Private Foundation Assets Up 48 Percent Since Recession, Report Finds

4. Post recession, foundations paid lower investment fees: In the wake of the recession, foundations were paying lower investment fees. In 2008, 19 percent were paying between 100 and 150 basis points, whereas in 2013, only 6 percent paid fees at that level. During the same time period, the number of foundations paying less than 50 basis points grew from 34 percent to 55 percent.

According to Robert Chartener, CEO of Foundation Source, "Private foundations have philanthropic commitments that depend on reliable investment returns. At no time has the pressure on their financial advisors to meet this challenge been greater than during this economically turbulent span of time. Our new report shows how our clients, together with their financial advisors, capitalized on improving markets these last few years, revealing in the process some noteworthy trends in investing."

According to Page Snow, chief philanthropic officer of Foundation Source, "Some of the findings seem surprising until you take the distributions of these foundations into account. For example, across the board, foundation portfolios enjoyed very similar market gains, yet the endowments of the sub-$1 million foundations remained flat year over year. That's because, in our experience, smaller foundations distribute a greater percentage of their assets — on average above 20 percent of their assets — than their larger counterparts."

To provide additional context to its quantitative data, Foundation Source surveyed 190 clients regarding their perceptions of their investments and advisors. Overall, clients were either "highly" or "mostly" positive about their foundation's performance (93.7 percent) and their relationships with advisors (97.4 percent), findings that were likely bolstered by the market recovery. Still, the survey pointed to three key areas where advisors might add additional value to client relationships. These were:

• Creating an investment policy: 64.5 percent of foundation respondents indicated that they lacked a written investment policy. Of those that did have such a policy, 36.9 percent said they'd updated it within the last year.
• Engaging the next generation: 38 percent of respondents said it was "somewhat important" that advisors engage with the next generation of foundation leaders, while 22.3 percent said it was "critically" important for advisors to do so. Despite their apparent interest, less than half (46.3 percent) of respondents said that their investment advisor had interacted with the next generation.
• Impact investments: Although the majority (60.1 percent) said advice on social impact or mission-related investments was "not at all important," fully one third of respondents said such advice was either "somewhat" or "critically" important.

According to William Sutton, head of U.S. Philanthropic Services at UBS: "Private foundation donors clearly value and maintain their relationships with financial advisors. Nevertheless, in a competitive marketplace, it's essential that advisors bring added value to the client relationship where and whenever possible. The Foundation Source report on private foundation investing provides a host of valuable findings for the advisor community, grounded by survey data from an audience that can be difficult to reach."