Private-foundation assets lag pre-recession levels

Most private foundations have not regained the asset value lost from the collapse of the capital markets that began in September 2008, a new study says.

At the end of 2011, the endowments of private foundations with under $50 million in assets were still nearly 9 percent below their pre-recession values, says the study by Foundation Source.

Those foundations account for 98 percent of the roughly 80,000 private foundations in the U.S., the study says.

With donors contributing as much new capital to their foundations each year as the foundations grant out, it says, donors to private foundation since 2007 contributed fresh capital to their foundations at the rate of 104 percent of the amount the foundations made in grants, a percentage that does not include foundation expenses.

Despite growth in 2009 and 2010, asset levels at foundations fell 3 percent on average in 2011.

New capital contributions in 2011 grew 19 from the previous year but still funded only 84 percent of total grants plus expenses, compared to 72 percent in 2010, 94 percent in 2008 and 111 percent in 2009.

The study is based on data from 519 private foundations clients with assets under $50 million.

Foundation giving slips

Estimated giving by the more than 76,600 foundations in the U.S. totaled $46.9 billion in 2011, up from a peak of $46.8 billion before the economy plunged in 2008 but down slightly from 2010 after accounting for inflation new survey says.

Excluding giving the Bill & Melinda Gates Foundation, by far the biggest grantmaker in the U.S., 2011 giving would have been flat before accounting for inflation and down by roughly 3 percent after inflation.

Giving in 2012 likely will grow between 1 percent and 3 percent, although with inflation averaging just under 3 percent, giving likely will stay flat at best, based on real purchasing, says Foundation Growth and Giving Estimates, from the Foundation Center.

The survey, based on responses from 1,077 large and mid-size foundations, also suggests foundation giving in 2013 likely will show consistent yet modest growth.

“Foundations would like to ramp up giving, but that is unlikely to happen absent consistent economic growth,” Bradford K. Smith, president of the Foundation Center, says in a statement.

Charitable contributions by independent and family foundations, which represent the vast majority of U.S. foundations, grew less than 2 percent to $33.1 billion before inflation, the survey says.

Giving by corporate foundations grew 6 percent to $5.2 billion before inflation, the biggest increase among all foundations, while giving by community foundations fell slightly to $4.2 billion before inflation.

Over a third of foundations responding to the survey indicated their giving fell last year.

While foundation regained over 9 percent of their asset value in 2010, big swings in the capital markets in 2011 left them with estimated assets totaling $646.1 billion, up 0.3 percent and well below the record-high of $682.2 billion in 2007.

Some foundations continued to “recalibrate” their giving after increasing their “payout rate” during the economic crisis, or the amount they distribute for charitable purpose as a share of their assets.

That increase in the payout rate helped foundations maintain their level of giving, or limit reductions in their giving, despite big declines in their assets, the survey says.

While assets of those foundations have regained some of their 2008 losses, it says, “returning to more typical payout levels [5 percent for private foundations] means that overall grant dollars awarded by these foundations may remain fairly flat.”

As a result of poor performance of the capital markets in 2011, and the “unsteady nature of the economic recovery,” the survey says, foundation giving is “unlikely to gain much momentum this year.”

Still, 44 percent of respondents expect to increase their giving in 2012, while 18 percent expect to increase their giving.

Foundations that give $10 million or more, accounting for nearly 60 percent of total foundation giving, are most likely with anticipate increased giving, with 54 percent expecting to give more this year, including 53 percent of corporate foundations, 45 percent of community foundations, and 42 percent of independent foundations.

Nearly two in five foundations expect to reduce their giving in 2012, compared to between roughly a quarter to a roughly a third of funders that might expect to reduce their giving in more prosperous times, the survey says.

In 2013, 54 percent of foundations expect to keep their giving steady, 19 percent expect to give more and 9 percent expect to give less, with another 14 percent not clear what they will do.

“The uncertain nature of the current economic and political environment both in the United States and globally suggests a cautious approach to forecasting foundation growth over the next couple of years,” the survey says.

But if the economy performs more consistently this year, it says, foundations “may be in a position to raise their 2012 and 2013 giving beyond what they expected at the start of the year.”