SOURCE: Spectrem Group

December 09, 2009 08:00 ET

Endowments, Charitable Foundations Focused on Rebuilding Following Recession-Driven Declines

Alternative Investments and Liquidity Also Top Priorities

CHICAGO, IL--(Marketwire - December 9, 2009) - Impacted by recession and declines in asset values, endowments and charitable foundations are focused today on rebuilding their funds and evaluating both alternative investments and their own liquidity.

Nearly two-thirds (62%) of endowments and foundations polled cited rebuilding and growing their funds as a priority over the next year to 18 months, according to a new report, "The Endowment & Foundation Market 2009," released today by Spectrem Group (www.spectrem.com). For endowments and foundations with assets of $50 million to $199 million, 69% plan to focus on rebuilding.

Total endowment assets fell 24% in 2008 to $768 billion, from $1 trillion the prior year. Since 2008, assets appear to have rebounded only slightly.

"The recession has severely impacted endowments and charitable foundations, erasing a considerable portion of their assets and putting pressure on their ability to fulfill their missions. Some have had to reduce scholarships, while others have had to cut back grants. With traditional sources of financial support impacted as well, these organizations must focus on supplementing their fundraising with new strategies designed first to generate growth and additionally to ensure they have the liquidity to meet their spending needs," said Gerald O'Connor, a Director at Spectrem Group.

Given these needs, alternative investments, which include hedge funds, private equity and venture capital, are a priority in the post-recession environment. Alternatives were cited as an area of focus for more than one-third (36%) of the smallest endowments and foundations, those with assets of $25 million to $49 million, and 29% of the largest organizations, with assets of more than $200 million.

The largest endowments and foundations are also the most concerned with liquidity, with 41% citing it as a priority over the next year to 18 months. Liquidity concerns fall as asset size decreases, with zero percent of organizations with assets in the $25-$49 million range considering it a priority.

The Spectrem report, "The Endowment & Foundation Market 2009," is based on interviews with chief investment officers at 81 organizations with assets ranging from $25 million to more than $1 billion. Interviews were conducted in August and September of 2009.

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