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Endowments and Foundations’ Economic Concerns Triple in 2019

April 23, 2019

-- NEPC survey finds fears of a global economic slowdown in economic growth are 3x greater than in 2018. Nonprofits also weigh the impact of tax reform, the rise of donor-advised funds, and cryptocurrency donations --

BOSTON--(BUSINESS WIRE)--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 as causes for concern. 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. 40% 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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