Foundation Assets Plummeted Nearly 20% Last Year, Putting Grant Making at Risk

After three straight years of gains, foundation investments performed dismally last year, leading to a 19 percent decline in the value of their endowments, according to one estimate.

The losses, which include grants and operating expenses foundations made last year, suggest foundations will have a difficult time maintaining their grant-making levels unless they dig into their endowments.

Over the past three years, foundation investment returns have barely topped 3 percent on average, according to the projections. It is only looking at a 10-year horizon, when returns increased 6.1 percent on average, that foundations were able to avoid dipping into their endowments to meet the federal requirement that they distribute at least 5 percent of their assets each year.

“Investment returns alone for the last five years have not been able to keep pace,” said John Seitz, head of FoundationMark, a company that researches foundation market performance and just issued the latest estimates.

Foundation endowments shed $250 billion of their value in 2022, ending the year valued at $1.06 trillion in total, their lowest since 2018, according to projections by FoundationMark. The projections are based on investment performance at 40,000 foundations, representing about 98 percent of foundation assets, according to FoundationMark.

Investments made by foundations dropped 15.5 percent in value last year. Those losses were slightly less than what a portfolio with 60 percent invested in equities in a Standard & Poor’s index fund and 40 percent in bonds would have lost during the same period, according to FoundationMark.

To maintain current grant-making budgets without culling funds from their endowments, foundations on average would have to see an 18 percent return in the market this year, Seitz said.

“That’s huge,” he said. “That doesn’t happen very often.”

During the fourth quarter, foundation investments notched a 6.4 percent increase on average, softening some of the blow of the dismal year. Major stock indices are in positive territory just a few weeks into the year, but the market has shown great volatility.