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Philanthropy is an increasingly important part of a well-rounded wealth management program—one that helps link your clients’ ideals and priorities to the way you help them structure, invest and deploy their assets now and in the future.
We recently examined the giving activities of nearly 1,000 private foundations with assets between $1 million and $500 million over the past two years to understand how wealthy families are pursuing their philanthropy. While some of the highs and lows we experienced in that period may feel like incomparable moments in time, they’ve had a lasting impact that sets the stage for future giving. These top five findings provide a benchmark for affluent philanthropists and the advisors who support them.
- Higher Levels of Giving – supported by double-digit endowment growth and the residual effects of 2020, private foundations increased their giving in 2021. The foundations we analyzed gave away a total of $689 million in 2021, an increase of $40 million over the prior year, and an average of $727,129 per foundation.
- Concentrated Impact – at the same time, these foundations funded 500 fewer grants in 2021, indicating a shift from getting aid to as many recipients as possible during the intense and rapidly changing needs of 2020 to increased targeting of their dollars in an effort to create greater impact.
- Long-Term Generosity – our data indicates that a large number of foundations regularly give more than the annual mandatory distribution requirement, signaling a strong commitment to go above and beyond for charitable causes. In 2021, the foundations in our study disbursed an average of 7.2% of their assets, with smaller foundations (those with assets between $1 million and $10 million) giving away 8.9% of their assets.
- Pre-Pandemic Norms are Reemerging – in addition to fewer, more concentrated grants there is other evidence that philanthropists are starting to revert to pre-pandemic giving patterns. First, there was a notable decrease in grants to Human Services and Public/Societal Benefit organizations which both saw sharp increases during 2020 as donors focused on the public health emergency and tackling systemic racial inequities. Second, we observed less use of general purpose grants, which were especially useful during the pandemic, and more specific-purpose grants that have long been favored by major donors as it allows them to ensure their gifts align with their mission. Third, during the recovery of 2021, there was a 64% decrease in grants-to-individuals which were used abundantly in 2020 to get aid quickly and directly to the people and places that needed it most.
- Size Influences Endowment Portfolios – smaller foundations have the highest allocation to equities, ending 2021 with 61.5% exposure. They also maintain the highest level of cash at 12.4%, as the increased liquidity enables higher levels of giving. Conversely, larger foundations have more complex portfolios. They have an average allocation of 23.5% to alternative investments, such as private equity and hedge funds, which is nearly five times the exposure of smaller foundations, and 8.4% of their assets are in a unique mix of life insurance, program-related investments, closely-held stock, receivables, annuities, inventory and other untraditional assets.
Hannah Shaw Grove is chief marketing officer at Foundation Source, nation’s largest provider of foundation management services and a trusted source for philanthropic expertise.
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