By Heather Joslyn

Seventy-one percent of American nonprofit organizations in a new survey say that they are making changes in how they allocate their invested assets, in the wake of staggering losses brought on by the recession and market volatility, according to SEI’s Institutional Group, an investment manager with headquarters in Oaks. Pa.

The pool of respondents reported taking big hits in their investments: Eight-one percent of the organizations surveyed said their invested assets had declined by at least 21 percent last year. Such losses have triggered some hard choices, according to the poll. Forty-five percent of respondents said the recession has forced them to decide between cutting staff positions and trimming programs.

The survey included 160 nonprofit organizations with endowments, with the smallest having at least $25-million in invested assets and the largest endowments surveyed having $1-billion or more in assets; none of the organizations polled are clients of the company, according to SEI, whose Nonprofit Management Research Panel conducted the poll. One in three respondents was an educational institution, while 19 percent were private foundations, and 13 percent community funds.

Arts and cultural organizations; environmental, health, and human-services groups; and religious charities were also surveyed.

Making Changes

Among those organizations that are making changes in how they allocate their investment funds, the largest share—69 percent—said they are moving into fixed-income investments; nearly as many respondents—67 percent— said they are increasing their holdings in other alternative investments.

By contrast, the groups that are making changes were most likely to be decreasing their holdings in foreign equities (63 percent), and in hedge funds (58 percent).

Hedge funds, which use a wide range of investments to protect, or hedge, against a variety of market conditions, are still the most popular alternative investment among respondents, with 74 percent of groups who invest in alternatives saying they are currently invested in such funds. (Of groups in the survey with more than $300-million in assets, 89 percent said they had hedge funds in their portfolios.)

The shaky economy and the spate of recent investment scandals has triggered not only asset reallocation but also rethinking of priorities and management among nonprofit groups with endowments, according to the survey.

Among the findings:

Though 56 percent of organizations surveyed confer with a consultant for investment decisions, 31 percent of those respondents are considering other management options for the future. (Another 30 percent of total respondents delegate all asset management decisions to an outsider.) Forty-five percent of organizations that use consultants to manage their endowments said they were disappointed in how the consultant communicated with them during the recent upheaval in the markets. Thirty-one percent of respondents said their organizations are putting increased focus on building donor confidence as they craft their investment plans. Forty-five percent of nonprofit groups that handle investment management internally said that increased investment risk has made their investment committees more concerned about meeting their fiduciary obligations.

For a copy of the poll results, “Nonprofits Look for Investment Management Answers in Response to Ongoing Volatility,” send an e-mail message to seiresearch@seic.com