RALEIGH, N.C. – February 24, 2022 – CAPTRUST Financial Advisors (CAPTRUST) today released the findings from its annual Endowment & Foundation Survey, highlighting the unique needs of nonprofits with long-term investment assets between $10 million and $250 million. For the fourth annual edition, the firm surveyed 156 organizations, including public and private foundations focused on religious, educational, and other charitable missions.
This year’s survey included new questions regarding diversity, equity, and inclusion (DEI). Sixty-nine percent of respondents indicated that DEI is a priority for their organization, meaning that it is part of the organization’s mission statement or actively discussed in board meetings. Among the organizations that prioritize DEI, the top issues that they were concerned with were race and ethnicity (89 percent), gender (73 percent), and culture (47 percent).
“Ninety-one percent of the nonprofits that indicated that diversity, equity, and inclusion are important to their organization reinforce this commitment by evaluating DEI criteria when identifying new board members,” said James Stenstrom, endowment and foundation director at CAPTRUST.
Additionally, the majority of organizations continue to require (23 percent) or expect (66 percent) financial contributions from board members. Of these groups, organizations that require—rather than expect—board gifting are significantly less likely to be dissatisfied with their level of racial and gender identity diversity.
“The data around board member contributions indicates that clearly defining and communicating these requirements may aid in removing cross-cultural barriers, rather than making them worse,” continued Stenstrom.
When it comes to investments, 38 percent of organizations are using environmental, social, and governance (ESG); impact; or mission-aligned strategies, up 27 percent year-over-year. This marks the second consecutive survey with more organizations allocating to ESG or other values-based strategies. Additionally, more organizations (28 percent) are adopting positive screening methodologies (up from 22 percent), meaning they look to invest in companies that align with their values.
“We anticipate seeing additional organizations not only leverage ESG investments but also prioritize positive screening methods to ensure a more direct alignment with their mission. Those organizations that are able to clearly communicate this to their donors may have an advantage over other organizations,” said Grant Verhaeghe, senior director, endowment and foundation practice leader at CAPTRUST.
Most organizations do not plan on changing their asset allocation in the year ahead. But, of the organizations that are looking to make an adjustment, 95 percent plan on increasing their allocation toward alternatives and other investments.
Alternative investments, which broadly represent strategies beyond owning publicly traded securities, are currently a part of 56 percent of our respondents’ current portfolios. Larger endowments and foundations allocate to alternatives at a higher rate than their smaller peers; every respondent with over $500 million in investable assets uses the asset class. Furthermore, investors with more than $100 million in assets allocated a larger proportion of their portfolio to alternatives.
“For those organizations that are not currently investing in alternatives, the 26 percent pointed to portfolio size, while 25 percent expressed concerns in liquidity as obstacles to investing in alternatives. Another nine percent felt that there is no perceived benefit to investing in the space,” continued Verhaeghe.
The 2021 Endowment & Foundation Survey dives into a number of additional topics, including fundraising, spending policy, and performance trends. The full findings can be found here.
Founded in 1997 in Raleigh, North Carolina, CAPTRUST is an independent registered investment advisor. The firm provides investment management, financial planning, estate planning, and tax advisory and compliance for individuals and families. For retirement plan sponsors, endowments, foundations, and religious entities, CAPTRUST offers investment advisory services, fiduciary support, plan design, provider analysis/fee benchmarking, and employee advice programs. With more than 1,000 employees across more than 65 locations nationwide, CAPTRUST oversees more than $95 billion in assets under management and more than $700 billion in assets under advisement (as of December 31, 2021).