Most German foundations have come through the financial crisis relatively well so far, according to a survey from the Association of German Foundations (AGF).

Nearly 40% of the foundations surveyed managed to maintain their investment income in 2012, while around 25% have actually increased their earnings.

Only one-third saw a fall in income over the same period.

The survey was carried out to investigate the effect that continuing low interest rates has had on foundation income, with 250 foundations responding to an online questionnaire last July about their most recent financial results.

Hans Fleisch, secretary-general at the AGF, said: “Many foundations have found a way round the crisis by increased fundraising.

“Another strategy has been to bring greater professionalism to investing, including the creation or revision of investment guidelines.

“Results show that the better the foundation’s knowledge of investments, the higher its returns.”

But he warned: “Because of continuing low interest rates, expectations for this year are still subdued.

“And the longer the period of low interest, the thinner the air for foundations.”

For the third year in a row, investment returns have been very low.

In both 2012 and 2011, average returns on assets were 3%, down from 3.5% in 2010.

A similar survey in 2008 revealed average returns of 4.4%.

However, Fleisch said it was striking that foundations with a higher endowment ­– €1m or above – could usually generate significantly higher returns.

For 2012, these foundations reported returns as high as 4.3%.

“Larger foundations are more likely to possess in-house professional expertise, which can add a few basis points to income,” Fleisch said.

“Furthermore, some investment solutions are not possible if you’re small.”

He said most of the return had come from equities – largely German stocks, which had done well because of the performance of the domestic economy.

Fleisch estimates the assets of German foundations to be worth €100bn.

More than 60% of total foundation assets in Germany are held in conservative assets, largely government bonds, he added.

However, he said there has been a noticeable shift over the past year towards real estate, particularly the booming Berlin market.

Around 10-15% of total assets are currently in real estate, including commercial and residential property, forestry and agriculture.

Very little is in alternatives.

The survey showed that while 61% of the larger foundations have an investment policy document, this is true for only 46% of the smaller foundations.

Fleisch said that more foundations were now planning to create guidelines, while many of those with a policy already were revising it to allow more investment risk – for example, by permitting a greater percentage of assets to be held in equities.

However, some German states restrict risky assets to a specific percentage of the portfolio, or prohibit ‘speculative’ investing.

German federal law says the total book value of a foundation’s endowment capital must be maintained over the medium term.

Meanwhile, mission-related investing is, for most foundations, still in the future – only one-fifth of trusts that have set guidelines are planning to connect the foundation’s purpose with its investment policy.

Only half the foundations responding to the survey said they were planning any concrete measures to deal with the financial crisis.

But 68% of larger foundations are planning to improve effectiveness though cooperation with other parties.

Fleisch said the economic crisis had not dampened the enthusiasm for creating foundations – each year, approximately 600-700 new ones are formed in Germany.