November 25, 2008
Foundation Assets May Have Dropped 30%, Expert Predicts
By Ian Wilhelm
Foundations have lost an average of 30 percent of their assets due to the plunge in the stock market, predicts the leader of a major association of grant makers.
And that loss has come as the organizations these foundations support are facing a huge upswing in demand, Steve Gunderson, president of the Council on Foundations, said in an interview with The Chronicle of Philanthropy. (Audio excerpts from the interview with Mr. Gunderson are available here.)
“The need is greater, and the resources are less,” he said, summing up the challenge facing philanthropy in the face of the economic downturn.
Because of stock-market losses, many charitable funds have been forced to scale back their grant making, Mr. Gunderson says.
Despite the financial problems, Mr. Gunderson says the council has been “incredibly moved” by the creative way foundations have tried to help hard-hit families and cash-strapped nonprofit groups.
For example, he says foundations are rethinking their investment strategies to better use their asset portfolios to support social and environmental causes in response to the downturn.
In other cases, grant makers are bringing together local leaders from the nonprofit world, business, and government to hammer out economic recovery plans for their areas.
“I don’t think there’s any doubt that when history looks back on this economic crisis, one of the really positive chapters will be philanthropy’s response,” he says.
In October, Mr. Gunderson and Ralph Smith, the chairman of the council’s board, wrote a letter to the organization’s 2,000 or so members, asking them to consider doing more to support struggling charities.
Some people have criticized the letter, however. They say the council should have explicitly told philanthropies to give more money and overlook concerns that such an increase in contributions would hurt their ability to remain in existence.
Mr. Gunderson says he appreciates the critics’ point, but says the council must respect the different goals philanthropies have and asking all of them to increase their giving at this time would have been inappropriate.
(Read The Chronicle’s article about the letter and an opinion article questioning the council’s move.)
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I applaud those grant making foundations that are, as Ian writes “rethinking their investment strategies to better use their asset portfolios to support social and environmental causes in response to the downturn.” If these donors’ respective missions explicitly support efforts to ameliorate the impact on families of economic dislocation, then their extraordinary efforts should be applauded – and supported in any manner possible. However, for grant makers who engage in strategic philanthropy—as opposed to charity—now is not the time to abandon their philosophical commitment to results-oriented investing. By adhering to a strategic approach, foundations can, for example, help unwind and address some of the structural weaknesses that have lead to the current economic fix. To do so, foundations must hew closely to a strategic formula which calls for setting clear, measurable goals; developing sound, evidence-based strategies for achieving them; measuring progress along the way to achieving them; and determining whether you were actually successful in reaching the goals. Strategic philanthropists should steer clear of charity. Instead they should leverage their know-how to protect American families from the effects of future economic calamities.
— George Nov 25, 02:51 PM #