The 2024 Community Foundation Survey received 107 responses across 31 states, representing approximately $40.9 billion in assets.¹ Organization asset size ranged from less than $25 million to greater than $1 billion, with 30% of respondents reporting assets between $101-$250 million. Overall, the survey revealed several key themes: the OCIO advisory model is gaining traction, though traditional consulting models remain more popular; many foundations are considering increasing private investments and reducing hedge fund exposures; legislative actions have slowed momentum for diverse asset managers, but some institutions are shifting towards private capital for impact investing; and while half of respondents support responsive investing, actual investments remain limited. Finally, community foundation spending rates have slightly increased compared to last year and minimal changes are expected in the coming year.
1 Assets under advisement were self-reported by respondents as of September 30, 2023.
The FEG Community Foundation Survey collects data on a variety of financial and enterprise topics to provide insight on issues affecting community foundations.
The survey was completed primarily by senior-level investment decision-makers. Responses were accepted from January 16 to March 8, 2024. FEG would like to thank all community foundations dedicated to serving the needs of their communities—especially those who contributed to the survey.
Advisory/Consultant Service Model
While traditional consulting/non-discretionary models remain the most popular service model, there has been a noticeable increase since the inception of this survey in the number of community foundations with an OCIO/discretionary service model. Approximately 37% of respondents indicated they utilize an OCIO model, a 2% point increase from the prior year’s survey and a 14% point increase from the initial survey in 2016. However, traditional consulting is still the most popular model, with 47% of respondents indicating they have adopted this approach.
When considering a service model adjustment, community foundations should reflect candidly on their governance and the roles and responsibilities of their investment committee, staff, and advisor(s). Community foundations should also take into consideration investment resources—both staff and the investment committee.
In this year’s survey, the trend of limited investment staff continued, with approximately 83% of respondents stating they have one or fewer fulltime equivalent (FTE) staff to administer the foundation’s investment portfolio. Moreover, 79% of respondents indicated they expect staffing levels to remain static over the next 5 years.
To learn more about FEG's approach to governance, visit www.feg.com/governance.
Investment Committee Composition
Asset Allocation
Similar to previous years, smaller community foundations indicated a stronger home country bias, with 47% of portfolio assets dedicated to U.S. equities. This year’s investment performance results reflected smaller community foundations, on average, outpacing larger organizations on a trailing 1-year basis. While 2022 was a difficult year for both public equity and fixed income, 2023 was a year of recovery in the public markets. The relative performance differential between large and small foundations is due in part to the lagged reporting methodology of private capital investments. The differential was further exacerbated by the outsized performance of the U.S. large cap—where, again, smaller foundations maintained a higher concentration—amid the 2023 recovery. Over longer periods of time, however, a return premium has been observed for those foundations that have allocated to the private markets. This has benefitted many large community foundations with mature private capital programs. The average allocation to private investments for community foundations with more than $500 million is 19.2%.
While every community foundation has unique factors that contribute to risk levels and liquidity needs, the survey has found consistently over the years that larger community foundations allocate more to alternatives.
Number of Investment Managers
Another area in which the survey identified a significant difference depending on a community foundation’s size was the number of investment managers. Overall, foundations reported an average of 19 investment managers in their primary pool, but the number of managers varied greatly depending on asset size. Community foundations with assets greater than $500 million averaged 42 managers, while those with assets less than $25 million only had approximately 10 managers. The reason for the higher number of managers may be attributed to a greater utilization of private capital.
Responsive Investing (RI)
Interest—and investment—in responsive investing has increased since 2017. However, in recent years overall adoption and donor interest have decreased from peak levels experienced in 2022. Half of the respondents (50%) indicated they have responsive investing strategies within their portfolio—down from 54% in 2023—but the actual dollars invested of the total portfolio remain limited.
As community foundations continue exploring implementation of DEI to align their missions with their investments, there has been a bit of a pullback this year and somewhat of a plateau in terms of the number of community foundations interested in investing in diverse managers. Nearly 44% of respondents indicated having hired or having considered hiring a diverse asset manager, which is down from 49% in the 2023 survey. Education and inventory are the major areas where community foundations are seeking further assistance regarding DEI and diverse managers. Furthermore, investing in diverse asset managers/DEI is among the top trends being discussed by investment committees.
|
Defining Diverse While it can be challenging to arrive at a universal definition of diverse, more than half the respondents indicated they define a diverse manager as one with more than 50% composition of ownership and/or portfolio managers who are described as women or persons of color. |
Spending Rates
Average and median community foundation spending rates increased year over year as equity and fixed income markets rebounded from 2022. The average and median spending rates are 4.4% and 4.5%, respectively. Notably, only 12% of respondents signaled an intent to change spending rate in the coming year.
Spending Methodology
The methodology an organization uses to determine its endowment spending can help mitigate the impact of volatility. Similar to the results shown in the 2023 Community Foundation Survey, the most common methodology used as indicated in the 2024 Community Foundation Survey was moving average, primarily over a rolling 12-quarter period.
Thank you to the community foundations that participated in the survey and contributed to its content. FEG greatly appreciates the time and energy of those who have participated in the past and looks forward to increasing the number of participants and improving the usefulness of the data in the future.
Should you have any ideas or feedback to incorporate for the 2024 survey, please send an email to communications@feg.com.
Investment Consulting Models
TRADITIONAL CONSULTING / NON-DISCRETIONARY
Traditional consulting is the use of a third party that advises a board/committee on investment decisions but does not have discretionary power—sometimes referred to as an investment advisor.
OCIO / DISCRETIONARY
An OCIO is a third party that manages an investment portfolio.
DELEGATED INVESTING MODEL
This model combines traditional consulting and OCIO. The consultant—a third-party advisor—advises the board/committee on investment decisions but might have some discretionary power.
INVESTMENT MANAGER
A mutual fund manager (e.g., Morgan Stanley).
This report was prepared by FEG (also known as Fund Evaluation Group, LLC), a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing non-discretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Fund Evaluation Group, LLC, Form ADV Part 2A & 2B can be obtained by written request directly to: Fund Evaluation Group, LLC, 201 East Fifth Street, Suite 1600, Cincinnati, OH 45202, Attention: Compliance Department.
The Community Foundations data is obtained from the proprietary FEG 2024 Community Foundation Survey. The study includes a survey of 107 U.S. Community Foundations. The survey was open for responses online from January 16 - March 8, 2024. Participants also had the option to complete as a word document and email the results back to FEG. The data from this survey is in preliminary stages and not yet finalized. Participants include community foundations with assets ranging from less than $25 million to greater than $1 billion. The information in this study is based on the responses provided by the participants and is meant for illustration and educational purposes only.
Data in this presentation may also be obtained from the 2023, 2022, 2021, 2020, 2019, 2018, 2017, and 2016 proprietary FEG Community Foundation Surveys. To receive the full disclosures for these surveys, please email communications@feg.com.
Index performance results do not represent any managed portfolio returns. An investor cannot invest directly in a presented index, as an investment vehicle replicating an index would be required. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.
Neither the information nor any opinion expressed in this report constitutes an offer, or an invitation to make an offer, to buy or sell any securities.
The information herein was obtained from various sources. FEG does not guarantee the accuracy or completeness of such information provided by third parties. The information in this report is given as of the date indicated and believed to be reliable. FEG assumes no obligation to update this information, or to advise on further developments relating to it.
This presentation is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this presentation.
Any return expectations provided are not intended as, and must not be regarded as, a representation, warranty or predication that the investment will achieve any particular rate of return over any particular time period or that investors will not incur losses.
Past performance is not indicative of future results.
Investments in private funds are speculative, involve a high degree of risk, and are designed for sophisticated investors.
Diversification or asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.
The purchase of interests in private equity funds involves certain risks and is suitable only for persons of substantial financial means who have no need for liquidity in their investment, and who can bear the risk of the potential loss of their entire investment. No guarantee or representation is made that the investment will be successful, that the various underlying funds selected will produce positive returns, or that the fund will achieve its investment objectives. Various risks involved in investing may include market risk, liquidity risk, limited transferability, investment funds risk, non-registered investment funds risk, valuation risk, derivative risk, venture financing risk, distressed securities risk, interest rate risk, real estate ownership risk, currency risk, and financial risk, among others. Investors should refer to the applicable Private Placement Memorandum and Offering Documents for further information concerning risks.
Published August 2024