-- Foundations and non-profit groups that invest in the stock market are getting battered by recent Wall Street volatility.
Hardest hit are community groups that rely on both endowments and donations, which are also expected to decline, says Sigurd Nilsen, director of policy research for the Council on Foundations. The council represents about 2,200 grant-making foundations.
In a survey the council released in May, 52% of the community foundations that responded said they plan to distribute less grant money next year because of the economic downturn. Nilsen says the results still apply.
The Princeton Area Community Foundation in New Jersey, which has about $55 million in net assets, awards most of its grants in the state. Its investments are down 6.8% since the beginning of the year, says executive director Nancy Kieling.
The foundation calculates the amount of grant money it awards by averaging the value of its assets over the past two years. If losses continue, she says, "Payouts in upcoming years will be lower."
Kieling's foundation and others say their losses are limited because they diversify their portfolios, putting money into different classes of stocks, bonds, real estate and other investments.
"Even though the market has been bad, we're going to give out more money next year than this year," says Daniel Silverman, spokesman for the James Irvine Foundation, which provides grants to non-profit organizations in California.
College endowments, too, have moved heavily into hedge funds, real estate and other investments in the past decade.
None has reported significant losses from troubled securities or real estate, but public reporting requirements require little disclosure beyond annual reports.
"The university invests for the long term," says University of Washington spokesman Robert Roseth. "We expect short-term gyrations and setbacks."
The university's money managers have moved more funds into cash and other safer investments, he says.
John Griswold, executive director of the Commonfund Institute, part of a non-profit that manages $40 billion for endowments, says endowments shouldn't suffer catastrophic losses barring "imprudent risk."
"Diversification has been the name of the game in endowments, and that's good," he says. "The problem is, in a crisis like this, everything can go down and diversification doesn't help."