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 110 institutions for the calendar year ended December 31, 2023. Included in this year’s report are commentary and exhibits that are spread across five separate sections.
A rebound in equity and bond markets propelled foundation returns in 2023, with the majority of participants in our universe reporting double-digit returns. However, performance for illiquid asset classes lagged public strategies by significant margins. Most foundations underperformed a simple public equity/bond blended index for the year, with the spreads being greatest for those with larger and more diversified portfolios. The story was the opposite when the evaluation periods are extended across multiple years, as foundations with higher allocations to private investments continued to outperform over the long term. Our Investment Portfolio Returns section highlights these and other topics related to investment performance results.
A public equity index is the most common approach to representing private equity and venture capital (PE/VC) in the policy portfolio benchmark. In a year such as 2023, where public markets produced much higher returns than private markets, it is difficult for foundations to outperform their benchmarks. Our Investment Policy section touches on this topic and includes a breakdown of the most commonly used indexes in policy benchmarks. This section also touches on asset allocation strategies among foundations and how those can differ from a policy perspective.
A review of foundation asset allocation trends over the past decade shows that PE/VC allocations have risen dramatically, while allocations to most other strategies have declined. The Portfolio Asset Allocation section highlights these asset allocation trends and incorporates data on recent changes in target asset allocations.
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, the former Investment Office Staffing and Governance section will now be available as a standalone publication. Data collection for the biennial Organization and Staffing for Endowment Management survey and publication will begin in summer 2024. This publication will explore all facets of investment office resourcing and governance structure.