Foundation Source, a provider of services for private foundations, today released a report on how private foundations with less than $50 million in assets fared from the beginning of the recession in early 2008 through the end of 2011. Private foundations with less than $50 million in assets account for 98% of the approximately 80,000 private foundations in the United States. Of the 519 foundations tracked in the Report, 55% have less than $1 million in assets, 39% have assets in the range of $1 million to $10 million, and about 6% occupy the top tier of $10 million to $50 million.
Top findings include of the report:
ASSET ALLOCATION: Of the four asset classes: cash, equities, fixed income, and alternative investments (e.g., private equity, real estate, commodities), the number of foundations using alternative investments as part of their diversification strategy shifted most significantly during the study period. On January 1, 2008, 38.3% of private foundations used alternative investments; by December 31, 2011, 49.3% had incorporated them into their investment strategies. For private foundations with assets between $1 and $10 million, the jump was even more extreme: 41.6% to 60.1% during the same time span.
GRANTMAKING: Even during the worst of the recession, private foundations consistently gave well in excess of the 5% annual distribution required by federal law. Disbursements for grants and charitable expenses averaged 11.6% of assets between 2008 and 2011, and the total value of grants increased 4.5% during the same period. This challenges conventional wisdom, and shows that the so-called “5% payout requirement” acts much less as a ceiling than it does as a floor for private foundation grantmaking.
ENDOWMENT GROWTH/DECLINE: The extent to which donors continually replenish capital and add to foundation endowments is often overlooked. For every dollar that was granted to a nonprofit or paid as a charitable expense, 88 cents was received in newly contributed capital from the foundation’s donors.
“What we think we know about foundations is largely based on studies of only the largest of foundations. Our Annual Report on Private Foundations provides a rare snapshot of the fiscal performance of the ‘other 98%’ of private foundations in the United States during the worst economic crisis since the Great Depression. As we analyzed the data, we discovered that some of our long-held assumptions about private foundation grantmaking and other activities need to be revisited,” said H. King McGlaughon, Chief Executive Officer of Foundation Source.
Foundation Source provides its services to more than 1,100 family, corporate and professionally staffed foundations, ranging in size from $250,000 to over $500 million. The company provides its services directly to philanthropically focused families and institutions as well as in partnership with the nation’s leading private wealth management firms, law firms, and accounting firms. Foundation Source is headquartered in Fairfield, CT with offices in Atlanta, Chicago, Dallas, Denver, Los Angeles, New York, Philadelphia, San Francisco, South Florida, and Washington, D.C. (www.foundationsource.com).
The Foundation Source First Annual Report on Private Foundations can be downloaded as a free PDF from the Foundation Source website by clicking HERE.
© 2012 PEPD • Private Equity’s Leading News Magazine • 11-9-12