Study: Operating Charity Investment Returns Rise to an Average of 15.1 Percent in Fiscal Year 2013

Additional information about operating charity investment performance, asset allocation, governance and related topics follows.

Returns

Cultural organizations' returns averaged 15.1 percent, religious institutions averaged 15.3percent and social service organizations averaged 14.8 percent. As previously noted, when data are viewed by size of organization, charities with assets under $101 million returned an average of 16.5 percent; organizations with assets between $101 and $500 million returned 15.1 percent; and organizations with assets over $500 million secured a return of 13.4 percent.

Also as mentioned, by asset class/strategy, domestic equities returned 31.1 percent; international equities, 17.3 percent; alternative strategies, 10.5 percent; short-term securities/cash/other, 0.0 percent; and fixed income, -0.7 percent.

Within the broad alternatives category, distressed debt produced the highest return, at 15.6 percent. This was followed by marketable alternative strategies (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives), at 13.5 percent, and by private equity (leveraged buyouts, mezzanine debt, M&A funds and international private equity), at 10.3 percent. Venture capital and private equity real estate (non-campus) both generated a return of 9.9 percent, while energy and natural resources returned 5.0 percent. The only negative return among alternative strategies came from commodities and managed futures, at -7.1 percent.

Asset Allocation

At December 31, 2013, participating institutions' asset allocations (with comparable FY2012 returns in parentheses) were:

Domestic equities: 25 percent (22 percent)

Fixed income: 20 percent (22 percent)

International equities: 20 percent (19 percent)

Alternative strategies: 28 percent (31 percent)

Short-term securities/cash/other: 7 percent (6 percent)

(While 72 percent of the operating charities that participated in last year's Study took part once again this year, changes in participant composition year over year can, in certain instances, affect the data. Such is the case with the alternative strategies allocation; a matched sample shows a higher 34 percent allocation to alternative strategies among institutions participating in both Studies. The matched sample shows an 18 percent fixed income allocation and a 4 percent allocation to short-term securities/cash/other, both somewhat lower than data gathered from this year's participants. The full Study notes those instances where there are meaningful differences in data from FY2012 to FY2013 owing to changes in the composition of Study participants.)