finance & investments
2021 investment results
In 2021, the good times continued to roll, at least in the financial markets. This was especially true in the U.S., where the stock market rose 26.7% as measured by the Wilshire 5000 Index.
International equity returns were also up, though not quite as much at 12.6%.
Both markets were influenced by the persistence of the low interest rate regime that has prevailed globally since 2010, but the low absolute level of rates finally caught up the bond market.
The Barclay’s Aggregate Bond Index (a broad index of domestic bonds, ranging from US Treasury bonds to “junk bonds”) generated a negative 1.5% return; the index had not generated a negative return since 1999. Meanwhile international bond returns declined an astounding 8.2%.
Within these strange times, the Foundation produced a return of 15.0%, ahead of our Blended Benchmark which is a weighted average of the market indices used to measure portfolio performance.
2021 results also exceeded our endowment spending target of 5% plus the increase in the Consumer Price Index (which clocked in at 6.7%), and outperformed the 14.7% median rate of return for all community foundations participating in the annual Council on Foundations survey.
We are pleased to report these relatively favorable results, but we are firmly aware of the old adage, “The year is over, what have you done for me lately?”
* The Foundation’s Blended Benchmark Index is a weighted average of the market indices used to measure portfolio performance.
131 funds participate in ECF’s $36.9 million investment portfolio.
2022 investment outlook
Gauging by the results of the financial markets in the first five months of the new year, 2022 is not likely to be a year for stellar returns. Just as there are periods to make money, there are times in which the backdrop is not favorable and taking care to hunker down and ride out the storm is the most prudent course of action.
Normally, this would suggest a widely diversified portfolio, as one segment or another of the broad financial markets may perform well, even if most segments are not. In this case, however, we note that bonds are continuing to perform poorly as interest rates rise, and stocks are finally taking note of interest rate increases and inflation.
It is fairly easy to envision success for any investment security or theme when interest rates are zero. It becomes quite another matter to justify dubious business plans or high risk companies as rates move up.
Right now, in the thick of summer, ECF’s portfolio is widely diversified, as befits a portfolio built for the long term. In the areas where ECF has actively managed holdings, we are working with managers whose solid approaches to investing both align with our values and our investment sensibilities.
Riding out a storm is never pleasant, but the aftermath also brings clearing skies.
2021 financial review
ECF’s financial results for 2021 align with the transitional nature of the year for ECF and all of us. We assessed and adapted, increasing our efforts to address the inequities laid bare at the height of the pandemic.
The Foundation’s 2021 revenues and expenses reflect the winding down of our Rapid Response Fund and the evolution of our grantmaking and programs. 2021 contributions and program expenses are significantly less than the exceptional 2020 levels, but also differ from prior years in significant ways. Our community’s continuing support for ECF’s work was reflected in Now! Fund contributions that exceeded any previous year. And, buoyed by the final Rapid Response gifts, our community-centered grantmaking exceeded $1.2 million, nearly 50% more than comparable grantmaking in 2019. In 2021, our donor advised funds increased their grantmaking to ECF and nonprofits in Evanston by 40%.
As noted in the report of the investment council, the funds invested in ECF’s portfolio earned 15.0% in 2021, ahead of our 2020 return of 12.4%.
The investment results are reflected in both the increase in assets and liabilities. The funds ECF holds for other nonprofits are categorized as liabilities, in accordance with accounting standards. Investment earnings on those funds in 2021 exceeded fund distributions by more than $500,000.