The problem of our age is the proper administration of wealth. — Andrew Carnegie, The Gospel of Wealth, June 1889

Who manages foundation money and how well are they doing?

John Seitz, CEO of FoundationMark, gnawed on that bone for years while working as a hedge fund analyst, portfolio manager, and Outsourced Chief Investment Officer (OCIO).  Finally, in 2015, frustrated at the lack of available data, he established FM to produce and provide performance indices, peer group data, and research tools for nonprofits, asset managers, and Wall Street sellsiders.

As recruiters, we are avid consumers of investment metrics and publish a yearly endowment performance report to support our candidate and OCIO selections.  So, we asked Mr. Seitz if he would share his data on one hundred large US private foundations.  You will find his latest available foundation investment returns below.

We think his research and rankings are useful companions to our endowment studies, of interest to asset owners and all purveyors of investment products and services.

Foundations everywhere

College endowments bask in media attention, yet foundations embrace a much larger market, both in numbers and assets – about 3,300 foundations versus 573 endowments over $50 million, totaling $1.4 trillion versus $807 billion.

While the corporate world jettisons their pension liabilities, and head count flattens at endowments, health systems, and public pensions, the foundation community and family office segment (a major source of charitable largesse) is flourishing.

US Private Foundations

151: over $1 bn
185: $500 mil – $1 bn
343: $250 mil – $500 mil
1,076: $100 mil – $250 mil
1,613: $50 mil – $100 mil
116,000: under $50 mil

Source: FoundationMark

US Endowments

131: over $1 bn
75: $500 mil – $1 mil
257: $100 mil – $500 mil
210: $1 mil – $100 mil

Source: NACUBO

So far, so good

When Andrew Carnegie endowed his newly formed Carnegie Corporation with $125 million in 1911 – roughly $3 billion in current dollars – he founded the largest charitable entity of its day.  Along with the creation of the Rockefeller Foundation in 1913, this marked the beginning of the modern era of foundation philanthropy.

Today, U.S. tax-exempt charitable organizations are a major force in American life, administering 3.8 trillion dollars in assets, of which approximately a third reside in private foundations.

Jon Hirtle, executive chairman of OCIO provider Hirtle Callaghan puts it this way:

Foundations are responsible for a meaningful portion of society’s accumulated and monetized patrimony. That financial patrimony is used to enhance social services, the arts, scholarship, research…human progress, if you will.  So, better foundation investing means more human progress.  How about that for an inspiring mission?

Counting the ways

Foundations make grants and, in the case of “operating” foundations, run their own, internally managed charitable programs.  But surprisingly few Americans know or care.

The J. Paul Getty Trust, largest US based operating foundation, rings our bell because of their museums and global endeavors, but how about Casey Family Programs?

Dr. William Bell, CEO, Joseph Boateng, CIO, and staff are bedrock supporters of foster care in America thanks to Mr. James E. Casey’s generous gifts and a legacy of dedicated stewardship.  But unless you have personally passed through the system, you’ve probably never heard of them.

And all investment professionals owe a debt to the Ford Foundation.

Professor Harry M. Markowitz laid the theoretical underpinnings for modern portfolio management and the late David F. Swensen, Yale’s long-serving CIO, turned Harry’s theory into practice, but it was the Ford Foundation that connected the dots.

The conceptual groundwork for Mr. Swensen’s investment heresy was prepared in 1967 by another Yale alum, McGeorge Bundy A.B. ‘40, then-president of the Ford Foundation.

In the Foundation’s ‘67 annual report (pg9), President Bundy wrote that “we have begun our promised study of the problems and possibilities in the management of endowment funds.”

Along with the dissemination of modern portfolio theory, the Ford initiatives cleared a path for Swensen’s sophisticated and non-traditional portfolio management style at Yale and, in the years that followed, allowed other schools and foundations to diversify across the investment spectrum.

That’s all there is

Foundations do good by investing well.  And like any big business, they have budgets, expenses, and commitments.  But the revenue to fund their pursuits typically flows through a single pipe, investment returns from a one-off family or institutional gift, and skillfully managing the legacy is vital to mission survival.

As Kim Lew, Columbia University’s chief investment officer, and former CIO at the Carnegie Corporation, told us in an interview a few years ago:

A private foundation is not a university endowment.  We don’t have rich alumni we can go to for help if we take an unexpected haircut.  We have constraints which demand close attention to liquidity.  That means we can’t lay out sixty to seventy percent of the portfolio in private equity, venture capital, timber, and other assets which might take years to sell.

Cash and kindness

Foundations enjoy tax breaks, i.e., taxpayer subsidies.  So, it seems reasonable to ask what they are doing with the money.  You don’t always know.  Cash and kindness are the bane of many a benefactor as we noted in a recent piece, Saints, Sinners, and Foundation Money.

Adding to the muddle, many foundations are public relations troglodytes.  Most organizations in this space decline to publish official investment returns.  They don’t have to and you can’t make them, but this creates complications for service providers like us who recruit chief investment officers and select OCIO providers.  We would like to know who they are and how we can help.

“Who you gonna call?”

Mr. Seitz and FoundationMark are here to fill the gaps.  To be sure, his estimates, as he emphatically reminds us, are based on IRS filings – 990PFs to be precise, which foundations must swear to “under penalty of perjury” – and not our go-to sources for endowment data, internal performance disclosures and annual reports.

But thanks to the IRS, foundations are required to disclose a greater level of detail about their portfolios than college endowments; ergo, the source for FoundationMark’s calculations.

One last note.  Foundations have a hodgepodge of fiscal year-ends and, adding complications to the complexity, many are excruciatingly slow to file the IRS forms no matter what their fiscal year.  As a result, December 31, 2021, is the most recent year-end to provide a meaningful number of return samples for our research.

(100 foundations: 1-yr, 5-yr investment returns below)


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John Seitz, CEO, FoundationMark

Skorina: John, what prompted you to start FoundationMark?

Seitz: As you mentioned in your introduction, I started managing money at a mutual fund, then moved to a hedge fund, and finally joined an OCIO firm doing asset allocation and manager selection for nonprofit clients.

The SEC requires mutual funds to report their holdings on a quarterly basis and most include discussions of performance, while hedge funds disclose investment returns for marketing purposes, but nonprofits are only required to file annual 990s, which the IRS then releases “for public inspection.”

The challenge for us was, how could we find data that wasn’t disclosed?  We discovered that private foundations reveal a lot to the IRS, more than public charities.  They must disclose their holdings, the fair market value, and their cash flows, the very inputs we needed to compute performance.

Eight years on we now have a database of virtually all foundations with over $1 million in assets, about 50,000 portfolios, and we calculated returns for all of them.  This allowed us to construct performance indices by asset size and examine portfolio strategy.

Foundations love this data.  Trustees can request reports free of charge from FoundationMark and evaluate their performance against peers and third-party managers.

Skorina: What’s so different about Foundation portfolios?

Seitz: It turns out, quite a lot.  Foundation portfolios show much more variability in asset allocation and returns than endowments.  Our calculations for five-year returns as of 2021 show a spread of 40% in performance, from 37% to -3%.

I think your ten-year college report (granted it’s not apples to apples) shows just a 7% spread, from 13.3% to 6.3%.

You would never see an endowment with an 80 percent allocation to venture like the Crankstart Foundation.  Or a “single stock” portfolio like the Lilly, or the Susan Thompson Buffett Foundation with about 75% Berkshire Hathaway stock.

Finally, foundations have unique time horizons – the Gates, for example, intends to wind down, and the Atlantic Philanthropies gave the last of their eight billion away in 2020.  But I don’t think we will see Harvard calling it a day within the next 50 years.

Skorina: Given what you see about foundation performance, how many would you say might be better off considering outside investment help, the OCIO option for example?

Seitz: Once you drop below the billion dollars in assets group, I would say most of them.  As I mentioned earlier, there are over 3000 foundations with assets above $50 million versus under 600 college endowments.

Looking at their performance and allocations we see that foundations, especially those with less than $1 billion haven’t performed as well as they should have given the risk they took, which suggests that outside help should be on the table.

Skorina: Expenses are another big concern.  Based on your data, do you think they are paying too much?

Seitz: That’s hard to say.  Each Foundation has its own objectives, so expenses should be looked at on a case-by-case basis.  But we do know that in aggregate they reported close to $6 billion in investment expenses and the actual number is much higher because alternative fees are rarely accounted for.  We think it’s useful to know what your peers are paying.

Skorina: Where is the biggest demand for your data coming from?

Seitz:  We have two business groups. FoundationMark provides data free-of-charge to the nonprofit community, while FoundationIQ, a paid service, offers innovative search tools and a wide range of investment performance data to consultants, assets managers, RIAs, OCIOs, and banks.

For example, if you wanted a list of California foundations with over $50 million AUM that have underperformed over the past 5 years, you can create one in a few clicks; in this case we have over 100 foundations.

Then you can drill down to see their performance and holdings as well as trustees, employees, and contribution information.  Firms can also use the data to see how they are doing versus competitors, or how their portfolios are structured versus peers.

Skorina: Thank you, John for letting us use this data.  I think our readers will appreciate it.

Seitz: You’re welcome. Anytime.

Private Foundation Performance

As practitioners, we tend to feel that approximate data you actually

have is better than precise data you can’t get, so we’ll go with Mr. Seitz.

But please proceed with caution. These estimates are per FoundationMark, not from the respective organizations.

[Updates? Corrections? Please let us know.]

(Click link for chart)

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