With the Foundation Monitor, our branch office in Vienna, together with the platform "stiftung-nextgen", annually analyses relevant developments in the Austrian foundation sector. A total of around 150 people took part in the survey at the end of 2022, which, taking into account multiple functions, means that up to 10 % of Austrian foundations could be reached.

This time, among other things, it was investigated whether the different stakeholders (founders, board, beneficiaries) have different perceptions on various aspects, such as the quality of reporting, the risk profile of the investments, etc. The results of the questionnaire were then used as a basis for further research. Indeed, the answers differ in some areas. We highlight possible causes and consequences of this below.

This year's data on investment structure indicate that the importance of private equity and real estate has further increased in 2022. This confirms the trend towards alternative or more illiquid asset classes that has continued in recent years.

72 % of foundations hold stakes in companies

The following key findings can be derived from the resultsof the study:

Finding 1: The quality of reporting is assessed differently
Timely reporting that takes all asset classes into account is the basis for efficient management of the foundation's assets. Documents from the accounting department are only available with a delay and are often confusing. While 88 % of board members are convinced that a report on all assets is available, only 74 % of founders are.
Against this backdrop, it is interesting to note that the board of directors and the founders sometimes provide different information on the development of assets in the past year. This could be due to the fact that a uniform basis of information is often not available.

Recommendation: The existing reporting should be reviewed to see whether it is suitable for providing timely information on the development of the total assets and on key figures on return, risk and costs of asset management.

Finding 2: There is a need for external support in the area of foundation management.
Most of the need for external support is seen in the areas of asset control and reporting. External support is also seen as useful in the areas of central filing, compliance with disclosure obligations and administrative activities (organisation of meetings, preparation of resolutions, payment transactions, etc.).

Recommendation: Not least against the background of the generational change that is imminent in many foundations, it is necessary to set up professional structures. Comprehensive investment controlling covers the essential functions of an internal control system for the area of asset management.​​​​​​
 

Finding 3: Different risk perceptions
Around 40 % say they have conservatively managed portfolios. Compared to the previous year, this share is twice as high this year. Dynamic investments were reduced to the same extent. This suggests a significantly reduced risk appetite among investors in 2022. It is interesting to note that the information on the degree of risk of financial investments differs between the board of directors, founders and beneficiaries. This suggests that the risk perception is partly different or that a uniform information basis is missing.

Recommendation: Incorrect expectations about the risk level of financial assets can lead to unexpected results and conflicts in years like 2022. Comprehensive reporting also transparently reflects the risk of the investment. Negative "surprises" can thus be prevented. The goal is to make the level of risk transparent for all parties involved. Changes in the investment strategy should not be indicated by temporary market events. These interventions in the long-term strategy usually have a negative impact on the investment result. Changes in the investment strategy should be based on changed long-term framework conditions and paradigms.

Finding 4: A review of the foundation's specifications does not take place on a regular basis.
The percentage of foundations that have never reviewed the foundation deed or last reviewed it more than 10 years ago is very high at 25 %. These foundations run the risk that the deed contains formulations that do not take into account a change in case law, the needs of the founders or beneficiaries or the economic environment. One third have no investment guidelines.

Recommendation: From the point of view of asset management, the guidelines should be checked to see whether there is sufficient scope to react to changes in the economic environment. As a constitution, the deed should only provide a framework. Concrete guidelines for investment activities can be laid down in investment guidelines.

Finding 5:
Another focus of this year's survey was real estate. After years of rising prices, the sharp rise in interest rates in 2022 is bringing this cycle to an abrupt end. Falling valuations and rising financing costs require efficient management of properties. Valuation issues and the ongoing controlling and reporting of real estate are thus coming back into focus. The participants' answers on diversification and risk assessment of their real estate investments are particularly interesting against this background.

The complete results on all topics of the survey can be found on the platform www.stiftung-nextgen.at