Endowments and Foundations’ Economic Concerns Triple in 2019

NEPC,
LLC, one of the industry’s largest
independent, research-driven investment consulting firms, today
announced the results of their latest Endowments & Foundations Survey.
NEPC’s Endowments & Foundations practice team conducted this survey to
gauge non-profit organizations’ views on the economy, investment
opportunities, and key market trends.

Top findings include:

• Economic fears tripled: 60% of Endowments and Foundations say a
  slowdown in global growth is the largest threat to their investment
  portfolio and 36% say the economy is in a worse place, compared to 21%
  and 13% last year. Waning threats include geopolitical uncertainty
  (18%), global inflation (2%), and interest rates (0%).
• Impact investing gains momentum: Nearly two in five (38%)
  Endowments and Foundations have an impact investing program in place
  or plan to set one up within two years.
• Cryptocurrency donations fall short of the hype: Endowments and
  Foundations are not seeing a significant shift from regular cash
  donations to cryptocurrency, despite the hype. The majority (60%) are
  unsure whether their donors are using digital currency and the other
  40% have seen no change in the level of cryptocurrency donations.

The survey also reveals that non-traditional giving strategies are
gaining ground. Nearly one-quarter (23%) of Endowments and Foundations
report donor-advised funds are detracting from direct cash donations.
Some Endowments and Foundations are even creating their own
donor-advised funds to adapt to donors’ changing giving behaviors. The
donation of highly appreciated assets increased marginally, by 10%.

“Economic pressures weigh heavily on Endowments and Foundations’ minds
as we approach the midpoint of 2019,” said Cathy
Konicki, partner and leader of NEPC’s Endowments & Foundations
practice. “As investment committees anticipate a potential global
slowdown for the first time in a decade, it has never been more
important to construct an investment portfolio balanced to withstand
volatility.”

Endowments and Foundations anticipate the strongest performing asset
classes will be Private Equity (31%), Domestic Equities (29%), and
Emerging Markets Equities (29%). This is a shift from Endowments and
Foundations’ perceptions of the strongest asset class last year, with
just 6% and 15% selecting Domestic Equities and Private Equity,
respectively. The outlook for Emerging Market Equities was slightly
tempered, as nearly half (45%) expected it to be the strongest asset
class last year.

In terms of investment focus for 2019, 41% of respondents anticipate
allocating more to Private Equity, while 51% plan to maintain their
current exposure. Twenty-eight percent say they will allocate more to
Emerging Markets and 23% say the same about Real Estate. At the same
time, Endowments and Foundations anticipate allocating less to hedge
funds (32%).

More than one-third (36%) of Endowments and Foundations say tax reform
poses a slight concern for their fundraising abilities, with several
pointing to the increased standard deduction and changes in generational
giving habits. To mitigate the impact of tax reform, 13% launched
campaigns to attract new donors and 4% elicited larger gifts from
businesses and high-wealth donors.

Overall, charitable giving stayed strong in spite of the tax reform
frenzy. Organizations closed out their annual fundraising with increased
(28%) or constant (55%) levels of donations. Forty percent of Endowments
and Foundations have a positive outlook for the year ahead and forecast
2019 annual fundraising will meet (13%) or exceed (27%) last year’s
levels.

For more information, view the full survey and infographic here.

About the Survey

This NEPC survey was conducted online by the Endowments & Foundations
Practice Group in March 2019. Respondents include higher education
institutions, private foundations, public charities, and nonprofit
healthcare organizations. Copyright is held by NEPC.

About NEPC, LLC

NEPC is an independent investment consultant and private wealth advisor
with more than 30 years’ experience creating research-based, bespoke
investment portfolios that align to the individual goals of its clients
and their constituencies. Combining a proprietary research team
dedicated to meeting the long-term financial objectives of institutional
and high-net-worth investors, with our unique client-centric model, NEPC
builds investment portfolios defining the future of finance.

We serve over 100 Endowments & Foundations, representing over $79
billion in Endowment & Foundation assets, from our offices in Atlanta,
Boston, Charlotte, Chicago, Detroit, Las Vegas, Portland and San
Francisco with a forward-thinking approach to solving the most complex
challenges facing the industry.

To learn more about NEPC’s Endowments & Foundations’ Practice Group,
please visit https://www.nepc.com/focus-areas/endowments-foundations.

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