivy League of foundations, let’s look at handful that have similar stature, which we will call the Eleemosynary Eight or more easily pronounced, the “E-8”.
5 Year Return Chart – Foundations
Since foundations don’t have school colors, we color coded this based simply on which foundations outperformed the average in the group in green, while those who under-performed are shown in red. Hewlett matched the average resulting in the grey shading.
It is important to note that these returns shouldn’t be compared to the colleges as they cover different periods as colleges use a June fiscal year. Foundations can choose any month for their fiscal year-end, but the E-8 all use the December calendar year end.
As we mentioned above, very few foundations disclose their investment performance, among the E-8 the only one that does is MacArthur (MarArthur’s calculated 5-Year return was 8.34%, Foundation Financial Research’s estimate was 8.39%, a difference of 5 basis points. The chart uses the FFR estimate for consistency with the other foundations). Ford did disclose their investment performance in 2016 but we haven’t seen an update for 2017.