The annual “Stiftungsmonitor” survey shows that there is an urgent need for action in many foundations in preparation for generational change. With the Foundation Monitor, our branch office in Vienna, together with the platform stiftung-nextgen, annually analyses relevant developments in the Austrian foundation sector. In total, more than 130 eastern private foundations participated in the survey at the end of 2021.
Almost all foundations indicated that they have securities within their financial investments. The asset classes private equity and art are also increasingly represented as investments in foundations:

Which asset classes are represented in eastern private foundations?

For the area of financial investments, the following key findings can be derived from the results of the study:

Finding 1: Around half of the foundation deeds do not provide for any rights of change.
Any specifications in the investment guidelines on investment objectives or strategy can no longer be adjusted after the founder’s death. Changes in the capital market environment, for example, may mean that distributions can no longer be made to the desired or required extent.
Recommendation: Founders should adapt the foundation deed during their lifetime or have it checked by foundation experts, especially with regard to amendment rights, in order to avoid possible disadvantageous consequences.

Finding 2: More than half of the beneficiaries are only informed informally by the founder.
If there is no institutionalised reporting system, there is an information deficit when the founder passes away. One fifth of the beneficiaries then no longer receive any information. Conflicts with beneficiaries are often due to a lack of transparency.
Recommendation: This risk can be avoided with a professional reporting system. In this way, the family’s right to information is guaranteed and, moreover, decisions can be made on an accurate basis.

Finding 3: After the founder’s death, there is usually no assessment of the investment results by a neutral body.
As long as the founder is active, in many cases he monitors the development of the assets and the investment results himself. After his death, the board often sees the bank in this function. This means, however, that independent monitoring and neutral assessment of the investment results is no longer guaranteed.
Recommendation: Foundations should install an independent authority to monitor and assess asset performance already during their lifetime. In addition, independent monitoring often reveals potential for optimisation.

Finding 4: The investment strategy after the generational change is usually more conservative.
If the responsibility for the investment strategy lies with the board or the bank after the founder’s death, it is often more conservative. This can lead to a conflict of objectives with the financial requirements of the foundation.
Recommendation: While the founder is still alive, the investment strategy should be aligned with the foundation’s purpose and requirements in order to avoid possible conflicts of objectives in the future.

The complete results on all topics of the survey (financial investments, organisation and governance, generational change and non-profit status) are available on the platform:
https://stiftung-nextgen.at/2022/02/24/stiftungsmonitor-2021-die-ergebnisse/