This study is based on a survey that Cambridge Associates (CA) administers annually to our foundation clients. The report that follows summarizes returns, asset allocation, and other investment-related data for 112 foundations for the calendar year ended December 31, 2020. Included in this year’s report are commentary and figures that are spread across six separate sections.
Our Investment Portfolio Returns section highlights performance results for select trailing periods. It was a volatile year for capital markets in 2020, and the dispersion in returns among participating foundations was much wider than normal. This section investigates some of the factors that contributed to the variation of peer returns and what made top performers stand out.
Performance results of peers can be informative, but they are not necessarily the most effective benchmark for evaluating a foundation’s investment performance. Differences in investment policies across foundations lead to a wide range of performance objectives as defined by policy portfolio benchmarks. As a result, many foundations that underperformed the peer median in this study fared well when evaluated against their own policy portfolio benchmark. Our Investment Policy section examines this and other related topics.
The Portfolio Asset Allocation section looks back at changes over the last decade and incorporates data on target asset allocations to lend insights into how foundations are altering their portfolios heading into the future. The 2020 observations are mostly a continuation of longer-term trends, which show that foundations in general are increasing allocations to growth assets decreasing exposure to hedge funds and real assets strategies.
The number of managers that foundations use for their overall portfolio and within specific asset classes can vary widely. Our Investment Manager Structures section explores data on this topic, as well as implementation strategies for traditional assets (i.e., active versus passive management) and alternative assets.
Meanwhile, the Payout from the Long-Term Investment Portfolio section contains a set of analyses that look at spending objectives and policies of private non-operating foundations. These types of foundations are required under the Federal tax code to distribute approximately 5% of their assets each year. While most of these foundations’ payout objectives are tied closely to this requirement, some also use smoothing-type spending rules like those used more commonly among endowments.
Finally, our Investment Office Staffing and Governance section of the report looks at topics such as the number of personnel in the investment office and investment committee structure. Also included are analyses on who has decision making responsibility for asset allocation policy development and manager selection.