NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, March 9, 2015

A study by Exponent Philanthropy suggests philanthropists and family foundations are becoming more impact-oriented, doling out fewer grants but with larger dollar amounts given to only the top-performing nonprofits.

Exponent Philanthropy estimates that it’s 2,300 members, with total assets of $87.8 billion, made 158,000 grants last year, down from 203,000 a year earlier. But the median grant size increased 24% to $19,116.

That’s a significant refocusing of business, says Exponent Philanthropy CEO Henry Berman. These foundations have stopped blankly writing checks, jettisoned underperforming charities, and are now zeroing in on nonprofits that truly matter to the family’s overall mission.

But add up the aforementioned grant-making numbers and another truth emerges: Charitable giving actually declined by 3.5%, as the foundations gave away 6.5% of their assets. This, while the average foundation endowment realized 14% returns, versus the previous survey’s increase of 9.7%.

So charitable giving declined while the value of portfolios grew. What gives? Exponent Philanthropy thinks it has the answer. Its poll asked 777 member foundations to identify “the most important issues facing foundations.” The top three big concerns were board/generational succession, need for greater focus/impact in grant-making, and family/board dynamics.

Issues of succession have opened up a broader dialogue between the current generation and heirs, says Berman, and, in order to engage their children ages 18 to 30 years old, they are asking for input. That’s an important change. “This is a restless generation that is more willing to take risk,” Berman says. And that translates into fewer but more targeted grants that might have significant impact in the world.