What’s worth doing is worth doing for money. — Gordon Gekko (Michael Douglas) Wall Street
What do investment professionals earn at nonprofit institutions? We recruit these executives for a living, so we avidly track their pay and performance.
In this letter we highlight the compensation of one-hundred twenty-eight chief investment officers and staff at private US foundations and tie their pay to five-year performance.
Our goal is to give boards, CEOs, and CIOs a useful set of benchmarks as they consider what to pay their investment executives.
FoundationMark
As always, when it comes to foundation research we draw on the impressive data set from our good friend John Seitz, CEO of FoundationMark.
We think his research and rankings are excellent companions to our pay and performance studies, of interest to asset owners and all purveyors of investment products and services.
The Business of Philanthropy
While college endowments garner most of the media attention, foundations embrace a much larger market, both in numbers and assets.
Over the last thirty years the number of foundations has tripled from about 40,000 in 1995 with assets of $373.4 billion to nearly 120,000 holding $1.6 trillion today. One report puts total nonprofit assets at over $8 trillion dollars.
By comparison, the 2024 NACUBO-Commonfund Study of Endowments lists 658 U.S. colleges and universities and affiliated foundations with $873.7 billion in assets.
Nonprofits are major employers in almost every state. Did you know that:
- The nonprofit workforce is 12.5 million strong, making it the third largest “industry” in the U.S., outdistancing all but two major for-profit industries in its contribution to state employment and payrolls.
- Nonprofit employment is dynamic, growing more rapidly over time than overall employment.
- Nonprofit wages actually exceed for-profit wages in many of the fields where both sectors operate.
(How does foundation pay compare to Wall Street money, you ask? These Heidrick & Struggles comp surveys on alternative asset managers and private equity professionals suggest it’s a toss-up.)
Performance
Unlike academia with its traditions of open access and publish-or-perish, foundations have no impetus to reveal or publish much of anything, particularly investment data, and few do, less than .01%.
As Professors Matteo Binfare and Kyle Zimmerschied found while drafting a paper on foundation investing: “There is little research to date on the investment performance of private foundations.”
Undaunted, Mr. Seitz and staff have developed a system which tracks and estimates the investment performance of most foundations in the nonprofit universe. But please keep in mind that these numbers are estimates based on 990 data, not public pronouncements from the foundations.
Moreover, there’s a long lag – a year and a half to two years – before compensation data is publicly available. Hence, the comp numbers in our table are mostly as of December 31, 2023, with a handful from March and June 2024.
Pass the gravy
Charity often comes down to semantics.
Large private foundations pay their employees well, and for the most part they provide substantial public benefits. The more foundations earn, the more they give away. That’s how the system is supposed to work.
But there are exceptions. We wrote about one case a while back of too much charity staying at home. And Professors Nathan Born and Adam Looney assert in “How Much Do Tax-exempt Organizations Benefit From Tax Exemption?” (pg.8) that a few nonprofit beneficiaries seem reluctant to share their tax-free bounty.
The OCIO Option
The OCIO industry has grown dramatically over the last forty years for good reason, managing institutional money is expensive. It takes time and resources to build a competitive, institutional-grade investment office, and staff compensation alone can run seventy-five to eighty-five percent of total costs.
The top three foundations in our table, for example, disclose investment staff comp of $13,438,547 for the Hewlett, $12,400,949 for the Ford, and $11,133,746 for the Moore, but that’s only for the highest paid employees. The actual investment office headcount and payroll is often much larger.
OCIOs such as Hirtle Callaghan, Blackrock, Brown Brothers Harriman, McMorgan & Company, Third Lake Partners, et al, have spent decades building their platforms and working with organizations and families with like-minded missions, objectives, and challenges.
These full-discretion investment managers offer the proven performance of in-house investment staffs and the process and structure to cope with operational and regulatory headaches, all at a reasonable price.
For most nonprofits under $1 billion AUM, and for many with more, outsourcing is the better choice.
Reporting
The IRS uses 990PF filings for tax computations and foundations must swear to the accuracy of the data “under penalty of perjury.”
Remuneration falls into three categories: compensation, contributions to employee benefit plans and deferred compensation, and expenses.
But, to spare the eyes and keep tables legible, we’ve added together the compensation, benefits, and expense numbers for each investment professional and filing year. In all but a few cases, the benefits and expenses run ten to twenty percent of listed comp.
As for any breakout reveals of base and bonus – and insights as to how bonuses and investment performance relate – they just aren’t there, folks.
Most foundations don’t disclose detailed comp breakdowns, and they don’t have to. And, of course, we can only publish pay and performance from public sources, not what we may have been told in private.
Clarity
One last caution. 990s data is not always consistent or clear. If you see a figure that you know is off and have an explanation we can publish, let us know. We’re happy to revise and send out an update.
And now, on to our pay table.
— Charles Skorina
Pay and Performance at Private Foundations
Highest Paid Investment Staff Members
