Smaller U.S. Private Foundations Thrived in 2013

Private foundations with less than $50 million in assets saw their endowments grow in 2013 for the second consecutive year, Foundation Source, a service provider, reported Wednesday.

The growth in foundation endowments was the product of both a 14.7% increase in investment returns and a 7.9% rise in new contributions by funders.

Foundation assets grew even though charitable distributions exceeded the 5% minimum by nearly 50%, according to the report.

“These foundations have demonstrated time and time again that compliance with the 5% minimum distribution requirement is not what drives their philanthropy,” the report’s author Andrew Schulz said in a statement.

Foundation Source focused its report on smaller foundations in contrast to “mega foundations,” which make up just 2% of all foundations, yet represent some 70% of foundation assets.

It said that extrapolating data from these huge entities to the larger community could lead to significant misunderstandings about the overall sector.

The new report was based on the transactions of 714 Foundation Source clients, collected over the course of 2013. The data represented actual foundation transactions recorded by Foundation Source (not opinion surveys or estimates) as it processed grants and paid expenses on behalf of its U.S. clients and recorded investment information.

Researchers found that aggregate assets held by foundations sampled in the report grew from $2.4 billion at the end of 2012 to $2.7 billion at the end of last year, a 14.1% increase. Thirty-five percent of the foundations studied distributed 10% or more.

Smaller foundations have exceeded the 5% minimum distribution every year since the onset of the recession in 2008, according to Foundation Source.