Endowments Increasingly Dour About Economy

The number of endowments and foundations that believe the economy has worsened, and see a slowdown as their biggest long-term threat, has tripled over the past year, according to a survey from investment consulting firm NEPC.

The survey found that 60% of endowments and foundations say an economic slowdown in global growth is the biggest threat to their investment portfolio, which is up sharply from 21% just a year ago. At the same time, 36% of foundations and endowments surveyed said they believe the economy has worsened over the past year, up from just 13% that held that view last year.

“Economic pressures weigh heavily on endowments and foundations’ minds as we approach the midpoint of 2019,” Cathy Konicki, head of NEPC’s endowments and foundations practice, said in a release. “As investment committees anticipate a potential global slowdown for the first time in a decade, it has never been more important to construct an investment portfolio balanced to withstand volatility.”

The survey also found that 31% of endowments and foundations expect private equity will be the top-performing asset class, while 29% said the same about both domestic equities and emerging markets equities. This is a significant change from last year’s expectations, when only 15% said private equity would be the top asset class, and just 6% felt the same way about domestic equities. Emerging market equities were expected to be the top performer last year as 45% said they expected it to be the strongest asset class.

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As a result of this year’s perception of private equity, 41% of the survey’s respondents said they plan to allocate more funds to the asset class, while 51% said they have no plans to change their current exposure. And 28% of respondents said they will allocate more to emerging markets, while 23% said the same about the real estate sector. Meanwhile, 32% of the endowments and foundations surveyed said they expect to allocate less to hedge funds.

The survey also found that endowments and foundations are not seeing a significant shift from regular cash donations to cryptocurrency. Some 60% said they are unsure whether their donors are using digital currency, while the other 40% said they haven’t seen a change in the level of cryptocurrency donations.

And more than one-third (36%) of endowments and foundations said tax reform poses a minor concern for their fundraising abilities, with several citing the increased standard deduction and changes in generational giving habits as potential reasons to worry. In order to lessen the impact of tax reform, 13% of respondents said they launched campaigns to attract new donors, while 4% drew larger gifts from businesses and wealthy donors.

As for charitable giving, the survey found that 28% of endowments and foundations ended their annual fundraising with increased donations, while 55% remained unchanged. Additionally, 40% of endowments and foundations said they have a positive outlook for the coming year, with 27% saying they expect 2019 annual fundraising will exceed last year’s levels, and 13% expecting to match last year’s fundraising levels.

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Tags: Economy, Endowments, Foundations, NEPC, Survey

Australian wealth manager IOOF Holdings has been sued by shareholders who claim the firm allegedly breached stock market disclosure obligations and “engaged in misleading or deceptive conduct.”

The suit was filed in the New South Wales Supreme Court in Sydney by law firm Quinn Emanuel Urquhart & Sullivan.

Quinn Emanuel’s claim against IOOF stems from evidence given by the wealth manager at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The law firm said the evidence concerned breaches by IOOF’s directors and officers, and its subsidiaries, of their obligations as superannuation trustees.

According to the law firm, IOOF shares lost over 35% of their value “following these revelations at the Royal Commission, and the announcement of various proceedings against IOOF’s subsidiaries and officers related to those breaches by the Australian Prudential Regulation Authority (APRA).”

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In response to the lawsuit, IOOF said the claim against it was “speculative and without foundation.” The wealth manager also said it “takes its continuous disclosure obligations seriously,” and that it “does not engage in misleading or deceptive conduct.”

In December, the APRA announced a series of actions it was undertaking against IOOF entities, directors, and executives for “failing to act in the best interests of superannuation members.”

APRA Deputy Chair Helen Rowell said the regulator had tried to resolve conflict of interest concerns with IOOF over several years but decided it was necessary to take stronger action after concluding the company was not making adequate progress, nor was it likely to do so in a reasonable period of time.

“APRA’s efforts to resolve its concerns with IOOF have been frustrated by a disappointing level of acceptance and responsiveness to the issues raised by APRA,” Rowell said in a statement. “The actions we are now taking are aimed at achieving enduring change to ensure that the trustees of the superannuation funds operated by IOOF fully meet their obligation to put the interests of members ahead of all other interests.”

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Tags: IOOF Holdings, Lawsuits, New South Wales Supreme Court, Wealth Manager