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The Foundation Source First Annual Report on Private Foundations

Documents trends in asset allocation, grantmaking behavior, and endowment growth/decline among private foundations with less than $50 million in assets, before and throughout the recession.

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Private foundations with less than $50 million in assets account for 98% of the approximately 80,000 private foundations in the United States; however, until now, data about this super majority was scant, as most research focused only on the largest private foundations.

The Foundation Source First Annual Report on Private Foundations provides information on asset allocations, grantmaking behavior, and endowment growth/decline based on the actual transactions of 519 Foundation Source clients, all with assets under $50 million, between January 1, 2008 and December 31, 2011. Top findings include:

  1. ASSET ALLOCATION: The Alternative Investments Boom. 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. 38.3% of private foundations used alternative investments on January 1, 2008, while 49.3% incorporated them into their investment strategies by December 31, 2011.
  2. GRANTMAKING: The Myth of the 5% “Ceiling.” 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.
  3. ENDOWMENT GROWTH/DECLINE: (Almost) Keeping Pace with Grants and Expenses. 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.

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