July 24, 2008 | Read Time: 5 minutes
More than $468.2-billion is held in the endowments of 253 of the nation’s major foundations, universities, and other nonprofit organizations, according to the fifth annual study of endowments conducted by The Chronicle of Philanthropy.
The organizations in the study achieved a median investment return of 15.7 percent in their 2007 fiscal years, meaning that half the groups surveyed achieved returns greater than that figure, and half had smaller or negative returns.
Of the 253 groups that participated in the survey, 244 groups provided data on their returns for the 2006 and 2007 fiscal years. At organizations whose fiscal year ends on June 30, the median change in returns was 57.2 percent. At groups whose fiscal year ends December 31, the median change in returns was negative 23.2 percent.
Biggest Changes
The amount held in endowments shows the financial might of the country’s large nonprofit organizations. The total market value of the endowments on this year’s list exceeds the gross domestic products of Hong Kong and Thailand combined.
Scholarship America, in St. Peter, Minn., whose endowment was worth slightly more than $154.3-million last year, achieved the biggest percentage change in returns from 2006 to 2007 of any organization in The Chronicle’s survey.
The group’s investment return was 11.4 percent in 2007, compared with 1.4 percent in 2006.
“We had a bond index fund and a stock index fund that both did very well last year,” says Anne L. Cheney, the organization’s controller. “It wasn’t that it was clever investing, it was just that the indices were up that year.”
Such gains, Ms. Cheney says, will mean that the charity will probably be able to give out larger scholarships this year.
The Windfall Factor
Another organization that earned big gains in the value of its endowment was Direct Relief International, a medical-assistance and disaster-relief organization in Santa Barbara, Calif. The group’s endowment grew to more than $44.1-million in 2007, from $9.5-million in 2006.
The increase was largely due to a $33.4-million bequest the organization received from the Doris and Hector Guy Di Stefano estate, says Thomas Tighe, the group’s president. The Di Stefanos’ wealth came from UPS stock that Ms. Di Stefano inherited from her father, who had been a top executive of the company.
“What do you do when you get a windfall that you didn’t anticipate? We looked at all the options. You can park it away forever, you can spend it all immediately, and we thought somewhere in between that,” says Mr. Tighe. “We definitely received this money to help people and advance the mission of the organization.”
The bequest, he says, will enable Direct Relief to establish a special fund for disaster relief, update and expand the group’s system for managing and distributing pharmaceuticals and medical supplies, and support additional programs, including training for health workers in southern Sudan. The group also plans to use some of the interest from the bequest to pay for fund raising and administrative costs.
For the fourth consecutive year, the biggest endowment on the list was the Bill & Melinda Gates Foundation, in Seattle, with $38.7-billion in assets, followed by Harvard University, in Cambridge, Mass., at $34.9-billion, and Yale University, in New Haven, Conn., with $22.5-billion in assets.
Largest Drops
Endowments at most of the organizations on The Chronicle’s list grew last year. While several groups saw their endowments shrink, the downward drop was not particularly steep.
The Arizona Community Foundation’s endowment fell by 5.3 percent — the sharpest decline on the list — to $464.9-million last year, but the drop had little to do with investment performance, says Paul Velaski, the foundation’s chief financial officer.
The decrease in 2007 occurred primarily because the foundation, in Phoenix, directed some of its endowment money toward grants to some struggling local nonprofit groups, said Mr. Velaski. The foundation gave a total of $70.2-million in grants last year, the most money it has given away in the 30 years it has been operating, and the first time the organization has been able to give out more money than it received in contributions.
Mr. Velaski says he views the endowment’s decrease as a positive development.
“Obviously we want to continue to grow our assets, but we’re also here to get money out into the community,” he says. “Particularly when there are a lot of nonprofits struggling, if we can make sure we have the resources to get money out to them quickly, that’s what we’re here for.”
Another organization that faced a decline in the market value of its endowment was the Fellowship of Christian Athletes, in Kansas City, Mo., whose endowment stood at $13.9-million in 2006 and fell to $13.2-million in 2007.
Ken Williams, the organization’s executive vice president, says his group used endowment money last year to repair its building and pay for a database system to keep track of its donors, and that accounted for the decrease.
Gathering Data
Nonprofit organizations are not required by law to disclose information about their endowments, so to determine the size of their holdings, and learn more about how nonprofit groups manage their money, The Chronicle sent questionnaires to 420 nonprofit organizations.
Figures for the market value of endowments at five institutions that appear in the survey — Columbia University, Indiana University and Foundation, the University of Illinois and Foundation, the University of Virginia, and Yale University — were taken from the 2007 National Association of College and University Business Officers Endowment Study, because those institutions declined to provide The Chronicle with information about their endowments.
Most of the organizations on the list had participated in the endowment survey in previous years or were included in the Philanthropy 400, The Chronicle of Philanthropy’s annual list of nonprofit organizations that raise the most money.
The newspaper also sought data from colleges and universities with the largest endowments according to the National Association of College and University Business Officers, in Washington.
The endowment survey was compiled by Maria Di Mento, with assistance from Noelle Barton, Audrey Hill, and Candie Jones.
