January 29, 1998 | Read Time: 4 minutes
Soaring assets bump Ford to second; Packard to be third
The Lilly Endowment in Indianapolis, which saw its assets soar to $12.7-billion last year, has surpassed the Ford Foundation to become the nation’s largest private foundation.
Ford, which had held the No. 1 ranking for more than 30 years, is now worth $9.4-billion.
Lilly’s growth was fueled almost entirely by the fast rise in the value of stock in the pharmaceutical company started by the endowment’s founders. Virtually all of its assets are invested in Eli Lilly and Company. The endowment has grown by 140 per cent in the past two years, along with the rising sales of the company’s products, such as the popular anti-depressant drug Prozac.
Soon to rise to the No. 3 position among foundations, from No. 9, is the David and Lucile Packard Foundation, which will see its assets increase to approximately $9-billion by March when it receives a $5-billion bequest from the founder’s estate. David Packard’s bequest of stock in the Hewlett-Packard Company was one of the largest ever recorded. A 21-per-cent increase in the value of Hewlett-Packard stock last year also caused the foundation’s assets to grow significantly.
The infusion of money has prompted the Packards’ four children to undertake a major evaluation of the foundation’s grant making and to expand the scope of its operations. Packard plans to increase the amount it gives by 124 per cent over the next two years.
Officials at the Lilly Endowment are more circumspect in discussing how they will deal with the growth of the fund’s resources, but they will have to give away much more money to comply with federal law. Under the law, foundations must distribute at least 5 per cent of their investment assets annually. Last year, the fund made $252-millon in grants. That figure will now greatly increase: In 1998, Lilly plans to give $413-million.
“Adding new programs is a possibility,” said N. Clay Robbins, president of the Lilly Endowment, in a written statement. “But there is nothing we are ready to announce.”
Lilly, he said, is unlikely to swerve too far from the grant-making patterns of its founders, who confined their giving largely to the state of Indiana with a few exceptions, mostly in the areas of religion and minority education.
To determine the current rankings of the nation’s wealthiest foundations, The Chronicle conducted a survey of the largest private grant-making funds in the 1997 Foundation Center directory.
The Chronicle survey found that the strong stock market has significantly increased assets of all the grant makers on the list. The Robert W. Woodruff Foundation in Atlanta, which has 90 per cent of its assets in the Coca-Cola Company, has become the seventh wealthiest foundation because of the run-up in the value of its shares. Now worth $3.7-billion, the foundation previously ranked 10th on the Foundation Center’s list.
While foundations that hold shares in the corporations run by their founding families are thriving, some financial experts caution that those philanthropies could one day find themselves in trouble unless they diversify their assets.
“The first rule of investing is to diversify, the second rule of investing is to diversify, and the third rule of investing is to diversify,” said John English, former chief investment officer at the Ford Foundation, which sold its last shares of Ford Motor Company stock in 1973. “Nobody in their right mind,” he says, “would have all their assets in a single stock.”
The Lilly Endowment has already felt the difficulties that can come when its investment has a downturn. In 1992, the Lilly company’s stock did poorly, causing the endowment’s value to tumble from $3.9-billion to $2.9-billion. As a result, the grants approved by the fund in 1993 shrank from $110.3-million to $47.6-million.
Because Lilly has weathered such ups and downs, officials of the endowment say they have not spent a lot of time worrying about exactly where they rank among large foundations. In fact, they said they were unaware that Lilly had become the nation’s wealthiest foundation until a Chronicle reporter called.
”The No. 1 ranking may focus more attention on the Lilly Endowment,” Mr. Robbins said, but he doubted that it would have any other effect. “Our goals as an institution,” he added, “really have no relationship to our ranking.”
