While the new year has arrived amidst extraordinary challenges and market volatility, high-net-worth (HNW) family philanthropy is fortunately strong and a driving force for social change.
To understand how HNW families maintain and support their charitable work, we recently analyzed buildings More than 1,000 private, non-operating foundations—most of which are family foundations—with assets of less than $50 million over a 2-year period.
Here are our top three takeaways about Family Foundation Endowments:
- Development from multiple sources. Family Foundation endowments enjoyed double-digit growth in 2020 and 2019, helped by funding increase in grant Looked into 2020 and set the stage to deliver the future. Part of the growth was driven by investment returns; Tea The endowments we studied achieved average portfolio growth of 12.7% in 2020 and 20.0% in 2019 gross-fees. development was also New contributions from grantees who contributed an average of 57 cents for every 83 cents disbursed in grants and expenses indicate ongoing charitable intent.
- Equity dominates. In our study sample, equities had the largest portfolio allocation of endowments at approximately 55%, which is consistent with a longer-term horizon and institutional-caliber investment strategies. The average allocation for fixed income was 16%, and options were 12%. When viewed from the size of the foundation, a few differences emerged:
- Smaller foundations (those with less than $1 million in assets) had the highest allocation of cash, at 19%, most likely to support their higher grant volumes and associated liquidity needs.
- Mid-size foundations (those with $1 million and $10 million in assets) had the highest allocation to equity at 60%.
- Large foundations (those with $10 million and $50 million in assets) had the highest allocation of 14% to alternative investments, far more than the exposure of small and medium-sized foundations to similar asset types.
- decreasing cost. Average expenses associated with investment-related services – including banking, brokerage and advisory fees – decreased from 54 basis points in 2019 to 50 basis points in 2020 across the foundation in our study.
To see our full report on Private Foundation Endowments, go here. Of Of the approximately 100,000 private non-operating foundations in the United States, 98% have endowments of less than $50 million and 63% have less than $1 million. Thus, the findings of our report are an important benchmark for affluent philanthropists and the mentors who support them. In conjunction with Bear 2021 Report on Private Foundations – Grant Creation, the report provides a complete picture of the giving and funding activities at the heart of family foundation operations.
Hannah Shaw Grove Has spent three decades studying and working with high-net-worth families, family offices, and their closest advisors to achieve wealth management priorities. She Chief Marketing Officer at Foundation SourceThe country’s largest provider of support services to private foundations. The firm works in partnership with financial and legal advisors as well as directly with individuals and families.