Long-term investment returns held steady and U.S. foundations generally maintained or increased their spending rates in 2020, a report from the Council on Foundations and Commonfund Institute finds.

The ninth annual study between the partners, the 2020 Council on Foundations–Commonfund Study of Investment of Endowments for Private and Community Foundations (100 pages, PDF), is based on investments returns, spending, and asset allocations across two hundred and sixty private and community foundations. According to the report, U.S. foundations generally maintained or increased their spending rates, which rose to 5.6 percent from 5.4 percent for private foundations in 2020 but declined moderately to 4.7 percent from 4.8 percent among community foundations; private and community foundations with assets of at least $500 million spent at the highest rate, 6.1 percent; and 45 percent of community foundations reported an increase in donations received, with a median increase of 83.6 percent.

The study also found that private foundations reported an average of 13.1 percent in short-term returns and community foundations reported an average return of 12.1 percent in 2020, both representing a decrease compared with 2019's returns of 17.4 percent and 18.2 percent, respectively. Long-term investment returns held steady, however, as private foundations reported an average ten-year return of 8.4 percent, up from last year's 7.8 percent, while community foundations reported a ten-year return of 7.6 percent, slightly lower than last year's 7.7 percent.

The study also found that private foundations increased their allocation to alternative strategies from 42 percent in 2019 to 45 percent in 2020 — the largest single year-over-year change in asset allocation and that community foundations reported 2-percentage-point changes in two allocations: an increase in U.S. equities and a decrease in fixed income. 

"For the second consecutive year, participating foundations' investment returns were strong and those returns are the underpinning of the financial wherewithal needed to sustain their organizational viability and support their mission through time," said Council on Foundations president and CEO Kathleen P. Enright and Commonfund Institute executive director George Suttles in a joint statement. "While we never take such good returns for granted, the real news coming out of the study was the maintenance of spending in a highly uncertain environment as well as incremental spending focused on COVID-19 needs. This was especially true on the part of some smaller community foundations, which, it would appear based on the data, had their finger on the pulse of their communities and took action."

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