U.S. foundations had a 15.5% decline in asset values during 2022 as equities markets plummeted, portending what is likely to be a commensurate drop-off in giving to nonprofits during 2023 and possibly longer.

U.S. foundations lost nearly $250 billion from investment portfolios year-over-year, which fell from a record high of $1.3 trillion at the start of 2022 to $1.06 trillion at the end of the year, according to data from research outfit FoundationMark’s Grantmaker Investment Value (GIV) Performance Index.

It was by far their largest year-over-year dollar decline ever and the second largest percentage decline since the nearly 25% drop following the 2008 stock market crash, said FoundationMark Founder & CEO John Seitz.

It also followed a run of three straight years — 2019, 2020, and 2021 — during which foundations rode the wave of a bull market that saw their asset values grow by double-digit annual percentages of 20.1%, 11.6%, and 16.4% respectively.

Foundation portfolios suffered their greatest losses last year from equity investments that fell 18.1% but were also hurt by a 13% decline in the value of fixed-income investments.

Foundations are required by federal law to pay out a minimum of 5% of asset values each year. Most exceed this minimum and maintain a “remarkably consistent” giving rate of about 8% based on a rolling three-year average of their assets, Seitz said. Still, any decline in their asset valuations is typically bad news for nonprofits that rely heavily on foundation support.

Foundation giving as a percentage of assets increased slightly from 7.8% in 2021 to 8.1% in 2022, which allowed the dollar amount of giving to hold steady at about $90 billion each year despite the decline in portfolios.

However, the steep decline in asset values on year-end balance sheets for 2022 suggests foundation giving could fall off a cliff in 2023, which would be doubly painful for nonprofits already reeling from the headwinds of inflation and a growing demand for their services.

Nonprofits today rely more heavily on foundation giving that they have in the past. The sector overall received 19% of its funding from foundations in 2021 as compared with just 11% in 2000, according to data prepared for GivingUSA by Indiana University’s Lilly Family School of Philanthropy in Indianapolis.

Foundations would likely require an 18% increase in investment performance next year — an outcome viewed as highly unlikely by most economists — to offset last year’s losses and maintain their grantmaking levels of the past two years, Seitz said. 

FoundationMark, a nonprofit, aggregates data from the publicly available Internal Revue Service filings of more than 40,000 foundations nationwide with assets of $1 million or more, which collectively represent 97% of all foundation assets in the country. It uses the data to update its GIV and other performance indices. It also provides foundations with free independent assessments of their investment performance relative to the stock market and to other foundations individually and as a whole.

Foundation IQ, a sister organization, operates as a for-profit company and uses the same data to provide more granular analyses for a fee to public and private organizations.