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

Spending

Among participating operating charities, spending as a percentage of assets-the effective spending rate-was 4.7 percent, unchanged year over year and down modestly from 4.8 percent in FY2011. (Since most nonprofits use a multi-period smoothing rule to calculate annual endowment spending, operating charities' effective spending rate-their spending as a percentage of assets-often moves inversely with the direction of annual investment returns.)

Social service organizations reported the highest effective spending rate, at 5.4 percent, while cultural organizations' effective spending rate was 4.7 percent and religious institutions reported an effectivespending rate of 4.2 percent.

When the data are viewed by endowment size, organizations with assets under $101 million had the highest effective spending rate at 5.2 percent. Charities with assets over $500 million reported an effective spending rate of 4.7 percent, while those with assets between $101 and $500 million reported the lowest effective spending rate, at 4.3 percent.

Debt

Continuing the deleveraging trend of recent years, for FY2013 the 24 operating charities reporting that they carried debt had an average debt of level of $39.8 million and a median debt level of $10.7 million. Last year's comparables were average debt of $50.4 million and median debt of $13.8 million.

Of 22 responding institutions with debt, 14 percent increased their debt load in FY2013 while 50 percent decreased it. Thirty-six percent reported no change.

Resources, Management and Governance

The number of full-time professional operating charity staff members devoted to investments averaged 1.5 full-time equivalents (FTEs) versus last year's average of 1.4 FTEs. Twenty-two percent of Study participants reported having a chief investment officer, down from 25 percent a year ago. Eighty-two percent of Study participants reported using a consultant, all but unchanged compared to last year's 83 percent. Twenty-two percent of respondents said they have substantially outsourced the investment function, while another 12 percent said they are considering substantially outsourcing the function.