In 2022, U.S. foundations showed the largest year-over-year decreases in their investment returns since 2008, an annual report from the Council on Foundations and the Commonfund Institute finds.

The 2022 Council on Foundations–Commonfund Study of Investment of Endowments for Private and Community Foundations (108 pages, PDF)—the 11th annual collaborative report between the partners—is based on data from 277 private and community foundations representing combined assets totaling $119.6 billion. According to the report, private foundations reported a 12.0 percent decline in 2022 (down from a 16.3 percent increase in 2021). Similarly, community foundations reported a return of -13.3 percent (down from 14.8 percent in 2021). The largest foundations fared the best, as private foundations with assets of more than $500 million reported a return of -9.1 percent, a majority of other categories realizing losses in the -12.0 percent range, and community foundations with assets under $101 million reporting a 14.0 percent decrease.

In all, private foundations reported relatively better 2022 returns than their community foundation counterparts. The 10-year average annual return in 2022 for private foundations declined to 7.3 percent in 2022 (down from 9.7 percent in 2021), while returns for community foundations fell to 6.4 percent (down from 9.2 percent in 2021). Despite declines on returns, foundations reported increased spending in 2022. In total, 19 percent of private foundations reported an increase (5 percent reported a decrease), and 10 percent of community foundations reported little change in spending (vs. 6 percent reporting a decrease).

Data on responsible investing practices and policies were mixed, however, with 28 percent of private and 26 percent of community foundations reporting that they currently require or permit investments ranking high on environmental, social, and governance (ESG) criteria in their portfolios (up from 23 percent and 24 percent, respectively). But just 10 percent of private foundations and 34 percent of community foundations said they were considering adding ESG to their investment policy statements compared with 20 percent and 35 percent in 2021.

“We are always concerned when we see returns—long- or short-term—decline. Fortunately, financial markets have generally produced good returns in recent years, so we are hopeful that 2022 will prove to be an anomaly and not a trend. Strong year-to-date results in 2023 give credence to our optimism,” said Council on Foundations president and CEO Kathleen P. Enright and Commonfund Institute executive director George Suttles in a joint statement. “It was just a few years ago that 10-year returns were only slightly above the 5.0 percent level, which is not sufficient to fund grantmaking, meet operating expenses, and keep up with inflation. Nevertheless, through the challenges of recent years, including the global pandemic and rising inflation, foundations have remained committed to maintaining spending levels in support of their missions.” 

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