Half of Canadian endowments, foundations and non-profits say their greatest risk over the next several years will be that returns will be insufficient to meet their objectives, according to a Mercer survey.
“Long-term returns have not justified or supported historical spending and distribution levels, and the sector is beginning to recognize this,” says Frank Belvedere, the Mercer partner responsible for the firm’s endowment consulting practice in Canada.
Thirty-five percent of participants said their greatest risk is the ability to maintain beneficiary distributions.
Survey findings indicate that respondents are concerned with their ability to maintain spending, as they feel challenged to earn the investment returns required to do so.
These concerns are justified, Mercer notes. Returns have fallen short of being able to meet typical objectives for spending, inflation protection and provision for their operating expenses.
Three-quarters of respondents reported having a formal spending or beneficiary distribution policy, but only 56% relate their spending policy to their investment policy allocation. And 73% intend to review their policy in light of the current market environment.
Mercer surveyed 27 Canadian endowments and foundations with total assets of $4 billion and funds ranging in size from $5 million to more than $1.1 billion.