F.B. Heron: Charitable Giving Is Only a Small Part of What Foundations Do With Their Money
Foundations make up a big part—about a sixth—of all the charitable giving that happens in the U.S. But some would argue that their biggest impact comes not from the money they give away, but from the far larger pile of assets they hold.
Most of the attention foundations receive is for the grants they make. U.S. law requires most foundations to pay out at least five percent of their net assets to charitable causes every year. That often leaves 95 percent of their holdings: a collection of assets that attracts much less attention. In 2012, a little over $300 billion was given away in total in the U.S.—that’s everything from foundation grants to money people gave at church. That year, foundations reported more than $700 billion in assets.
Typically, that heap of assets is managed like any other, to maximize its financial value. One set of people in a foundation would manage it, and another set would manage the grant-funded programs the foundation oversees. But a growing number of foundations are exploring impact investing with their portfolios—seeking not just financial returns, but social benefits...