The publication shows an increase in donations to endowments, as well as the growth of resources allocated to socio-environmental projects

In its second edition, the Endowment Performance Yearbook, a publication by IDIS – Institute for the Development of Social Investment, and the Brazilian Endowment Coalition, had the participation of 59 endowments, constituting a sample almost 50% larger than the previous year, which had 40 respondents. The combined assets of the funds included in the survey are also substantially higher – BRL 13 billion in 2021 versus BRL 123 billion in 2022. The historical series covers data from 2019 to 2022, and the publication includes articles by experts that contribute to interpreting the findings.

The growth in the number of respondents provides an even more accurate picture of endowment in Brazil and reaffirms the Yearbook as a national reference for endowment managers.

“The first endowment legislation in Brazil dates from 2019. Since than, the topic is on the rise. As more endowments are created, the greater is the need for parameters and benchmarks. Our hope is that the Yearbook becomes an effective tool for decision-making and that the historical series contribute to an understanding of the evolution of endowment funds in Brazil”, comments Paula Fabiani, CEO of IDIS.

The sample analysis indicate that after a sharp decline in contributions to the funds in 2021, there´s been a recovery in donations received, nearly doubling the amount (R$ 174 million vs. R$ 330 million). However, donations continue to be highly concentrated in a few funds. In 2022, three funds recieved 64% of the total donation volume. In 2021, the top three attracted 53%.

Despite fluctuations in donations, the volume of redemptions made by the endowments increased over the period analyzed. It rose from R$ 158 million in 2019 to R$ 340 million in 2022, allocated to financing socio-environmental projects.

Education is the largest area of attraction for these endowments. From the perspective of the beneficiary organizations, over one-third (35%) are educational institutions. From the standpoint of the supported causes, 70% of funds with predefined causes claim to support Education in some way, with Science & Technology being the second most frequent cause. This is partly due to the large number of endowment funds associated with colleges and universities.

Brazilian endowments are still mostly executors, with 90% or more of their donations used for their own projects. More than half (51%) of the sample funds fall into this category.

The allocation of endowment funds’ investments remains heavily concentrated in fixed income assets, which have remained at around 70% (74% in 2020, 73% in 2021, and 75% in 2022). One possible interpretation is that the stable behavior of the managers is linked to the resource allocation rules contained in the investment policies.

The nominal return on endowment funds recovered in 2022 after a year of decline. This performance is common to all asset size categories. In the aggregated data, the average return in 2020 was 6.0%, followed by 3.4% in 2021 and 8.3% in 2022.

The first law that regulated endowment funds in Brazil dates back to 2019. Its sanction contributed to increasing the visibility of the mechanism and accelerated its adoption. Nevertheless, since compliance with the law is not mandatory, the number of funds that claim to follow the model established by Law 13,800/19 is still relatively low – 29% (17 out of the 59 participants) in the sample. The most frequent reason for non-compliance is that the funds were created before the law was enacted (33%). The other reasons mentioned by a larger number of managers are the high cost of maintaining two institutions (14%), lack of tax incentives for donations (12%), and complex governance (10%).

The sample analyzed showed that endowment funds tend to have well-structured governance. Almost all (90%) have a Board of Directors, with 72% of them having independent members. Seventy-one percent have Audit Committees, and 70% have Investment Committees.

Endowment fund managers still consider that the biggest challenge is fundraising, mentioned by nearly half of them (48%). Next are returns (17%) and consolidation of their own fund (14%).

Regarding the challenges faced by endowment managers, Supreme Court Justice Minister Luis Fux stated in the Yearbook’s preface: “Despite significant progress in consolidating endowment, financial difficulties cannot be disregarded in order to provide them with efficient management in the current scenario of successive economic crises. Their administrators, consequently, need reliable information to provide them with (i) the basis for making strategic decisions, (ii) risk control, (iii) attracting profitable investments, (iv) assessing the cost-benefit of new practices, (v) and establishing solid parameters for governance and transparency. In this context, the new edition of the Endowment Performance Yearbook is very timely.”

This is an initiative of IDIS – Institute for the Development of Social Investment and Brazilian Endowment Coalition. The publication is supported by 1618 Investimentos, ASA – Santo Agostinho Association, José Luiz Egydio Setúbal Foundation, Maria Cecília Souto Vidigal Foundation, Pragma Gestão de Patrimônio, Santander Bank, Umane, and Wright Capital Wealth Management.

About IDIS and Brazilian Endowment Coalition

For over a decade, IDIS has been dedicated to promoting the advance of endowment funds in Brazil, leading the Brazilian Endowment Coalition. With over 100 members from different sectors, the initiative seeks to develop this model of financial sustainability for organizations and causes through advocacy.

Among the network’s achievements is the approval, in January 2019, of the regulation of the instrument through Law 13,800/19, known as the Endowment Funds Law. The coalition remains active in seeking improvements in the legislation on more specific issues. IDIS also provides advice for the implementation of endowments, participating in projects for Unicamp, Unesp, Ibram, MAR – Museu de Arte do Rio, ASA – Santo Agostinho Association, Hospital AC Camargo, among others.