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 institutions for the
calendar year ended December 31, 2021. Included in this year’s report are commentary and exhibits that are spread across six separate sections.
Calendar year 2021 was the third straight year in which the median participant return was in the double digits. Although foundations across the board have earned strong recent returns, the range of outcomes among participants was the widest it has been in more than 20 years. Our Investment Portfolio Returns section highlights performance results for this past calendar year. This section investigates some of the factors that contributed to the historically large variation of peer returns and what made top performers in particular stand out. It also includes analyses on investment performance over multiyear trailing periods, and shows how these last few years helped boost longer-term results.
Foundations not only generated robust returns on an absolute basis in 2021. The vast majority of respondents to our survey also outperformed their policy portfolio benchmarks for the year, including some by extremely large margins. But what components are most commonly used in policy benchmarks? Our Investment Policy section touches on this topic and how peer practices for benchmarking private equity have changed over the past decade. This section features data on real return objectives and how asset allocation strategies among foundations can differ from a policy perspective as well.
The Portfolio Asset Allocation section highlights how foundations have evolved in investing their portfolios over the past decade, with a particular focus on the increased equity exposure that foundations have taken on in recent years. This section also incorporates data on target asset allocations to lend insights into how institutions are altering their portfolios heading into the future. 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.
Finally, our Investment Office Staffing and Governance section of the report takes a look at topics such as the number of personnel in the investment office and investment committee structure. Also included are analyses on how foundations use outside advisors/consultants and who has decision rights for asset allocation policy development and manager selection.