| NEW YORK
NEW YORK Nov 8 Private foundations with assets
of less that $50 million increased their investments in
alternative assets and gave away double the minimum requirement
during a four-year period, a report based on actual foundation
transactions showed on Thursday.
The first annual report on small private foundations,
published by The Foundation Source, establishes a baseline for
future editions on giving trends, endowment growth and decline,
and trends in investment strategies for small private
foundations, which account for 98 percent of the 80,000
non-operating private foundations in the United States.
"What this information does is provide us with context about
underlying investments of those $1 million to $50 million
foundations, which are the majority in the country," said
William Sutton, who heads U.S. Philanthropic Services at UBS.
"This data informs our investment and budgeting conversation
with our clients," he said. "It is a great data point that we
can have with our clients on their giving, granting and asset
The report showed the number of foundations using
alternative investments as part of their diversification
strategy increased the most between Jan. 1, 2008 and Dec. 31,
2011, compared to the other asset classes such as cash, equities
In early 2008, more than 38 percent of private foundations
used alternative investments; by the end of last year, more than
49 percent had incorporated them into their investment
The increase in alternative investments was even more
pronounced for private foundations with assets between $1
million and $10 million, as investment in such assets rose to
60.1 percent from 41.6 percent during the same time span.
"The $1 million to $10 million group is the most active in
terms of new funding, grant making and also in embracing more
sophisticated solutions and strategies to try to preserve and
minimize the risk to their assets so that they can continue to
give at high levels," Foundation Source Chief Executive King
McGlaughon told Reuters.
Based on the actual transactions of 519 clients of
Fairfield, Connecticut-based Foundation Source, the nation's
largest provider of back-office services to small private
foundations, these organizations gave well in excess of the 5
percent annual distribution required by federal law, even during
the worst of the 2008-2009 economic recession.
Disbursements for grants and charitable expenses averaged
11.6 percent of assets between 2008 and 2011, and the total
value of grants increased 4.5 percent during the same period.
The report also showed that donors continually replenished
their private foundation endowments, almost matching their
grants and expenses.
Despite that, 71 percent of the private foundations saw the
value of their endowments decrease during the four-year period,
there was an overall increase in giving.
"In addition to maintain a high rate of giving - on average
double of what the law requires - actual dollars were up. And
while the disbursements were being made donors continued to fund
their foundation with an average of 88 cents on the dollar
during the period," said Andy Bangser, chief financial officer.
These small foundations are responsible for $18 billion of
annual giving, or 42 percent of all private foundation support
to nonprofits in the United States and overseas, according to
Foundation Source. Yet data on this important sector of the
market is scarce because private foundation research
historically has focused on the other 2 percent -the largest of
"This kind of attention has not been paid to the small size
foundations even though these are some of the wealthiest
families in the country," Sutton said. "I have not seen anything
of this sample size, certainly nothing this recent, and nothing
that is this comprehensive."
McGlaughon said he intends to update the report with a major
release every year and is contemplating issuing a mid-year look
on the foundations' developments.
The report includes only foundations that were active
clients for all four years of the study period, and excludes
foundations that were less than five years old.