After getting off to a rocky start at the beginning of President Obama's term, the stock market has grown steadily. Consider the Dow Jones, which went up 128 points on Wednesday alone.
Even if you don't have a stock portfolio overflowing with GOOG and AAPL, and especially if you're involved with a nonprofit or charity, here's another reason to be thankful for the Obama administration's success in turning the stock markets around: Commonfund, the 40-year-old Connecticut-based financial advisor to educational and nonprofit endowments, has just released two companion studies of 175 foundations, including 135 private/public foundations and 40 community foundations and operating charities, with a combined total of $108.2 billion in assets.
The Commonfund studies found that investment returns of the foundations were in the range of 12 percent in FY2010.
This is critical, as it's the interest or returns on investments that is disbursed by most foundations and charities.
Commonfund notes that while the 12 percent returns in FY 2010 were well below the 21 percent range posted in the Obama recovery year of FY2009, these two consecutive years of double-digit returns served as a welcome offset to the 26 percent portfolio decline experienced by these organizations in FY2008, during the final year of the Bush administration. In fact, the average investment returns in 2010 were the fourth highest in the nine years that the foundation study has been conducted and the third highest in the seven years of the operating charities study.
According to Commonfund's executive director John Griswold, foundation funds are still tight, but the situation appears to be less than the crisis that has been feared in the non-profit sector:
"Two consecutive years of good performance is a great relief for foundations and operating charities participating in the two Studies after the serious erosion in asset values experienced in FY2008. While three-year returns are just about flat, five- and 10-year returns are edging back into the range of 5 percent, which is an encouraging sign although it still falls short of covering these nonprofit organizations' spending, inflation and costs."
The same is true with regard to the levels of giving:
Among operating charities, giving was stronger in FY2010, but far from robust. Among responding institutions, 17 percent reported decreased giving in FY2010, a marked improvement over the 38 percent that reported decreased giving in FY2009.
Finally, the study found that levels of giving by foundations are inching up, with the largest foundations, not surprisingly, leading the way, with community foundations, perhaps hedging their bets about the recovery, giving away the least to nonprofits and charities.
Given the "pipeline" effect, resulting from the time delay for foundations and charities to pass along the available funds resulting from their investment returns, nonprofits over the past year or two may have been feeling the lingering results of the poor stock market under the final year of the Bush administration, whereas the revenue from the past year or two may just, in many cases, be starting to flow. If so, that is certainly welcome news to nonprofits. At the same time, this all represents another example of the inextricable ties between "too big to fail" Wall Street and the rest of the nation.