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 106 institutions for the calendar year ended December 31, 2022. Included in this year’s report are commentary and exhibits that are spread across six separate sections.
After three straight years of strong performance, foundation returns plummeted in 2022 as the US central bank pursued its most aggressive series of interest rate hikes in decades. The dispersion in returns among participating foundations actually narrowed considerably compared to the previous year, as correlations between equities and bonds turned positive in the rising interest rate environment. Still, it was a market environment where most illiquid strategies outperformed the public markets, resulting in top performers having the highest average allocations to private investments. Our Investment Portfolio Returns section highlights these and other topics related to investment performance results for this past calendar year. Also included in this section are analyses on returns over longer-term periods.
Despite the negative return environment, diversified portfolios performed well compared to broad market benchmarks in 2022. Most respondents to our survey also outperformed their policy portfolio benchmarks for the year. Our Investment Policy section discusses this topic and includes a breakdown of the most commonly used indexes in policy benchmarks. This section also reviews how asset allocation strategies among foundations can differ from a policy perspective as well.
The last few years have seen private equity and venture capital (PE/VC) allocations rise dramatically among foundations in our universe. The Portfolio Asset Allocation section highlights how these fit in with asset allocation trends over the longer term. 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 nonoperating 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-making rights for asset allocation policy development and manager selection.